A Guide to Setting Up a Brokerage in The Seychelles

The Seychelles is an archipelago of 115 islands in the Indian Ocean, 1,500 miles off the East African coast, with the capital Victoria, on Mahe island, having a tiny population of only 27,000 people. The total population of the Seychelles is just 100,000. Although the authorities in the Seychelles do not provide a definitive list of brokers set up in the territory (with this type of secrecy being one of the attractions to brokers setting up here), it is estimated that there are between 300-400 retail brokers registered in The Seychelles. Why are there so many brokers registered here? One of the main drivers is the ability of brokers to circumvent leverage restrictions imposed in major regulatory jurisdictions. On top of that, the Seychelles FSA have attractive minimum capital requirements for firms setting up business in the territory making it the attractive choice for many brokers looking to compete with their peers on leverage.

 

Since the introduction of MiFID II in 2018, stricter leverage limits were introduced for European forex brokers offering services to retail clients. Default leverage was reduced from 100:1 to 30:1 on major currency pairs. Leverage on minor pairs and gold was reduced to 20:1. This clampdown was mirrored by other regulators worldwide, including ASIC in Australia, the US (NFA), the UK (FCA), Canada (IIROC), Hong Kong, Singapore and New Zealand.

 

One broker we spoke with who is currently in the process of setting up in the Seychelles, Andrey Stoychev, an experienced FX, CFDs and Digital Assets manager, stated that, “Basically The Seychelles is a FX and CFD friendly environment but also a strictly regulated territory. On one hand you can start totally to legally to offer your services, can have a normal bank account for your operations and on the other hand clients can be sure that their broker treats them fairly and transparently having in mind that there are several reports which are regularly submitted to the local regulator. In general there is a good environment for the business in The Seychelles and also a lot of experienced consultants who are ready to help building a business out of there.”

 

In general, the main reasons that brokers have chosen The Seychelles over other jurisdictions can be summarised as follows:

Lighter regulation:

• The Seychelles has relatively light forex and financial regulation compared to stricter regimes like the US, UK or EU.
• Light regulation means that brokers are able to offer products and services prohibited elsewhere, like high leverage. There are in fact no restrictions on leverage for companies operating here. Some brokers in The Seychelles offer 1:1000 leverage, and some an eyewatering 1:2000! (see this list here)
• Brokers can potentially reduce compliance costs and oversight versus other jurisdictions.

Tax benefits:

• The Seychelles offers attractive corporate tax incentives like a zero tax rate on profits earned offshore.
• Offshore companies pay no capital gains tax or withholding taxes in the Seychelles.

Anonymity:

• The Seychelles permits owners and stakeholders of companies to remain largely anonymous.
• This appeals to brokers seeking discretion for their operations and finances.

Human resources:

• A local talent pool that is experienced in working with forex brokers.
  
  

Seychelles maintains a reputation for ease of doing business, making the process of setting up a brokerage relatively seamless. Understanding the local regulatory framework is a crucial starting point. The country's financial market is overseen by the Seychelles Financial Services Authority, ensuring transparency and compliance among businesses in the finance sector. Familiarising yourself with the licensing requirements and legal procedures will help you navigate this process smoothly.

 

Why Choose The Seychelles?

The Seychelles offer a unique combination of social stability, solid jurisdiction, and an advantageous tax environment.

 

Seychelles has experienced consistent economic growth in recent years, transforming itself into a competitive player in the African market. The nation's forward-thinking approach to investments and sound economic policies have contributed to creating an investor-friendly climate.

 

One of the key factors attracting businesses to Seychelles is its favourable tax regime. The corporate tax rate in Seychelles stands at 25%, while the personal income tax rate is progressive, starting at 0%. Furthermore, Seychelles has established double taxation avoidance treaties with several countries, making it even more appealing for international ventures.

 

Apart from the tax advantages, Seychelles' jurisdiction is solid and pro-business. The country offers a variety of legal structures for registering and operating a brokerage. These options allow you to choose the most suitable structure for your business, simplifying the process of setting up a brokerage.

