License for brokers in the Forex industry is very important because it is directly connected to your reputation. If you have a dubious license or do not have it all, traders will not trust you with their funds and you will be unable to conduct trading. There are many regulators in the foreign exchange market, however, CySEC is one of the most popular ones. In this article, we will talk about it.
The Cyprus Securities and Exchange Commission (CySEC) is an independent organization responsible for the investment services market. There are also other areas of responsibility for this organization. The mission of The Cyprus Securities and Exchange Commission consists of fulfilling quality supervision, in order to guarantee the protection of investors, as well as the healthy development of the financial sector.
When it was founded?
CySEC was founded on the basis of the 2001 law. The activities of the Commission are regulated by the laws on stocks, organizations, etc. For the purpose of its work, the Commission sees the creation of such conditions in Cyprus, that the country has developed into a secure, suitable, attractive method for investment.
Why do brokers go for the CySEC license?
Brokers, regulated by organizations, are fairly common in the industry. Hundreds of brokers in the Forex market are regulated by CySEC and it remains one of the most reliable ones. Furthermore, CySEC is not really defined by a particular size of a brokerage that applies for a license with them. If you take a look at T1Markets review here you’ll see that despite its relatively larger size it still goes for a local license. This can be said the same about the medium as well as small-sized brokerage firms.
Cyprus is a member of the European Union and is a member of the CySEC directive and MiFID. This will allow the service of the regulator to be provided in many countries. CySEC is one of the first organizations, which took over the regulation, as well as the legalization of trade with binary options.
Cyprus is the country that creates the image as a friend of businessmen. In Cyprus, there is a very simple tax system and it is very easy to create an enterprise. It is also a simple process of the creation of financial companies. At the same time, the brokers are happy to create the organization in Cyprus. As a result, they can cover a significant part of Europe’s Forex traders, as well as the whole world. This is one of the main reasons why brokers prefer The Cyprus Securities and Exchange Commission over others.
The organization simply proposes to create a brokerage business in Cyprus and allows companies to enter the EU market. Hence there is no need to open a company in another country. These opportunities do not only reduce the tax burden but also help not to pay for the maintenance of branches in other countries.
Why is this regulator criticized often?
In Cyprus, there were created such convenient terms that a lot of companies began to open themselves here. Since 2001, there have been so many companies, that some of them started breaking the laws, and what’s more, they could get away with minimal fines and sanctions. This situation created a feeling of weakness in control, which aroused criticism from the side of other European regulators. Most of the criticism was associated with the subject that the fines were less than in other organizations. As a result, the reforms of the basic principles of managing the situation were carried out.
The new face of the regulator
In 2010, the regulator changed its policy and built a new normative base. They had to be fully compliant with the MiFID directive. 2012 saw a giant shift in the operation of the regulator. As a result of this, most of the dishonest companies were caught under a ban, and a huge fine was also issued. Such reforms led to the fact that the reputation of CySEC improved notably. At this time, the regulator already provides a comfortable business environment without dubious laws, which earlier made it possible to threaten the integrity of the markets.
At this moment the regulator is aimed at ensuring the well-being of investors. For this purpose, a particular set of measures were adopted, which guarantees the trader safety when they deposit their money. The regulator has assigned the minimum capital for the millions of euros without a quarter. Also, the brokers make contributions to the Compensation Fund for their traders.
The Compensation Fund is an analogy of what the brokers of the Financial Conduct Authority (FCA) of Great Britain offers. For this moment, each broker will be protected for 20,000 Euros of a Compensation Fund, if the broker is bankrupt or liquidates in some other way. The Compensation Fund is an important step in the development of the regulator and brand. Now the broker is becoming more suitable for work. Investors can take advantage of significant protection against unethical actions of brokers, as well as market risks.
Safety from scams
The Commission monitors the working of a broker through checking a lot of auditor reports, as well as other financial documents. This guarantees that the broker works in accordance with the main principles of the regulator – a fair, open, and transparent market. In this case, even if the broker still has the ambitions of manipulating the market, there is a clear procedure for resolving such situations. In this case, the trader should turn to his own broker. The broker, in its turn, should provide a fast, as well as an effective solution to the complaint. If a trader does not receive a satisfactory solution, on its side will be a legal system.
The main reason behind brokers choosing CySEC regulator is, first of all, the reputation of the Commission. When you are a broker and a trader sees that you have a CySEC license available the chances of choosing you over another broker are extremely high. This is simple psychology that works well among traders. At the same time, the laws and requirements that a regulator has, are very company-oriented and provide fertile ground for companies to establish themselves, without the additional tax burden.