26 February, 2024

How to Get Cyprus Forex License

cyprus forex license

Cyprus Forex License (CySEC)

Obtaining a Cyprus Forex License (CySEC) is made easy with RadiantBiz assistance.

Cyprus, located in the Eastern Mediterranean, has a thriving economy, a business-friendly environment, and a low corporate tax rate. Despite its reputation as a vacation destination, Cyprus has strategically diversified its economy and met EU admission criteria, joining the EU in 2008. This grants your brokerage EU passporting rights, enabling operations in other European markets without additional licenses or physical offices. The CySEC license covers all forex trading activities, streamlining the licensing process. RadiantBiz offers expertise in CySEC forex license applications, providing consultation and comprehensive services to kickstart your forex business in Europe. Contact us for a consultation; our expert team will respond within 30 minutes.

Opening a Bank Account for a Forex Company in Cyprus

In Cyprus, opening a bank account is an essential step at the onset of the licensing process, primarily for depositing the authorized capital of the company. This account is established after the company’s registration and serves as a repository for the required company capital. Subsequently, a certificate confirming the capital’s deposit is obtained from the bank, which is necessary for the license application submission to CySEC.

The entire authorized capital amount is maintained in the bank account throughout the licensing period, ensuring the company’s financial stability. These funds are immobilized during the license tenure. The authorized capital for a Cyprus forex broker typically ranges from EUR 50,000 to EUR 725,000, depending on the range of services offered.

forex trading license in cyprus

 

Documents Required for Obtaining a Forex Broker License

In Cyprus, licensing for financial activities falls under the jurisdiction of CySEC, the regulatory body overseeing the application process. Alongside the application, specific documents are required:

  • Organizational structure report.
  • Business plan.
  • Corporate procedures manual.
  • Money Laundering and Risk Control Manual.
  • Three-year financial forecast.
  • Questionnaires and certificates of criminal record and bankruptcy for all shareholders and directors.

A crucial requirement is appointing employees with a pristine reputation and requisite competence to key positions within the company.

CySEC mandates approval for certain company roles:

  • Four directors, including the managing director.
  • Risk manager.
  • Compliance control manager.
  • Internal and external auditor.

Furthermore, CySEC stipulates requirements for the brokerage company management structure:

  • A Board of Directors comprising at least four individuals of impeccable reputation and qualifications.
  • Establishment of corporate procedures ensuring client protection.
  • Implementation of a dedicated risk management department to mitigate operational risks.
  • Implementation of mechanisms to monitor company activities.
  • Implementation of a universal customer identification procedure.
  • Maintenance of customer data security protocols.

 

Advantages of Cyprus Forex License

  • Cyprus holds a significant position in the forex trading landscape, being an early adopter of recognizing its importance in the financial sector. With well-established infrastructure and regulations, Cyprus remains a top choice for forex traders worldwide. Despite stringent EU regulations, Cyprus offers a streamlined licensing process, saving time and money for applicants while ensuring a focus on robust business models.
  • Regulated United Europe (RUE) assists in meeting application requirements, which evolve to meet industry needs and maintain security. Fast-track processing options are available, ensuring timely licensing. Adhering to EU regulations, such as MiFID II, ensures high standards, enforced by CySec, a leading forex regulator, balancing compliance with operational efficiency.
  • Cyprus forex licenses grant EU passporting rights, allowing service provision across the European Economic Area without additional licensing or physical office requirements. This cost-effective approach optimizes operational expenses while enhancing investor security through regulatory oversight. The Cyprus banking system, regulated by the Central Bank of Cyprus, offers innovative services, multilingual support, and confidentiality, making it ideal for international entrepreneurs seeking stability and privacy.
  • Cyprus favorable tax regime further bolsters its appeal, with a low Corporate Income Tax rate of 12.5% and various exemptions and international agreements to reduce tax burdens for resident companies. This tax-efficient environment encourages cross-border investments and supports international entrepreneurship.

 

Tiers of Cyprus Forex Licenses

In Cyprus, there are three main tiers of forex licenses granted by CySEC under Law 87(Ι)/2017, depending on your business activities. CySEC oversees forex brokers, ensuring they meet capital adequacy requirements, financial compliance standards, and professional competency criteria for employees. Regardless of the license tier, the licensee must maintain the share capital at or above the required minimum level.

  • Basic License: Requires a minimum capital of 50,000 EUR. Allows businesses to provide investment advice and execute orders, or provide investment advice and portfolio management services. However, this license does not permit holding clients’ money or other financial instruments.
  • Standard License (Market Making): Requires a minimum capital of 125,000 EUR. Allows businesses to pass customers’ orders directly to the liquidity pool using the Straight-Through Processing (STP) model. This license permits holding clients’ money or other financial instruments but may expose clients to lower liquidity.
  • Full License (Dealing On Own Account): Requires a minimum capital of 730,000 EUR. Authorizes businesses to process customers’ trades in-house, acting as a counterparty to their trades. Clients can trade directly with the broker, benefiting from more liquidity and protection against market fluctuations. This license also allows holding clients’ money or other financial instruments.

