Offshore regulation is about to change? New Bahamas leverage rules are coming

The protagonist this time is the offshore regulatory anomaly, the Securities Commission of the Bahamas (subsequently referred to as SCB).

The retrograde Bahamas SCB! Look to Europe and America?

Traders who follow the industry dynamics a little should have heard of Bahamas’ reputation.

The Bahamas, an island nation located southeast of the U.S. Florida Keys, is the richest country in the Caribbean (second only to the United States and Canada in terms of GDP per capita among Western Hemisphere countries) and a world-renowned offshore financial center, home to a large number of hedge funds, trusts, and banks.

Over the past two years, with the awakening of government and public risk awareness, more and more offshore regulation has begun to experiment with reform. As one of the few developed countries left to provide offshore regulation, the Bahamas SCB is also considered the front-runner in this tide of reform.

Among them, the new regulations promulgated in 2020 (that is, the new regulations to be implemented in May) are taken as evidence that the Bahamas SCB is on par with the level of regulation in Europe and the United States.

The SCB issued a series of new regulatory rules in May 2020, under which, from 23 May 2021, the SCB’s CFD rules will change.
Maximum leverage for retail clients will be limited to less than 200:1; brokers must ensure that retail client accounts have no less than 50% net worth and no less than 0.5% margin; require negative balance protection for retail accounts; for CFD marketing techniques, the SCB prohibits brokers from adopting incentives such as bonus payments; and prohibit binary options trading.
In addition, the SCB also comprehensively increased the application cost of brokerage licenses, according to the new regulations of the fee standard, the application fee & registration fee rose by more than 25%, the annual fee for renewal rose to a maximum of $13,125 / year, this standard in the offshore regulators is considered very expensive.

As the saying goes, “the snake strikes the seventh inch,” pressure leverage, set the net worth ratio lower limit, limit the grant, ban binary options, increase the cost of license application & renewal,” the SCB’s adjustment can be said to be a move to the real & painful place.

There are many brokers that traders are familiar with (such as Radical Stone, PFX, LCG, etc.) that operate Chinese accounts with entities based in the Bahamas, regulated by the Bahamas Securities Commission, and this wave of new regulation adjustments can be considered to be very extensive.

Difficult to break the shackles of offshore regulation

Although the Bahamas aims to be on par with Europe and the United States and has great ideals, objectively speaking, the reality is still very skeletal.

The biggest difference between full regulation and offshore regulation is whether the regulated broker must provide financial services to local residents in the jurisdiction of the institution, and whether it needs to have physical office space and company executives.

The “offshore” nature of offshore regulation makes it difficult to implement strong real-time supervision of brokers.

In addition, although the SCB has raised the standards and costs of license applications, the cost and difficulty of applications have fallen by a fault line compared to European and American regulators.

SCB requires a deposit of $120,000 for brokers applying for an A Book license and $300,000 for brokers applying for a B Book license. For different types of brokers to make 2.5 ~ 300,000 U.S. dollars ranging from the registered capital requirements.
Compare this with the FCA, which requires a minimum of £50,000 to £730,000 of own funds for brokers, depending on the license (converted to $6.95 to $1.015 million at the instant exchange rate).
In addition, depending on the license, the longest application time for an FCA license takes a full 12 months, and the application time for an SCB license generally takes about 2-3 months to apply.

In addition, Bahamian regulated broker-dealer entities continue to receive fines and have a reputation far less than that of the large, senior regulated broker-dealers.

A recent example is the March 21, 2021 SEC charge that SureTrader, a Bahamas-registered broker-dealer, was illegally offering its services in the United States.

The SEC alleges SureTrader sold its services through a day trading website and required thousands of U.S.-based traders to open accounts. In addition, the broker-dealer remains in an ongoing securities relationship with U.S. traders, including holding funds and trading on their behalf. the SEC has filed charges against the company and its owners seeking an injunction to annex ill-gotten gains in the form of pre-judgment interest and civil penalties.

In general, the Bahamas Securities Commission is making efforts to align itself with the level of regulation in Europe and the United States, but there are still minor problems with regulation at the moment.

As the gold content of Bahamian licenses increases, so does the possibility of impostors, so how should one check if a broker is regulated by the Bahamas Securities Commission?

SBC official website URL: https://www.scb.gov.bs/

The easiest way to do this is to first check if the broker’s website lists its license number, and if it does, you can simply use the search function on the SCB website to find its records online through SCB.
If you don’t have a license number, you can also search through SCB to change the name of the platform.
If you are unable to find a brokerage through the search tool, you can also email SCB directly at info@scb.gov.bs.

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