 

In addition to its economic and jurisdictional benefits, Seychelles offers political and social stability. The nation has a stable political climate, which provides peace-of-mind for business owners. As a result, Seychelles has established itself as an attractive hub for setting up various enterprises, including brokerages.

 

Lastly, the beautiful landscape, welcoming culture, and prime location in the Indian Ocean make Seychelles an appealing destination for both establishing and conducting your brokerage business.

 

Advantages of A Seychelles Brokerage License

Setting up a brokerage in Seychelles offers numerous benefits for your business venture. One of the main advantages is the favourable tax environment. In Seychelles, the corporate tax rate is relatively low, ensuring that your profits are not heavily taxed. Additionally, personal tax rates are also competitive, allowing you to take home more of your hard-earned money.

 

Privacy and asset protection are other essential advantages. The jurisdiction has strict laws and regulations in place to protect privacy and safeguard business assets. This secure environment provides peace of mind for brokers and clients alike.

 

Another significant benefit of setting up a brokerage in Seychelles is its diverse financial services sector. The country offers various service providers, catering to different aspects of the brokerage business, including commodities and other financial products. This availability of resources allows you to easily set up and expand your financial services operation.

 

Moreover, Seychelles has a relatively low minimum paid-up capital requirement, which makes it an attractive option for startups and small businesses looking to establish a presence in the brokerage industry, with $50,000 being the minimum capital requirement. Moreover, once established, this capital can be used for financing the business, This financial advantage enables you to allocate more funds to other essential aspects of your business.

 

Setting up a brokerage in Seychelles can provide a range of benefits, including:

• Favourable tax environment
• Competitive personal tax rates
• Privacy and asset protection
• Diverse financial services sector
• Low minimum paid-up capital requirement

 

The Seychelles Regulatory Framework

In setting up a brokerage in Seychelles, it's essential to understand the regulatory framework you'll be dealing with. The main governing body responsible for overseeing securities and financial services in the country is the Seychelles Financial Services Authority (FSA). Established in 2013, the FSA is an autonomous institution responsible for supervising and regulating non-bank financial services within the Seychelles.

 

To operate a brokerage in Seychelles, you'll need to acquire a Seychelles Securities Dealer License. This license is issued by the FSA and permits registered entities to engage in various securities trading and investment activities. Some of the requirements in obtaining this license include:

• Proof of minimum capital
• Adequate insurance coverage
• Experience and qualifications of key personnel

 

To ensure compliance with the relevant rules and regulations, brokerages are required to adhere to the Securities Act 2007 and its amendments. The Act serves as a comprehensive regulatory framework for the securities sector, outlining the obligations and powers of the FSA, as well as stipulating licensing requirements and ongoing compliance standards for market participants.

 

The key aspects of the Act to be aware of include:

• Licensing and registration procedures for securities dealers
• Regulations on dealing with issues such as insider trading and market manipulation
• Requirements for filing regular financial statements and disclosures.

 

In addition to these key pieces of legislation, you'll also need to adhere to the regulations set out by relevant international organisations, as Seychelles aims to be compliant with global standards in the financial services sector.

 

Types of Brokerage Licences

 

When setting up a brokerage in Seychelles, you have several types of licences to consider. Each licence caters to different parts of the financial services sector. Let's explore the most relevant ones for your needs.

 

Securities Exchange Licence

A securities exchange licence allows you to operate an exchange platform for the trading of various types of securities, such as stocks, bonds, and other investment vehicles. Acquiring this licence ensures that your exchange complies with the regulatory requirements in Seychelles and operates transparently.

 

Securities Dealer License

If your intention is to trade securities on behalf of clients or for your own account, you will need to apply for a securities dealer license. To attain this licence, you must meet specific requirements laid out by the relevant authorities, including submitting an securities dealer license application.

 

Broker's License

A broker's license enables you to act as an intermediary between buyers and sellers of various financial instruments. The role involves providing clients with advice, market analysis, and access to a wide range of investment opportunities. You need to obtain this licence if you wish to facilitate transactions within the securities market.

 

Forex License

For those interested in operating within the foreign exchange market, a forex license is essential. This licence permits you to offer forex trading services to clients, execute trades on their behalf, and provide advice on currency movements.

