Obtaining financial license in Georgia

Georgian legislation does not provide for obtaining license to trade in financial instruments or other securities. At the same time, the law prescribes for licensing for:

the registrar of securities;
brokerage activities;
stock exchange;
central depository;
specialized depositary.

It is possible to register a limited liability company or a joint-stock company and obtain a license to carry out brokerage activities for the activity of a financial company in Georgia. To obtain financial license and other licensing services in Georgia, contact Law&Trust International.

The amount of the charter capital of a company applying for a brokerage license must be at least 500,000 Georgian Lari (approximately 233,349 USD). Also, according to the order of the National Bank of Georgia, this amount should always be available to the brokerage company.

Law of Georgia

According to Art. 23 of the Law of Georgia "On the Securities Market", the license for conducting brokerage activities gives the brokerage company the right to carry out transactions related to the circulation of equity stake in the capital, shares, bonds, certificates, bills of exchange, checks and other securities, and their maintenance and servicing, including:

List:

- conduct direct consultations for investors regarding investments, including - prices of securities, investments in securities, securities purchase and sale transactions, as well as when concluding related transactions with foreign currency;
- carry out research related to financial instruments and their issuers, and ensure the dissemination of the results of these examinations and studies or (and) recommendations on the investment strategy;
- advise issuers in connection with the issue of securities and attraction of investments;
- prepare and implement securities placement on a non-guaranteed basis;
- receive and transfer orders or instructions from clients in connection with securities, conclude transactions with securities involving the clients' funds in their own interests;
- manage investment portfolios of clients, including pension schemes, and funds allocated for transactions with securities;
- store and record investment funds or (and) securities of clients, as well as service nominee holders of securities; for this purpose, open cash accounts and securities accounts to clients and carry out transactions according to the indicated accounts;
- conclude transactions with securities with regard to own funds in own interests;
- prepare and place the issuer's securities on a guaranteed basis;
- grant securities to clients and borrow securities from them, and also use own funds to purchase securities for client, participate in "short sales", determined in accordance with the procedure established by the Agency;
- carry out the sale and purchase of foreign currency;
- carry out other operations with financial instruments, shares of an entrepreneurial company or other powers and authority as defined by the present Law.

Also, the Georgian legislation provides for a special preferential tax treatment for companies that have obtained the status of an international financial company.

Obtain the status

of international financial company

To obtain the status of international financial company, it is necessary to go through two stages of authorization (not including the fact of incorporation):

- to obtain a license (for example, of brokerage company) or permission (for example, of investment fund) and thereby become a financial institution;
- to obtain the status of international financial company (compared with the first stage, it is relatively simplified procedure, including with regard to the terms of decision-making - 5 working days).

The Georgian legislation provides for the following requirements for the activities of a brokerage company:

1. ne person can be the owner of a significant stake or employee of several brokerage companies at the same time. The specified person must notify the National Bank of Georgia and make this information public.
2. An employee of the exchange, registrar or central depository who has access to confidential information can not be simultaneously the employee of a brokerage company.
3. According to the Law “On Securities Market”, commercial banks are allowed to participate in the securities market directly or through their subsidiaries (brokerage companies) in accordance with paragraph 2 of Article 10 of the Law of Georgia "On the Activities of Commercial Banks".
4. Brokerage companies should not carry out activities not provided for in Article 23 of the Law of Georgia "On the Securities Market", except for participation in the above activities related to government securities and supporting activities necessary for conducting the main activity.
5. The National Bank of Georgia may, in accordance with the procedure established by it, determine the types of activities specified in Article 23 of the Law of Georgia "On the Securities Market", during carrying out of which no person is required to be a brokerage company or to have a license in the event that the person's activity is regulated by the relevant legislation.
6. Brokerage companies implement the procedure for opening an account in accordance with the Georgian Law "On Facilitating the Elimination of Legalization of Illegal Incomes" and the Agreement between the Government of the United States of America and the Government of Georgia on Improving the Performance of International Tax Obligations and the FATCA Compliance Act.
7. Persons who do not have a license to carry out brokerage activities can not use the words "brokerage company of securities" or other words or their combination expressing such activity in their content in the brand name when conducting their business activities and advertising.

