Offshore Regulation

What offshore licences allow

• Leverage of 1:500, 1:1000 or higher, against 1:30 under ESMA, FCA and ASIC rules.
• Deposit bonuses and promotions, banned for retail clients by the major regulators.
• Minimal capital requirements, sometimes under 100,000 dollars.
• Little or no requirement to segregate client money or provide negative balance protection.
• Marketing to almost any country, which is why they are used for global clients.

Why good brokers hold them

A broker with FCA and ASIC licences cannot legally serve a client in most of Asia, Africa or Latin America from those entities, and cannot offer the leverage those clients often want. An offshore entity solves both problems. The client gets the same platform, the same prices and usually the same company culture, but not the same legal protections. Whether that trade-off is acceptable depends on the client, and it should be made knowingly.

Judging an offshore entity

If the offshore company is part of a group whose main entities are regulated by the FCA, ASIC or CySEC, the group's reputation, capital and processes are on the line, and it will usually apply similar standards across the group even where it is not required to. If the offshore licence is the only licence, you are relying entirely on the broker's honesty, and the lesson on warning signs applies in full.

Some jurisdictions are not regulators at all

A St Vincent and the Grenadines company registration is not a forex licence; the SVG authority has said so publicly. A Marshall Islands company has no regulator for forex. A broker that calls a company registration a licence is either careless or dishonest, and either is disqualifying.

Key takeaways

• Offshore licences permit high leverage and bonuses and require little.
• Reputable groups use them to serve clients their main licences cannot.
• Judge the group behind the entity; an offshore-only broker is trust-based.
• A company registration is not a licence.