Like any other industry with a high net worth, legitimate ones can either gain a license from an onshore or offshore regulator. However, offshore licenses do not provide the same trust to traders that onshore counterparts offer. So, what is offshore regulation and in Shore supervision?
What is Offshore Regulation?
Today’s global regulation can be broadly divided into two types, one is offshore regulation, which has a relatively loose regulatory environment, and the other is onshore regulation, which has a strict regulatory and licensing system.
The offshore regulatory license issuance process is relatively fast, usually 2-4 months. At the same time, government department fees and operating expenses are relatively low. This type of regulation does not require companies to have local offices, company directors or shareholders. Due diligence or suitability requirements for company directors and shareholders are also relatively straightforward in most cases.
Offshore supervision does not require many reporting responsibilities for the license holder, mainly to prove its sufficient funds and submit financial statements. Most offshore regulations have little or no corporate income tax requirements in terms of tax filing. Moreover, offshore regulation neither requires financial service providers to provide services only from the local area, nor does it require them to provide services only to local residents. In terms of audit requirements, most offshore regulations only require the submission of annual financial statements. Of course, some may require monthly or quarterly statements.
Offshore regulators include Belize FSC, Seychelles FSA, and the latest Vanuatu VFSC.
What is Onshore Regulation?
Onshore regulation can also be called complete regulation, which has relatively stricter requirements on all aspects. In many cases, passports, resumes, academic certificates and professional qualification certificates, including recent family public bills, etc. are still not enough. It is also required to have good identification, proof of no criminal record, proof of non-bankruptcy and tax return proof, etc. Wait.
Not only that, onshore supervision also has relatively high requirements for the local operation of brokers, most of which are mandatory to work locally, and even their company employees must be local residents. Reports usually include financial status and minimum funding requirements. Risk management, compliance, anti-money laundering and other specific reports are also required by various regulators. In terms of taxation, the corporate income tax of each regulatory region is also different, but it must be higher than that of offshore regulatory regions.
Onshore regulators include UK FCA, Australia ASIC, Japan FSJ, US CFTC/NFA, Switzerland FINMA, Cyprus CySec, etc.
From this point of view, compared with offshore supervision, the onshore supervision system is much stricter. However, due to the relatively simple review procedures for offshore supervision, the relatively loose relevant rules, and the relatively short time for passing the review, for some newly established brokers, applying for an offshore regulatory license is often faster than applying for an onshore license. It saves time and cost, so offshore licenses are widely favored by new brokers.
It is also the offshore supervision that provides convenience for many large brokers. Some brokers will set up branches in offshore supervision areas, far away from domestic supervision. These branches can operate independently, using this as a springboard to attract customers from more regions. These branches often implement different operating standards from the parent company, take advantage of the relaxed environment of offshore supervision, and carry out bold illegal operations to mislead investors, resulting in damage to the interests of investors, and making the market suffer from the four offshore supervision. The word casts a shadow.
However, we cannot deny the ownership of a foreign exchange broker because of its offshore supervision. We should evaluate a broker’s operation method and platform performance more calmly and objectively before making a judgment. There is no absolutely good platform, only the platform that suits you! Of course, the premise is a formal brokerage platform, not a black platform or a capital market.