Forex License in Latvia

Forex License in Latvia

The Republic of Latvia is one of the European countries with the promising future. Countries with the valid market of interbank currency exchange at free prices (Forex) are divided into two types:

— classic for business;
— those that recently appeared on the retail market of securities currencies.

In the Baltic state that is a member-state to the European Union, all conditions and opportunities for successful trading and financial activities are created.

The applicable legislation of Latvia is based on principles of transparency and clarity, the banking system is known for its stability over the last fifteen years, the loyal and stimulating government policies commit to the foreign capital outsourcing.

Most entrepreneurs (engaged in commercial activity since the days of the Soviet Union) who seek to enter the European market shall be interested in the best offer for companies incorporated in line with laws of the country. The owners of licensed rights may participate in the certification program of the European Union.

Benefits and opportunities of a forex license in Latvia

As per clauses of the orders made by state authorities (Directive) to regulate activities of financial institutions, all countries of the Eurozone should grant the firms with right to render services subject to licensing. In Latvia, this order is also subject to actual implementation of international obligations at the government level (implemented).

Certification allows company owners based at the territory of Latvia notifying relevant competent bodies of other countries of their intention and subsequent provision of services to the company of investment pattern in the territory of their state. In compliance with terms of the current procedure, the additional permit for commercial activities is not required. All that is required is the written evidence from representatives of the chosen country.

Main benefits and advantages of jurisdiction to make transactions in the Forex market:

  • simplified mechanism to open a bank account;
  • if the application is rejected due to poor or inappropriate design, re-submission is allowed. All observations and errors above should be corrected;
  • efficiency of the registration process — period of registration is less than one quarter.

Companies may use various financial instruments. The following are sought-after:

  • Securities in circulation;
  • Options and futures;
  • Financial instruments in the money market;
  • Central Bank party in respect of commitments by statutory funds;
  • Forwards and other instruments of industrial nature related to financial indices, interest rates, financial calculations and so on;
  • Contracts on commodities and commodity resources with calculations in cash or as physical calculations in operation within multilateral trading platforms;
  • Forwards and CB derivatives in respect of contracts on commodities and commodity resources held as physical settlement, unless otherwise specified in the clause 6 above;
  • Cash settlement contracts;
  • Forward contracts, futures and options on interest rates and other tools of industrial character, in relation to climatic aspects, freight rates, emission quotas, conducted with cash, and so on.

Permits issued for CySEC business operations provides for the following aspects:

1. Administrative structure of the candidate and peculiar organizational adequacy;
2. Mechanism efficiency  and regularity for internal audit;
3. Separation of assets of the customer and the candidate with concurrent separation of customer assets among in-between;
4. The mechanism efficiency and its adequacy regarding prevention of conflicts of interest and related solutions;
5. The required staff for each candidate

Basic Parameters and Brokerage Firm Peculiarities

Members to the Association of European States (EU) that fulfilled all provisions and are successfully certified, and legal entities-residents of Latvia are entitled to obtain the license permit for intermediary financial and trading functions.

Since the republic does not refer to standard classical offshore centers, all business transactions are at all times subject to applicable basic tax rates.

A specially established Commission group supervises the compliance with rules to create financial assets and liabilities on the foreign currency market that operates in accordance with the applicable legislation of Latvia.

Peculiarities of brokerage firms of Latvia:

  1. To perform on the foreign currency market, brokers need a license permit (Forex). The Latvian legislation refers this category of companies to a business segment with the investment focus. The list of structural units is shown in the formal resolution; in addition, a full registry of financial instruments is listed.
  2. Representations and divisions of investment companies with the foreign capital are allowed to provide services on the Forex market. To implement activities, a license permit is needed.
  3. A prerequisite for companies operating in the foreign exchange market is to operate in the official valid office within Latvian territory.
  4. Advertising campaigns should give customers the real and valid information. The distribution of false information is strictly punished.
  5. Permit holders are prohibited to open affiliated companies according to the current legislation. This provision is adjusted if the main function of the division created will match activities of the parent company.
  6. To provide services in the financial market in other Eurozone countries, the company should inform the members of the Supervisory Committee.