 

Securities Dealer Representative

As a securities dealer representative, you can represent a licensed securities dealer in The Seychelles. This role involves advising clients, executing trades, and managing their investment portfolios. To obtain this status, you must have the necessary qualifications and complete the securities dealer representative licence application.

 

Requirements for Seychelles Brokerage License

 

Directors and Shareholders

To get started, your company must have at least one director and shareholder. Directors must be above 18 years old and have no criminal record or insolvency issues. Shareholders can be individuals or corporate entities and can reside anywhere in the world. However, it's essential to ensure that proper documentation, such as identification and address proofs, are submitted to the authorities.

 

Company Formation

Register your company under the Companies Ordinance, which requires submission of essential documents including your company's Memorandum and Articles of Association. You'll also need to choose an appropriate company name that reflects your brokerage business. The company must have 2 directors (who can be non-residents). At least one individual employee needs to be registered under the Securities Act 2007.The company also needs to rent premises in The Seychelles for keeping records or other documents.

 

Share Capital and Bank Account

The minimum share capital required for a Seychelles brokerage varies depending on the type of services you plan to offer. It's necessary to open a local bank account to deposit your share capital and conduct operations. Additionally, it's advisable to maintain a separate account for client funds to ensure transparency and compliance.

 

Licenses and Insurance

Obtain proper licenses, such as a Securities Dealer License, to offer services like trading in futures, options, warrants, debentures, contracts for difference, and investment in securities. Your brokerage is also required to have Professional Indemnity Cover to protect against potential claims arising from negligence or errors in your service.

 

Compliance Officer and Regulatory Requirements

Appoint a qualified Compliance Officer to oversee your brokerage's adherence to regulatory requirements. They'll ensure that internal controls and procedures are in place, monitor transactions, and maintain records. Furthermore, anti-money laundering policies and Know Your Customer (KYC) procedures must be implemented to prevent financial crimes. The MLRO must be a Seychelles resident.

 

Taxation and Privacy

Seychelles boasts a favourable tax regime for brokerages, with a corporate tax rate of 15%. However, tax exemptions may be available depending on your company structure and operations. Ensure that you comply with local tax regulations and report your financial statements to the authorities. Seychelles also offers a degree of privacy for company owners, but internationally accepted standards for transparency and information exchange must be adhered to.

 

Seychelles IBC Setup

When setting up a brokerage in Seychelles, you will need to establish an International Business Company (IBC). This process involves several steps and requirements to ensure your operations are in compliance with local regulations.

 

First, you must choose a suitable name for your Seychelles IBC. Ensure that the name is unique and does not infringe on existing trademarks, as well as adheres to any licensing conditions that may apply.

 

Your IBC must have a registered office address in Seychelles. This address will serve as the official point of contact for your business and must be a physical location within the country. It is crucial to select a reliable premises that offers sufficient asset protection and is in compliance with local regulations.

 

Before proceeding with the incorporation process, ensure that you have a bank reference. This is typically a letter from your bank stating that you are in good standing and have maintained a satisfactory banking relationship. This reference is essential, as the Central Bank of Seychelles requires it for their due diligence processes.

 

Familiarise yourself with the Seychelles International Business Companies Act, which governs the operation of IBCs. This legislation outlines the specific requirements and regulatory framework for offshore companies in Seychelles, including details on corporate structure, financial reporting, and taxation.

 

When incorporating your IBC, you may opt for a nominee service. This approach allows you to appoint nominees to serve as directors or shareholders, providing an additional layer of privacy and asset protection. It is crucial to ensure that the nominee service is reliable and compliant with Seychelles regulations.

 

To open an offshore bank account for your IBC, you will need to provide identification documents and proof of address for all directors and shareholders. Additionally, your company will require a Standard Due Diligence (SDL) process to verify the legitimacy and sources of funds.

 

Banking and Financial Services Relationships

When setting up a brokerage in Seychelles, establishing strong relationships with banking partners is crucial for the success of your business. These partnerships will provide access to various brokerage platforms and facilitate securities transactions for your clients. Additionally, they will assist in managing and maintaining your clients' portfolio of securities, loan stock, and certificates of deposits.

