A Seychelles securities dealer license (SDL) can enable brokers to operate free from the tight regulatory control onshore jurisdictions.
When it comes to applying for one, the overall process is twofold. You must first incorporate as a Special Licensed Company before applying for the Financial Services Authority (FSA) SDL.
If you’re new or still unsure how to approach either of these steps, then this guide can provide you with simple instructions that will help hasten the process that much faster.
Table of Contents
1. Understanding financial governance in Seychelles
Seychelles has a relatively similar economic growth curve to most offshore jurisdictions. In the beginning, it was primarily an agricultural-based economy that later developed into a foreign investment hub.
The transition was more to its nature as a command economy, i.e., the state makes the decisions for economic development. Currently, the overall government plan for growth is digitizing the public sector and its logistics to deliver modern financial services.
The FSA is an autonomous regulatory body for the non-bank branch of finance in Seychelles. Its role is to ensure the highest fiscal transparency in all financial activities conducted within the country’s borders. And by extension, in alignment with the government development strategy.
In this respect, it also liaises with the Central Bank of Seychelles (CBS) and the Financial Intelligence Unit (FIU) as part of a more extensive regulatory network.
2. Seychelles securities dealers license – permitted activities and perks
The Seychelles Securities Act 2007 contains provisions that regulate all relevant SDL holders. As a holder of an SDL, you can thereby engage in the following activities:
- Securities investment counseling
- Investment portfolio management
- Investment analysis and forecasting
But with every other jurisdiction having their version of securities investment licensing, why does Seychelles remain an industry favorite? The reason is the burgeoning amount of benefits that Seychelles as an offshore financial center can offer.
2.1. Low setup and maintenance cost
Theoretically, you can get licensed to engage in securities trading in any jurisdiction. However, the cost to get your business up and running in places like Japan, UK, or any other highly regulated country can be expensive.
If you were to incorporate as a broker-dealer firm in the UK, the minimum required capital would range around US$100,000 – 150,000. Note that this amount hasn’t even included other peripheral costs like state registration, onboarding fees, and deposits for clearing firms.
Combine this with annual regulatory compliance and day-to-day operating expenses, and the total cost can run into the hundreds of thousands. In contrast, the FSA-established minimum capital requirement is US$50,000, withdrawable upon issuance of the SDL.
2.2. Favorable taxation
Taxation has always been a hallmark of any offshore financial center, and Seychelles is no exception. A CSL is considered a domestic entity in Seychelles for tax purposes and is only subject to a very advantageous tax rate of 1.5% on offshore earnings.
It’s also granted access to the extensive and expanding network of countries that have entered double taxation treaties with Seychelles. Which, in turn, translates to the possibility of an even further tax reduction.
2.3. Fintech-based economic development
Officials have stated that the Seychelles economy is seeing complete digitization by 2023. The driving force is the Central Banking Services (CBS) and their promise to turn the National Payment System (NPS) into a completely cashless reinvention.
Among the three core strategies is an emphasis on the fintech ecosystem and its planned development in government and private sectors. Retrospectively, fintech has always been a phenomenal pairing with the financial services sector, and by relation, the securities trading market.
Some early adopters of this digital movement were brokers that saw massive improvements in sales-making power. Thanks to Artificial Intelligence (AI) and Machine Learning (ML), brokers can now onboard customers in a matter of minutes. Even better are the on-the-go market analysis and insights that these technologies can provide.
The forthcoming reworked NPS will provide even more tools for brokers to innovate and contribute to the betterment of financial services.
3. Overview of securities dealer license application
Applying for the SDL is preceded by incorporating it as a domestic entity under the Companies Act 1972. By definition, a domestic entity here refers to another business structure known as the Special Licensed Company (CSL).
Below is a quick rundown to help you visualize the entire process.
3.1. Corporate details
Before registration can begin, there are certain particulars regarding the structure of a CSL that you should pay to mind.
Share capital. To establish a brokerage business, the mandatory minimum amount of share capital is US$50,000.
Directors. You will need to employ at least two capable directors who possess the necessary managerial and technical aptitudes to deal with securities investors. If anonymity needs to be maintained, then you can opt for a nominee service.