The following shall be requisite in the written notice:

  1. The name of the state.
  2. Type of services to deliver, activities to take.
  3. Specificity of the organizational structure.

As the entire information is verified, the agency will send all the data to the authorized authority.

A permit (license) for Forex services in the Republic of Lithuania requires a comprehensive and systematic approach. Thanks to years of experience, high indicators of the successful outcome of each transaction, the specialists of the consulting company Private Financial Services will quickly and efficiently help to arrange activities at the territory of the Republic.

The Private Financial Services performs the procedure of business organization and formation; in addition it delivers a complete package of services for the current maintenance of the company:

— the company is responsible for preparation of the complete set of documentation and issuance of permit;
— it controls the registration process at all stages of the transaction;
— involves in the bank account opening and delivers the nominee shareholder and Director services;
— searches for the legal address and the proper software.

Requirements for the share capital formation

The main condition for the company that provides Forex services under the license is to avoid using intangible assets as the invested funds to form the share capital. The Financial Supervision Commission determines the sufficient minimum for the share capital to form. The company undertakes to comply with the specified size of deposits. The share capital of the company in the territory of Latvia should comply with standards as stipulated by the current legislation. The minimum size on the market of financial services is fifty thousand Euros.

In addition, depending on the specificity of activities performed, “the entry threshold” is defined:

  1. For Forex segment brokers with STP dealing (Straight Through Processing), the share capital code shall be not less than one hundred and twenty five thousand Euros. The amount of the equity capital is determined by calculation of percentage ratio – ten percent of the total company assets and not less than twenty-five percent of the cost of the company, independent of the volume of services provided (fixed costs).
  2. Company undertaking for exchange risks (market makers) form the share capital in the amount not less than seven hundred and thirty thousand Euros. The amount of the share capital is required to be paid in full.

When having high-risk transactions, the transaction amount cannot exceed the amount of eightfold size of the share capital.

Document Management and Establishment of The Forex Licensed Latvian Company

Prior to apply for a license, the procedure of registration should be completed in full.
The following is manadatory to get a licanese:

— current active bank account;
— written statement with a package of papers to the licensing department.
An appropriate authority will otify on the license or on refusal justified and explained.

The procedure of permit issue is free of charge. The annual use requires the duty payment with the amount that is reviewed every calendar period (365 days). Representatives of the Private Financial Services will establish a firm in compliance with requirements of the Latvian law for the period of up to seven days. Provided that one of the company owners is a legal entity, the procedure can take up to two weeks.

The company will need the valid address, to keep accounting records, to ensure preparation and submission of financial statements.

Upon the stage of the account verification, the company shall submit  the package of documents to the licensing office:

— official application. The text should indicate the list of services to deliver;
— personal information on the company owner and the company management structure;
— accounting and financial statements (Balance sheet). The report should be dated as of the previous month (prior to filing);
— plan-prospect for three years in view of risks, benefits, and business strategy. Characteristics of the accounting and managerial policies of the facility;
— description of the corporate structure with assignments and authorities. Detailed procedure of the Auditing Committee formation within the company.

Management's and Employees' Legal Requirements and Policies for Forex License in Latvia

There is a number of obligations and requirements to meet by a company for permission. Requirements are set both for business owners and for the share capital, hired employee and so on.

Company owners who plan to get Forex license in Latvia should meet the following conditions:

  1. No criminal records.
  2. Legal source of income officially supported.
  3. True autobiography and appropriate business status.
  4. The owner of the share in business (more than ten per cent) is required to have a broker experience and adequate specialized knowledge.

Qualified persons may be part of the management body experienced in similar positions (at least three years). The company may determine the eligibility of shareholders to perform supervisory functions. The company should employ two Latvian residents as the Director. The mandatory requirement is that the top management hold offices until the license permit expires.

Basic qualification requirements for the company employees:

— diploma of specialized education;
— work experience of at least three years on similar position;
— clear business standing.

All candidates are selected by the Committee that permits to register an employee.





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