 

It's essential to collaborate with reputable foreign securities dealers as well, as they can offer valuable insights and access to international markets. Keep in mind that you'll be required to fulfil minimum capital requirements, which will vary depending on the type of brokerage license you seek.

 

As a broker, you'll need to ensure that all those working in the company are fit and proper persons to operate in the financial services industry, including yourself. This involves having the necessary qualifications, experience, and no record of fraudulent activities. It's also essential that your brokerage operates from specified premises that meet the regulatory requirements of the jurisdiction.

 

Maintaining up-to-date Know Your Customer (KYC) processes is a crucial aspect of your brokerage business. Implementing robust KYC procedures will help you identify and verify the identities of your clients, preventing potential risks associated with money laundering or other illegal activities.

 

Financial statements are also crucial for the transparency and credibility of your brokerage. You'll need to ensure accurate, up-to-date records are maintained, and submitted to the relevant regulatory bodies. These documents should reflect your business's financial health and compliance with all relevant regulations.

 

In Seychelles, offshore corporations are commonly used to conduct broker business. This legal structure offers several benefits, including favourable tax treatment and increased confidentiality. However, it's essential to understand the requirements and restrictions placed on offshore corporations by the Seychelles regulatory authorities to ensure your brokerage operates within the legal framework.

 

Finding Liquidity Providers to work with in The Seychelles

Please note, the list of Liquidity Providers ready and willing to work with brokers registered in the Seychelles is not as long as it would be if the broker was operating from a tier-1 jurisdiction such as the UK (FCA), Australia (ASIC), Germany (BAFIN), Cyprus (CySEC) etc. This is partly due to the lower capital requirements and perceived financial and reputational risk of working with Seychelles regulated entities. Some brokerage firms get around this by being registered in a main jurisdiction, where they have established relationships with premier Liquidity Providers, and then act as their own liquidity provider to their offshore entity regulated in The Seychelles.

 

If you need help finding a liquidity provider to work with for your Seychelles brokerage, please contact Liquidity Finder. We will help advise which Liquidity Providers can work with your brokerage.

 

What’s the long-term outlook for Seychelles brokers?

In early 2023, forex brokers registered in another popular offshore territory, Saint Vincent and the Grenadines (SVG) were subject to major changes by the authorities in the country. In January 2023, the SVG Financial Services Authority stopped issuing new licenses to forex brokers. Existing brokers that were not regulated in another jurisdiction were given until the end of March 2023 to wind down operations and cancel their SVG licenses. Could the same approach happen to brokers licensed in The Seychelles?

 

It is possible that retail forex brokers in the Seychelles could face similar pressures to those in Saint Vincent and the Grenadines, leading to potential license terminations or regulatory changes. Some key factors that could contribute to this outcome:

 

EU scrutiny of the Seychelles - Like SVG, the EU has placed the Seychelles on its list of high-risk third countries with deficient anti-money laundering regimes. This pressures brokers serving European clients.

 

Global regulatory trends - Stricter regulation of offshore brokers and push towards onshore licensing is a global trend that could spread. Regulators want more oversight of broker client funds and operations.

 

Loss of tax advantages - IF the Seychelles changes its offshore tax incentives, it reduces benefits to forex brokers of locating there.

 

Reputational risks - Global bodies like FATF criticizing Seychelles over lax financial rules could motivate policy changes. Loss of Switzerland's regulatory equivalence is a recent example.

 

Increased compliance costs - The Seychelles may enhance its broker regulations, raising capital requirements, compliance expenses and barriers to operating.

 

Shift to new sectors - Like SVG's focus on fintech over forex, the Seychelles could also reprioritize if it sees forex as high-risk.

 

However, the Seychelles also relies heavily on financial services so may be less inclined to force out brokers completely. But increased scrutiny and regulatory pressures could lead to branch closures, license revocations or tougher broker rules in the future. Brokers focused heavily in the jurisdiction could face these risks.

 

Consulting firms that can help

Liquidity Finder has worked with a number of regulatory consulting firms that are very experienced in helping cmpanies get set up in The Seychelles. Please contact Sam Low via LiquidityFinder's messaging system  if you would like a list a recommendation of who can assist you through this process.   

 

 

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