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Review of FSC – BVI (Financial Services Commission, British Virgin Islands)

Financial regulators play an important role in the regulation and oversight of forex brokers. While there are many regulators, usually one per jurisdiction, the Financial Services Commission or FSC, based in the British Virgin Islands, is one such regulatory authority body.

More and more forex brokers are gaining an FSC license from BVI. As a result, traders might be wondering if an FSC BVI regulated forex brokers are trustworthy. In this article, we take a look at the role of FSC in the British Virgin Islands and see whether you can trade with forex brokers registered with the FSC – BVI.

What is the Financial Services Commission BVI?

The Financial Services Commission based in the British Virgin Islands, is a financial regulatory authority. The institution was established in December 2001, following the BVI’s financial services commission act. The FSC is an autonomous regulatory authority overseeing the jurisdiction in the British Virgin Islands region.

One of the important things to note is that the FSC’s main mission to protect the interest of the economic activities carried out in the BVI jurisdiction. The institution enforces its oversight, primarily by regulating the economic activities carried out by companies that are registered in the BVI jurisdiction.

Considering that BVI is an offshore jurisdiction, the cost of licensing to carry out retail forex trading activities are quite cheaper comparing to other licensing jurisdictions such as BaFIN in Germany, or the CySEC in Cyprus.

One of the main factors that attracts quite a few forex brokers to set up office in BVI is the fact that it is a tax haven. Therefore, the lower costs is one of the biggest reason for forex brokers to operate under a BVI license.

The advantage to the trader is here that the costs are low and in some cases it allows traders to circumvent the complex tax structures that they might encounter when trading with a forex broker that is regulated elsewhere.

Is the FSC BVI a good regulator?

One of the primary services offered by a financial regulator is to ensure the integrity of the companies that are registered there. In terms of the regulatory guidelines issued by the FSCBVI, the rules are quite simple.

But there are a few things that make it attractive for forex brokers to set up office there and gain a license and a few things that forex traders need to bear in mind.

Firstly, the biggest difference is that an FSCBVI regulated forex broker do not need to maintain a segregated account for customer deposits. Secondly the minimum capital required to set up a business is also much lower.

With these two, one can see that it is quite easy for just about anyone to open a company in the BVI and operate under the FSCBVI license. This can be cause for concern given the lack of proper diligence.

Given the lax rules, it is quite easy for a forex broker to take advantage of this and potentially engage in scams that will put the customer at a loss. Due to this, traders are in their right to remain concerned when opening a trading account with an FSC-BVI regulated forex broker.

To date, there hasn’t been any case where FSC BVI strictly enforced its rules and regulations. Also, the fact that its oversight is limited to the jurisdiction of the British Virgin Islands, traders do not have any access to recourse in the event of a dispute.

Why should you consider trading with a FSC BVI regulated forex broker?

Having outlined the above, the question that comes to mind is why a forex trader would prefer to trade with an FSC BVI regulated forex broker. The answer to this can be because of many reasons.

For example, the laws in the United States prohibit traders from taking on a leverage of more than 1:20. This greatly limits one’s trading ability especially if the trading capital is quite small.

To circumvent this restriction, US citizens can trade with a FSC BVI regulated forex broker. Of course, it comes with the risk of trusting the BVI regulated forex broker with your funds. There are quite a few well established examples of scams where some forex brokers operating with the FSC BVI license were able to get away due to lack of oversight and international reach.

All said and done, it is up to the trader to assess their need when looking for a forex broker that is regulated by the FSC-BVI. While there is no fool-proof method to ensure that your trading funds are secure, be sure to do your homework and conduct your own due diligence, especially when trading with an offshore regulated forex broker.

Read 805 times Last modified on Sunday, 12 April 2020 11:41