Having a majority or nearly entire board of Seychelles resident directors can allow a CSL to access the lucrative Double Taxation Avoidance network.
Shareholders. A minimum of two shareholders is required. Additionally, a shareholder can also be a director.
Office. A registered physical office is needed to retain the register of the directors’ and substantial shareholders’ interests.
Company Secretary. A CSL must have a Seychelles resident secretary – body corporate permissible – to submit or receive necessary documents on behalf of the company.
Compliance Officer. This person must be qualified in their field of expertise relating to finance, legal compliance, etc. Alternatively, a local agent can offer outsourced compliance function services.
SDL Representative. The broker entity must at all times have at least one FSA-licensed SDL representative.
Professional Indemnity Cover. Apart from accredited SDL representative(s), all licensees of the SDL application must effect and maintain professional indemnity insurance.
Prescribed measures for recordkeeping. The FSA or a person with relevant legal capacity is statutorily entitled to demand a brokerage entity to produce documents and records for vetting or discretionary purposes.
Annual Return. The Seychelles International Business Authority (SIBA) mandates filing annual returns annexed with documents related to accounts for all CSL companies. The timeframe of which must not be more than 90 days after the financial year-end.
Auditors. Under the Securities Act, all licensees must appoint auditors within 30 days after becoming licensed. In this respect, you can either seek service from a certified accountant within or outside of Seychelles. Note that the latter will require written approval from the Securities Authority.
3.2. Application Procedure
It’s important to start off slow to make sure you’ve gone over all the procedural guidelines on company formation and the subsequent license procurement.
3.2.1. Choose a name for your CSL
It would be best if you made sure that the name for your brokerage business is at the foremost statutorily sound. By this, there are several guidelines you need to follow, as stated below.
- The name must not be identical or deceptively similar to another business or person, regardless of domiciliation status in Seychelles;
- It cannot contain constituents that would infer its status as a proxy entity acting on behalf of another Government or any departments or officials thereof and;
- It must be void of all misleading words or expressions that could constitute an attempt to mislead investors or to misrepresent the business.
3.2.2. Incorporate your CSL
You will need to apply to the Registrar of Companies along with the set of documentation as mandated in the Companies Act. Be aware that this means you’re also engaging in a parallel registration with the FSA.
But during the incorporation process, you will also have to send the FSA a prescribed business plan. It should contain all intended business objectives and types of activities of your CSL written concisely.
If you’re not looking towards the prospect of doing all this by yourself, then a filing agent is highly recommended.
When enlisting a filing agent’s service, you will typically be asked to provide this line of documentation of each shareholder and director in the CSL. Among others, they include:
- Certified recent copies of passports
- A CV (Curriculum Vitae) (preferably up-to-date layout and information)
- Certified copies higher education qualifications
- Two professional reference letters
- Bank reference letter(s) from the bank(s) with which you have affiliation
- Employment Letter from current / past employer (if applicable)
- Police Criminal Certificate / Police Character Reference (not older than 3 months)
- Tax Compliance Certificate or any equivalents (recent)
- Proof of source of paid-up capital (bank statement showing at least US$50,000 in deposit)
If deemed qualified, a Certificate of Approval will be issued so that you can proceed with the CSL registration with the Registrar. When you receive the Certificate of Incorporation, please send it back to the FSA to issue you a Special License, aka the SDL. Your CSL is from then on considered valid to conduct its intended trading activities.
If you have any trouble when applying to the FSA or wish to have someone else take care of the entire process, we are here to help. Feel free to drop us a message or contact us via email@example.com.
3.2.3. Open a bank account
As part of the application process, you need to open a bank account for your Seychelles company to deposit the US$50,000 share capital. All of which is withdrawable later on for you to allocate to other aspects of your business. Of course, this can also be the recipient account to accept clients’ payments.
In general, a Seychelles securities dealer license is considerably quite accessible for most. It has good tax benefits and has a good value in the eyes of investors. With the recent exit from the EU’s prolific blacklist, Seychelles is showing that it’s capable of rising above global indemnification and adapting to changing times.