Acquiring a Forex license in the United Kingdom is a mandatory procedure for engaging in exchange operations. A brokerage license in the United Kingdom is one of the most prestigious worldwide. In the subsequent parts of the article, we will delve into the specifics of the licensing procedure, as well as the main conditions that candidates should fulfill.

Regulation of brokerage activities in the UK

In recent times, Forex has been gaining increasing popularity in many countries, particularly in the Commonwealth of Independent States. As evidenced by practice, the British license (alongside the US license) is considered the most authoritative. The United Kingdom has earned its status thanks to stringent control of monetary market activities.

The regulatory entity tasked with supervising Forex regulations in the United Kingdom, granting Forex licenses, and conducting oversight is the Financial Conduct Authority (FCA). Created to furnish a regulatory architecture for all financial entities, encompassing Forex licensure in the UK, the FCA's purview spans legislative and investigatory methodologies, law enforcement, and the enforcement of statutory requisites. Its regulatory ambit extends to exchanges, financial entities, and financial services markets.

The FCA operates independently of the authority, as it is funded through levies imposed on participants of the monetary services sphere. The Financial Conduct Authority holds significant supervisory powers, including safeguarding the rights of clients of financial firms, providing market participants with assurances, and setting minimum operational conditions.

Within its role, the FCA oversees and licenses British enterprises and closely collaborates with the Bank of England to guarantee that all forex brokers actively promote and foster a healthy trading climate. Forex brokers supervised by the FCA offer currency traders with confidence that their funds are safeguarded on their platform, as licensed brokers should regularly present evidence to the overseeing establishment to demonstrate that client funds and company funds remain divided uninterruptedly. Also, the FCA confirms that leverage constraints are applied to limit potential trader losses if markets unexpectedly move in the wrong direction.

A company may provide forex broker services in Britain upon acquiring the requisite authorization by the Financial Conduct Authority. The FCA controls any individual or entity involved in governed activities in the United Kingdom. The Financial Services and Markets Act 2000 (FSMA) presents the juridical framework used to create rules and provisions for licensing entities offering monetary services in the United Kingdom.

Note: FSMA Amendment/Order 2024 No. 169 came into force 11th March 2024, adding and specifying certain non-regulated activities turn into regulated ones. Kindly seek advice from our legal consultant regarding any of the alterations in the British legislation.

Supervised brokers are needed to periodically notify of their transactions to the FCA to demonstrate adherence with all rules and stipulations. In case of a broker's closure, the FCA provides compensation to investors.

Obtaining a forex license in the UK

If you're interested in getting a brokerage license in the United Kingdom, it's essential to study the primary legislative requirements. To act as a broker, you need to incorporate a firm within the territory of Britain.

A Forex license in the UK is required to work in the next areas:

  • purchase/sale of currency (Forex);
  • acquirement/vending of securities (on a margin basis);
  • activities with futures contracts;
  • access to online trading;
  • advisory services (on financial issues);
  • asset management.

According to the FCA, engaging in Forex market activities constitutes bookmaking, hence a company seeking licensure must adhere to stringent requirements, particularly regarding personnel. The director of the company must demonstrate professional expertise, experience, and industry knowledge. Throughout the company's activity, the director must work within the territory of the United Kingdom (the director's residency may be verified by FCA personnel). Additionally, to acquire a brokerage licensing in the UK, the candidate company should have:

  1. local office;
  2. compliance specialist;
  3. business plan;
  4. monetary plan for the next 3 years;
  5. independent auditor.

The company must implement AML procedures and undergo accreditation. Mandatory for the enterprise is to hire a compliance specialist who will collaborate with the regulator regarding the firm's activities and conformance with all legislative acts.

Forex broker services in the UK demand obtaining licenses, which are classified into 3 categories:

  1. The dealership license, a comprehensive license corresponding to "market-making". It encompasses the conducting transactions with monetary instruments.
  2. The mediator license is a Matched Principal License, limiting the broker's operation to Straight Through Processing (STP) order execution, implying hedging of client payments through equal transactions with a liquidity supplier.
  3. Limited brokerage license, a type of license allowing sales and marketing operations but does not grant the ability to keep client funds.

A dealer or intermediary license enables the enterprise to offer Contracts for Difference (CFDs) on currencies, commodities, futures, and stocks to retail and wholesale clients. Conversely, a limited license permits the firm to introduce customers to a dealer or intermediary firm.

Obtaining a Forex license in the UK necessitates adherence to specified capital prerequisites.

License to do business at one’s own expense (dealer license)

730,000 EUR

Matched Principal License (intermediary)

125,000 EUR

Limited brokerage license

50,000 EUR

The authorized finances are deposited into a bank account at the time of submitting a package of paperwork to the overseer (the use of these funds in the work of the entity is prohibited).

Forex supervision in Britain: learn more about the stipulations

As noted above, an enterprise that intends to receive a forex license in the UK should meet a scope of criteria:

Physical presence

It is crucial to establish that the company's operations are overseen from within the confines of the United Kingdom. The establishment must maintain a registered office within the nation's borders, along with a resident director. Failure to manage the company's affairs within the United Kingdom may result in the revocation of the license. Moreover, the company's office must be situated within British territory and fully furnished to facilitate its operations, including essential amenities such as internet and telephone connectivity.

Authorized individuals

Furthermore, it is necessary to designate a compliance officer and a chief executive officer, both of whom must be situated within the jurisdiction of the country. Each individual must undergo rigorous compliance assessments and receive approval from the regulatory authority.

Depending on the size of the firm, additional specialists such as sales representatives, technical support staff, compliance officers, and accountants may also be required. The experience and qualifications of personnel are among the most critical elements of compliance.

Other requirements

The regulatory body demands disclosure of nearly all aspects and details of the business. To apply for a brokerage license in the United Kingdom, among other requirements, one needs to:

  • Business and financial plan;
  • Supervision and AML Guidelines;
  • Verification of beneficial owners, directors, controllers, and affiliates according to KYC (Know Your Customer) requirements;
  • Documentation demonstrating professional liability insurance coverage.

Reporting and audit

The licensee is required to submit an audited monetary report annually. Additionally, you must notify regulatory authorities of any significant modifications in the company and its activities.

Documents needed for licensing

To acquire a brokerage license in the UK, you need to submit a set of documents, which comprises:

  • Application form;
  • Registration documents;
  • Passport information for company directors and founders;
  • Documentation regarding the qualifications and resumes of directors and shareholders;
  • Certificates of good conduct;
  • Confirmation of the presence of an established offline office;
  • Business plan;
  • Balance sheet with a description of the forecast;
  • Description of AML procedures;
  • Letter of recommendation from the bank.

Additional documentation may be requested by the regulator as part of the application review process.

Conclusion

The United Kingdom stands as one of the most esteemed global pecuniary hubs, attributed to its stability and strong economic and political positions. Furthermore, the country upholds a top standard of monetary overseeing framework. Hence, many entrepreneurs are keen on acquiring a forex broker license in the UK. Practically, almost all firms or even individuals offering monetary services in the United Kingdom should be authorized by the FCA. Normally, the processing time for a forex licensing in Britain spans about 6 months.

If you are also intending to establish an entity in the United Kingdom and get a British brokerage license, you can turn to our specialized experts. TKDeal specialists are ready to provide consultation on financial activity regulation in the United Kingdom and offer a comprehensive range of accompanying solutions. To get in touch with us, please fill out the dedicated form provided below.