Off-the-shelf Forex Licenses for Sale. Should One Buy a Second-hand License?.
Our clients sometimes ask whether it is worthwhile to buy companies with a ready-to-use Forex license. They believe this could provide significant savings in money and time, getting a ready-made working product at once. But few give thought to the pitfalls which purchasing a company with the Forex license may involve.
Are there many companies offering second-hand Forex licenses? Is it worth buying one? In this article, we will tell all about the benefits and drawbacks of used Forex licenses. Or is it better to obtain a broker’s license from scratch?
What is a Forex license?
Forex brokers are greatly popular in the market nowadays but brokerage companies are not legally entitled to process trading transactions without a Forex license. Traders shun brokers who do not have the license since the activities of such companies are considered illegal and unsafe. That’s why it is essential to obtain broker’s (Forex) licenses. Besides, brokerage companies lacking the license may raise red flags with regulatory bodies. Any Forex broker intending to avoid getting into trouble with the authorities or losing potential customers should receive the Forex license.
Companies with a ready-to-use Forex license: a pig in a pot or a great piece of luck?
There are indeed multiple offers of second-hand Forex licenses in the market. Buyers think that they can start operations immediately after the purchase but this is not quite true.
Clients are advised to remove their rose-tinted glasses and face the risks inherent in used broker licenses. We have highlighted major points worth attention:
Find out why the company is being sold: it might have some bad history. You need to know the reason of sale and analyze the data
Check the company’s background: verify its owners and analyze the operations. It is also advisable to check the company’s reputation. Should it prove to be tarnished, “black”, you may face issues with the regulator who might be “not fond” of the company by now. This does not require much effort as all the information can be found online. We at SBSB have an interesting case: a client bought a licensed company in Cyprus, without checking its background and reputation thoroughly. It turned out that the company had a black reputation. The client ultimately had major problems with the regulator who was very ill-disposed to the company
Company history: find out whether the company was in operation. If so, it must have financial statements which you also need to check. Request the statements and reports on transactions, and engage an independent firm for an audit
So what is the conclusion?
Accordingly, we advise against purchasing companies with off-the-shelf Forex licenses. It is best to get real and be aware that companies like that do not guarantee you will be able to launch operations the following day. You should also remember the risks and be prepared to spend a lot of time registering the changes pertaining to the company’s structure, owners, and management. Furthermore, it will take several months for the regulator to approve new company members. Do remember: if bank accounts were set up for the company, it is obligatory to notify the bank about the amended structure in the event of new shareholders and directors. And this is tantamount to opening a new account.
There are also success stories of second-hand Forex licenses bought but not so many of them. Our lawyers always inform clients about the above risks but not every company is so conscientious. We recommend obtaining Forex licenses from ground zero to avoid those problems.
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