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Obtaining an investment license
Investment activity is the process of investing funds in investment objects, as well as other actions aimed at making a profit. This can be the purchase and sale of securities, real estate under construction or completed, and other assets from which the investor expects their value to grow faster than the inflation rate.
Who needs an investment license?
Licensing of investment activities is necessary in most cases when this activity is carried out on a professional basis - that is, when a person or company does not simply invest their assets to earn money, but provides certain services (management, consulting, asset transactions, etc.) to third parties and for a fee.
What investment activities require a license?
There are several important classifications of investment activities, understanding which will allow you to accurately determine both the type of license required and the list of requirements for obtaining it.
The first fundamental point will be the distinction between investing the investor's own funds and investing other people's funds as a type of service provided, which was already mentioned earlier.
It is also of fundamental importance what assets exactly you plan to invest in:'
- "Traditional" investment assets: securities (debt and equity), derivative financial instruments, precious metals and energy, foreign currency, and real estate.
- "Alternative" investments: works of art, cryptocurrencies, animals, even comics or wine - everything that is bought and sold can become an investment.
The activities of professional participants in financial markets: brokers, investment funds and asset managers, investment advisers and consultants, and pension funds - also often require obtaining an appropriate license.
Separately, it should be said that even in countries where any type of investment activity is not licensed, the company may be required to confirm the legality of its activities for clients or counter-parties.
Such confirmation can be a Legal Opinion - a document issued by a licensed lawyer containing an answer to the question of compliance or non-compliance with the applicable law of certain company operations. Such a document, although not a license, serves as a guarantee of legality for counter-parties and helps to solve, among other things, marketing tasks.
What types of investment licenses are there?
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Brokerage license
A broker is the main participant in the professional investment market, who has the right to carry out transactions for clients in financial markets.
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Asset management license
An asset manager is a professional market participant who carries out transactions on behalf of his clients aimed at increasing the price of the client's assets and reducing the risks of their investment portfolio.
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Investment advisor license
An investment advisor does not have the right to carry out transactions with other people's assets but can give individual investment recommendations - advise his clients on which assets to buy and which to get rid of.
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Forex license
Forex broker is an intermediary in a specific financial market Forex (from foreign exchange) - an international banking market for exchanging one currency for another, which allows you to make investment transactions with currency without the participation of a bank and benefit from fluctuations in the rates of currency pairs.
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Investment Fund license
Investment funds are professional institutions that attract funds to their portfolio, invest it and strive to make a profit for those who invested.
Requirements for obtaining an investment license
Even though the terms, cost and other conditions for obtaining an investment license depend on both the type of license and the types of activities that are planned to be carried out, and on the country in whose jurisdiction the business is planned to be conducted, and, as a result, in which the required license must be obtained, it is possible to highlight certain common points and trends, for example, those based on the norms of international conventions or other supranational bodies - such as the EU directive MiFID II (The Markets in Financial Instruments Directive), which all the legislation of EU member states complies with.
- Substance
To combat fraud in financial markets, most countries require confirmation that the license applicant actually exists and is physically located in the country of operation, has a staff of specialists, appropriate conditions and has sufficient funds to conduct the business that it declares.
- AML/KYC compliance
Combating money laundering is the most important requirement for any business in the financial sector, including investment. Developing relevant policies, identifying and checking counter-parties, hiring qualified AML officers - the process of obtaining a license is unthinkable without all of this.
- Fit&Proper
Of course, any regulator issuing licenses will want to make sure that the future participant in the financial market, as well as its key personnel, management and founders, have sufficient experience, education and reputation, have not been noticed in dishonesty, have not been subject to sanctions, criminal cases and bankruptcies.
- Capital
No investment business can exist without significant capital requirements, deposits and insurance coverage, designed to compensate for the damage to its clients in the event of financial problems of a professional market participant and protect it from default on financial obligations.
Naturally, this list of requirements is not complete, very approximate and indicative.
What is the process of obtaining an investment license?
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Legal planningThe preparatory stage of obtaining a license is determining which country and type of license the business will need to conduct the desired activity, assessing the risks and consequences, as well as other related parameters - tax burden, cash flows and a financial plan.
After all, there is no single correct way to legalize your activity that would suit all businesses - after all, everyone has different goals, objectives, budgets and priorities. Therefore, copying other people's business structures without a thorough understanding of why and for what purpose this or that choice was made is the right way to get a completely different result than expected! -
IncorporationRegistration of a company that meets the requirements of the law is the first and essential step in obtaining a license. Remember, the company will not be able to advertise, attract clients, or operate before receiving a license - this will be a violation and a sure way to be denied a license.
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Preparing and collecting a package of documentsThe next step is for the company to comply with all requirements, develop internal documentation, find and hire the required employees, and collect a set of documents to apply to the regulatory authority.
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Reviewing the application and obtaining a licenseThe next stage involves the regulator reviewing the received application, clarifying the points of interest to them, checking the applicant's compliance with all applicable requirements, and making a decision on issuing a license.
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Compliance with current requirementsRemember that the process of compliance with requirements does not end with obtaining a license, but only begins!
Timely reporting, periodic inspections of activities, maintaining the company's compliance with requirements, paying taxes, and ongoing interaction with regulatory authorities - all these are key tasks in the process of conducting regulated investment activities.
Our Services
Below you can select the license you are interested in
Obtaining brokerage license
Brokerage activity is the activity of executing transactions with securities on behalf and at the expense of the client (including the issuer of securities at their placement) or on its own behalf and at the expense of the client on the basis of compensated agreements with the client.
A list of countries where we can assist to obtain this license
Obtaining an Asset Management License
To operate legally while handling client assets, investment portfolios, or pooled funds, financial institutions require specific regulatory authorization.
A list of countries where we can assist to obtain this license
Obtaining an investment advisor license
This license is required to advise individuals or legal entities on securities. The authorization will also assist in providing investment advice
Obtaining an Investment Fund License (Mutual Fund, Closed-End Fund, AIF)
Investment funds play a key role in today’s financial markets, enabling investors to efficiently manage their assets and diversify risk. In many legal systems, the operation of such funds requires proper licensing.