Brokerage companies should possess data on the identity of users of their services, their activities and the degree of risk of this activity within the period of business relations with users of their services and when verifying their transactions.

Broker companies are also required:

based on the Agreement between the Government of the United States of America and the Government of Georgia, to improve the performance of international tax obligations, determine the tax residence of clients and obtain information on the relevant status of individuals in course of executing the FATCA.

They have the right to independently determine and require the provision of other additional information. Brokerage companies are also entitled to declare a refusal to open an account without any justification and clarification.

At the same time, brokerage companies are entitled to declare a refusal to open an account or close the existing account if the person refuses to provide information based on the requirements established by the Agreement between the Government of the United States of America and the Government of Georgia in order to improve the performance of international tax obligations and the implementation of the FATCA.

Obtaining a license:

Package of documents for obtaining a license:

1. Written application, which must contain an indication of the type of license for activity that the applicant for the above license requires, and a list of attached documents, including:
  a) the name of the administrative authority to which the applicant applies;
  b) the identity and address of the applicant;
  c) the requirement;
  d) date of application and signature of the applicant;
  e) a list of documents attached to the application, if any.
2. An extract from the state register of companies;
3. Document certifying the payment of the license fee. According to the Law of Georgia "On licensing and licensing fees", the license fee for the issuance of a brokerage license is 700 lari.
In addition, the Law "On the Securities Market" in Article 24 provides for additional requirements for obtaining a brokerage license. The applicant for the license for brokerage activities applies to the National Bank of Georgia with the application for obtaining license to which, in addition to the documents mentioned above, the following information and documents should be attached:
- confirmation of registration as a limited liability company or a joint-stock company in accordance with the Law of Georgia "On Entrepreneurs";
- confirmation that none of the members of its management body and the owner of a significant share have a criminal record for committing a grave or especially serious crime, financing terrorism or (and) legalizing illegal proceeds or for committing another economic crime, any of its members of the management is not deprived of the right to participate in the management body and has not been subjected to administrative penalties for flagrant violation of the securities legislation during the last 5 years;
- information on the identity of the beneficial owner of the brokerage company, directly or indirectly owning a significant stake;
- financial statements for the last year or the last six months (whichever is the last) certified by the auditor. If a person applies to the Agency no later than six months from the date of its establishment, the person submits the current balance;
- confirmation that it has own capital in the minimum amount established by the Agency (if any);
- confirmation that the members of its management body have the appropriate education or (and) experience.

According to the Order of the National Bank of Georgia, the criteria for the compliance of members of the company's management bodies are also determined. So, when submitting the application, it is also necessary to submit information that none of the members of the managing body of the applicant for the license is deprived of the right to participate/be included in or assigned to the managing bodies.

None of the members of the managing body for the past 10 years have been convicted of economic crimes, and for the past 5 years they have not been subject to an administrative penalty for violating Georgian securities legislation (relevant application forms are being filled).

It is also necessary to provide information on the beneficial owners of the brokerage company, which directly or indirectly own significant (10% or more) shares. Information (documents) about the identity of the beneficial owners is the following:

full name;
in the case of a citizen of Georgia, a copy of the identity document (personal number, date of birth);
in the case of a foreign citizen, a legalized or certified copy of the identity document in accordance with the established procedure.

The term for issuing license is 30 days (in exceptional cases, the term can be extended to 3 or 6 months). In practice, the procedure takes 30 days without delay.

The cost of our services to support the process of obtaining license in Georgia will be 10 000 USD or more (it includes all costs and expenses, except for license fee and cost of translation; the cost of translation is paid separately).

The international financial company is exempt from the income tax (dividends received from this company are also not taxed with the withholding tax (tax at the source of payment)). The revenues of such company should not be formed from the source in Georgia. According to the Georgian legislation, international financial company is the financial institution that has been granted the status of the "international financial company" (quasi-offshore, comparable to an international business company of offshore jurisdictions).

In its turn, the term "financial institution" (according to the Georgian law "On the Securities market") is interpreted as a legal entity, which activity refers to the provision of financial services. The status of international financial company, in theory, can be obtained by banks, insurance organizations, reinsurance companies, stock exchanges, central depositories, broker companies, microfinance organizations, credit unions, investment funds or (and) other organizations that provide financial services (the list is determined by the National Bank of Georgia).