Getting a forex license in Latvia

Among European countries where forex business is interesting and profitable, there are several types of states ‒ those that are considered traditional for the industry and those that have recently entered the market. The Baltic region is a promising area, which, thanks to its membership in the EU, is opening up broad opportunities for work.

Latvia is especially attractive for entrepreneurs wishing to obtain a forex license. The country has a developed, well-established banking system, with clear and transparent legislation. At the same time, for incorporated companies, recipients of the Latvian license, certification in the EU is available – this is a key factor for many business owners from the former USSR states who are looking to expand to European markets.

Benefits of Forex Operations to Latvia

As per the existing Directive regulating operations with financial instruments and implemented in Latvia, all EU-States are obliged to give companies the freedom to provide services covered by their license.

Once your investment brokerage firm has been licensed in Latvia, you can simply notify the authorities of other Eurozone states of your intention to offer investment services in their territory (this will be regarded as actual certification). All you need is to obtain approval from the selected state without going through the licensing process again.

The following are some of the benefits offered by Latvia as a forex operations jurisdiction:

• easy opening of bank accounts;
• the opportunity to reapply if the previous application was denied (subject to compliance with comments);
• speed of registration ‒ registration procedures take less than two or three months.

Characteristics of Latvian Brokerage Firms

Latvia offers broker licenses to legal entities that are local residents or members of the European Union (duly certified). It should be understood that the Republic of Latvia is not an offshore business, commercial operations are subject to standard taxation. All relations in the financial instruments market are regulated by a specialised Supervisory Commission that carries out its functions as per the relevant legislation of the Republic of Latvia.

1. Latvia refers brokerage firms requiring forex licenses to investment business units providing fixed services. A list of these units and the financial instruments in respect of which they are produced is provided in the granted permit.




2. Branches of foreign investment firms that have been granted the appropriate license can also provide forex services.




3. Companies wishing to do business in the financial market are required to have a fully-operational and physical office in the territory of Latvia.




4. Distributed advertising information must be truthful, accurate, clear, and not misleading to users.




5. Recipients of a Republic of Latvia license are prohibited to have subsidiaries, with the exception of firms conducting activities similar to those of their parent companies.




6. To launch operations in other EU countries, you are required to notify the Latvian Supervisory Commission, indicating the desired state, type of activity, features of the organisational structure. The authority transmits the information to the receiving competent authority.

Prifinance provides the full range of support in obtaining a forex license in Latvia. We have gained considerable experience in the safe conduct of all types of businesses in various jurisdictions, and provide services for:

• collection of documents and obtaining licenses;
• registration procedures for the company;
• account opening and organisation of nominee services;
• selection of addresses, required software, and so on.

Conditions for Authorised Capital

When forming the authorised capital of a licensed forex firm, it is not possible to use intangible assets. The supervisory commission determines the level of equity capital sufficient for the subject, who is obliged to maintain the set "bar". The minimum threshold for entry into the market for authorised capital is EUR 50,000, including:

• for STP license ‒ EUR 125,000, equity in excess of 10% of the total assets and more than 25% of the fixed costs incurred in the previous year;
• for market makers ‒ EUR 730,000.

One hundred percent of the capital must be paid. High risk transaction amounts should not exceed the amount of equity by more than eight times.

Features of Documentation and Registration of Companies with Latvian Forex Licenses

To obtain a broker license, as a rule, you must first establish and register the appropriate firm. After that, you will need to:

• open a bank account;
• submit relevant documentation to the licensing authority;
• be granted permission or waiver with reasons.

No fee is charged for the license, but there are mandatory annual fees with rates set by the Latvian regulator on an annual basis.

Company incorporation under the auspices of Prifinance usually takes up to a week; if one or more of the founders is a legal entity ‒ up to two weeks. The company is required to have a full and real address, conduct bookkeeping and submit reports. Once the account is activated, the licensing authority is provided with the following:

• an application listing the types of services that the company intends to provide;
• papers with personal information about the owners and composition of the subject's board;
• the descriptive part for the organisation of the company's internal auditing system, its administrative structure (with clearly defined management authority) and the distribution of tasks based of department;
• the company balance sheet (for the month preceding the application filing);
• a description of the accounting policy / organisation and a detailed outlook plan for the next three consecutive years regarding company strategy, profit / loss forecasts, fixed costs and so on.

Licensing Requirements for Owners and Personnel of Forex Companies

To obtain a forex license in Latvia, a company must meet the numerous requirements that apply to owners, authorised capital, personnel and so on.

Owners

The following rules are established for the owners of the company applying for brokerage activity:

• you must provide only accurate and reliable information about yourself and have an unblemished business reputation;
• you cannot have even an expunged criminal record;
• the shareholder must have a convincing confirmation of the legality of the source of own funds and a sufficient share amount;
• if a shareholder has more than 10% stake in the business, he / she is required to prove possession of deep professional knowledge in the chosen field of activity and considerable experience in brokerage organisation.

Board

1. Members of the company board / executive council can only be those persons who have previously worked in similar companies (and in similar ranks/capacities) for at least three years.




2. The board members should be well-versed and competent in financial management matters. The company itself has the right to decide on the sufficiency of the shareholders' experience and knowledge as well as their ability to oversee corporate operations.

Additional Requirements for Personnel

In addition to the above conditions set for members of the Board of Directors / Executive Committee, the personnel of firms that have received a forex license are also subject to other requirements. The firm is required to employ two residents of the Republic of Latvia in senior/management positions. They must remain directors for the entire duration of the license. The management and key employees of the firm must have:

• diplomas / degrees in the relevant field;
• 3-5 years’ experience (depending on the license type) in the relevant positions over the past 5-8 years;
• spotless reputation.

The employed persons are agreed with the Commission ‒ it checks the information and grants the work permit.