One of the most popular regulators among offshore Forex brokers is the Financial Services Commission of the British Virgin Islands, often abbreviated BVI FSC. This institution is in charge of regulating brokers, banks, insurance companies, mutual funds, and more. It was founded in 2001 under the Financial Services Commission Act.
Is BVI FSC a legitimate regulator?
Forex brokers appreciate BVI FSC because it is considered to be relatively business-friendly compared to others. The entry barriers and costs are lower than they are with other regulators, and BVI FSC is not overly strict.
Nevertheless, BVI FSC is a legitimate autonomous regulator, providing real protection to traders. For Forex brokers to maintain their licenses with BVI FSC, they have to meet their criteria for regulation. That means satisfying standards for quality, transparency and fairness, as well as meeting minimum capital and AML standards.
Responsibilities
BVI FSC is responsible for regulating, supervising and inspecting all types of financial services that are operating from or within the British Virgin Islands. That includes Forex brokers, among many other types of services.
If a company that the BVI FSC regulates is in violation of its standards, it can take enforcement actions against that company. The commission is always actively monitoring for financial crimes, but also accepts reports from victims or observers of said crimes.
In addition to this regulatory oversight, BVI FSC educates the public about financial services and products. It also offers continuing education to financial service providers.
While the commission does not create financial legislation, it does monitor how effective existing legislation is, and provides feedback that may influence policymakers.
On the BVI FSC website, it is quick and easy for members of the public to conduct regulatory research. You can go to the "I would like to ..." dropdown on the homepage, and you can click to view legislation, find regulated entities, view a certificate, browse enforcement actions, or conduct a company search.
Who should register?
Here are some examples of types of financial services that should register with BVI FSC:
- Forex brokers
- Other types of brokers
- Insurance companies
- Banks
- Fiduciary services
- Investment businesses
- Insolvency services
- Trustee businesses
- Company management businesses
If a business is in doubt over whether it should apply for a license, it can contact BVI FSC.
Registration and compliance requirements
FSC regulates Forex brokers under the category of Investment Businesses. The Entity Type is "Dealing as Principal," or "Dealing as Agent," depending on the specifics for that company.
A company that wants to be licensed by FSC needs to apply for a license. The application forms are available on the regulator's website.
It's hard to find, but here is the Application for a License or Certificate as a Financial Services Business Provider form. Brokers also need to submit the Additional Information Required for an Application for An Investment Business License, Recognition and Registration of Mutual Funds and Related Functionaries form.
FSCI BVI doesn't provide a lot of information about the application or approval process on its web pages, but does provide a copy of the Securities and Investment Business Act of 2010. This is the act under which it regulates Forex brokers.
Here is what the Act states regarding "Financial Resource Requirements."
7. (1) A licensee shall, at all times, maintain its business in a financially soundcondition by
(a) having assets,
(b) providing for its liabilities, and
(c) generally conducting its business,
so as to be in a position to meet its liabilities as they fall due.
It also states:
8. (1) Without limiting section 7 and subject to subsection (4), where theRegulatory Code prescribes a minimum capital resource requirement with respect to
a category or sub-category of licence, a licensee holding a licence in such category or
sub-category shall ensure that at all times its capital resources are maintained in an
amount not less than the prescribed minimum.
FSC does not appear to list the exact capital requirements in any official resources, nor are they stated in this Act.
Based on our research, FSC determines the capital requirements on a case-by-case basis, typically ranging in between $100,000 and $500,000.
Regarding the appointment of directors and senior officers, BVI FSC states that licensees require prior written approval from the commission.
Powers at BVI FSC's disposal
If a company violates BVI FSC's rules, the commission is able to take enforcement actions against them. A list of offenses can be found in the Securities and Investment Business Act of 2010, along with their penalties for companies and individuals, which take the form of fines.
Depending on the type and severity of the offenses, FSC may suspend or even revoke a broker's license.
On the regulator's website, you can look under "Alerts" to see the latest public statements the commission has released, including warnings to the public and notifications of enforcement actions taken against various companies.
If you are thinking about trading with a Forex broker, and you want to know their status with BVI FSC, you can look them up in the regulator's database of Entities.
It is wise to do this even if the broker states on its website that is regulated. This information can be inaccurate or out of date, especially if you are dealing with an untrustworthy company.
Just enter the company name in the keyword search, keeping in mind that the company name may differ from the brand name of the broker.
If your search yields results, you can see what category it is in. To determine whether the status is current or former, you can check the boxes in the filters.
You can also have a look at past enforcement actions taken by BVI FSC. The BVI FSC rarely takes action against brokers, but does so on a regular basis against other types of companies it regulates. Nevertheless, here are some examples of (not-so-recent) actions it took against Forex brokers:
- Forex Place Ltd: BVI FSC issued a Cease and Desist Order against this company in 2013, which was operating under the name 4XP. The company was told it could no longer operate within the territory, and to submit evidence proving that it had ceased to do so.
- Bforex Limited: This scam company received a Cease and Desist Order just like the one given to Forex Place Ltd.
- Alfa Forex Ltd: BVI FSC administered this penalty in 2013 for a payment of $10,000. The penalty was imposed on Alfa Forex Ltd. "for its contravention of section 4(1) of the Securities and Investment Business Act, 2010, by carrying on unauthorised investment business."
Reporting to the BVI FSC
If you believe that a broker has violated BVI FSC's regulations, you can report that company to BVI FSC.
You can file your complaint directly through the website, which has a web form on the contact page. If you prefer, you can also submit your complaint via email or even over the phone.
Once you submit your complaint, BVI FSC will investigate what you had to say. Based on their findings, they might take enforcement action against the broker. If you were scammed, they can provide you with guidance for what to do next, but may not be able to recover your funds directly.
Conclusion
Many Forex brokers appreciate the business-friendly policies of BVI FSC, making it one of the more popular regulators. This regulator keeps entry barriers relatively low for brokers, but still provides oversight and protection for traders. This balanced approach ensures it will likely remain one of the most ubiquitous regulators for brokers.