 

Forex Regulations in Cyprus

In the European Economic Area (EEA), including Cyprus, the forex market operates under a unified set of regulations outlined in the Markets in Financial Instruments Directive II (MiFID II). Introduced in 2018, MiFID II sets the basic standards for financial activities. While countries like Switzerland and the UK have adopted stringent measures, Cyprus adheres to the fundamental requirements, offering flexibility while ensuring market safety and transparency.

MiFID II mandates funds segregation, requiring forex brokers to keep clients’ funds separate from company funds in distinct bank accounts. This safeguards clients’ funds in case of financial difficulties. Cyprus, however, adopts a more relaxed approach, which our team at Regulated United Europe (RUE) can guide you through in a personalized consultation.

Client categorization is another important aspect of MiFID II. Brokers must classify clients as retail or professional traders based on their knowledge and experience. This allows brokers to assess risks accurately, offer suitable products, and prevent inexperienced traders from engaging in high-risk activities.

The investor compensation rule is vital for protecting clients in event of broker bankruptcy. According to MiFID II, clients in the EEA, including Cyprus, are covered up to 20,000 EUR, while those outside the EEA are eligible for 1,160 EUR. In Cyprus, the Investor Compensation Fund (ICF) manages this function, providing compensation to non-professional investor-clients of ICF members, regardless of their legal status or nationality.

HOW TO ESTABLISH A CYPRUS INVESTMENT FIRM (CIF)

Due to its numerous advantages, many international business people consider establishing a Cyprus Investment Firm (CIF) as a valuable opportunity to conduct forex business across the European Economic Area (EEA). However, the process of setting up a new company in Cyprus, particularly a forex company, requires adherence to the EU’s rules for anti-money laundering/countering the financing of terrorism (AML/CFT).

To establish a CIF, certain requirements must be met:

  • Hiring at least four directors, with three residing in Cyprus.
  • Establishing a Board of Directors with members of excellent reputation and relevant professional competencies.
  • Opening a physical office in Cyprus with CySEC approved key employees.
  • Transferring the authorized minimum capital to a local bank account, which varies based on the intended forex license tier.

 

For incorporation, the following documents are needed:

  • Memorandum and Articles of Association.
  • A detailed business plan and financial plan.
  • Proof of deposited authorized minimum share capital.
  • Certified passport copies of directors, secretary, and ultimate beneficial owners.
  • Proof of the company’s registered address in Cyprus.

The business plan should cover management, services description, organizational structure, AML/CFT policies, risk management, compliance procedures, marketing plan, and financial projections.

The financial plan should include a profit and loss statement, balance sheet, cash flow statement, capital requirements, revenue and cost projections, and budget forecasts.

Once all documents are prepared, the application must be submitted to the Registrar of Companies (RCOR) in Cyprus. However, it’s important to note that a newly registered company cannot offer financial services without obtaining a license from CySEC first.

Application Process for Cyprus CIF

Receiving a Cyprus forex license typically takes around 6 months, as authorities are required to decide within this timeframe after receiving the application. However, if the application is incomplete or inaccurate, or if there are inconsistencies in the submitted documents, the process may extend to 10 months. The application fee is 3,000 EUR, with an additional 1,000 EUR per financial service, except for the Multilateral Trading Facility (MTF), which incurs an extra fee of 10,000 EUR, and 500 EUR per ancillary service. For an expedited process of 3–4 months, an additional fee of 25,000 EUR is required. It’s advisable to consult our legal team before opting for the fast-track option.

Once your Cyprus-based CIF is incorporated, follow these key steps to apply for a forex license:

  • Initiate the KYC verification process for shareholders and directors, with guidance from our team.
  • Prepare all application documents, which may take up to 2 months.
  • Submit the application to CySEC.

The application must include:

  • Completed CySEC application form
  • Information on company directors, managers, and shareholders
  • Certificate of Incorporation, Memorandum, and Articles of Association
  • Proof of registered office in Cyprus
  • Directors’ and secretary’s names proof
  • Group structure and organizational structure
  • Manual of internal procedures and processes
  • Three-year business plan
  • AML and KYC procedures guide

Each member of the Board of Directors and shareholders with special participation must submit:

  • Notarized copy of passport
  • Proof of residential address
  • CV showing financial industry experience
  • Education certificates demonstrating financial education
  • KYC documents
  • Certificate of no criminal record
  • Certificate of good financial standing
  • Personal questionnaire

RadiantBiz, is ready to assist you in incorporating a Cyprus company and obtaining a forex license. With our team of legal advisors, tax experts, and financial accountants, the application process will be smooth, transparent, and hassle-free.

Are you ready to setup a business in Dubai with RadiantBiz? If you want to learn about starting business in UAE, you can contact us by calling +971 50 797 4832 or sending a WhatsApp message to +971 50 777 5554. You can also email us at [email protected] for assistance.

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