What it is and what it does
Trading safely doesn’t just mean finding a good broker. Looking at a broker’s credentials is the real test of whether the service is legitimate or not. The regulators that provide licenses and approve brokers should also be carefully investigated before investing or trading. If you are considering signing up with a broker that has a Belize IFSC license, read this report first.
According to the Belize IFSC website, the Belizean International Financial Services Commission or IFSC was established by the International Financial Services Commission Act in 1999 and was enforced in 2000. The purpose of the founding of the IFSC is to allow Belize to confirm to international regulatory standards.
IFSC, as stated on the website, is the main regulatory body for the offshore industry in Belize and it aims to “protect and enhance Belize as an international financial services center.” It has regulatory control over:
IFSC Belize also grants licenses to investment firms, investment consultants, brokerage firms, and brokers. It is also responsible for administrative sanctions and disciplinary penalties to those who violate the standards set down by the IFSC.
Many brokers choose the Belize IFSC license because the IFSC provides certain tax advantages and has long had the reputation of being lenient, both in issuing licenses and enforcement. However, given the number of Belize IFSC warnings, the IFSC has been said to tighten its standards in recent years in efforts to reverse its reputation for leniency.
One of the reasons Belize is attracting brokers is its policy of not making brokers pay any tax on earnings made outside of the country. Its reputation as a tax haven is just one advantage. Also, it is relatively easy to sign up as a broker, and the IFSC has more lenient secrecy laws than most other regulatory bodies throughout the world. This may change soon, but its reputation for easy regulations remains.
According to its website, the IFSC outlined the penalties that those who violate its provisions will face:
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Belize IFSC, as mentioned above, is considered more lenient than many regulatory bodies, but is tightening up its rules. One of the requirements is an acceptable minimum of capital. At its founding, the IFSC required a mere $100,000 of capital which many would consider insufficient for a company that is intending to manage millions of dollars deposited by customers. Since then, the IFSC has raised the limit to $500,000.
The IFSC also requires its organizations to separate customer and company funds. This is essential for preventing unscrupulous behavior on behalf of fraudulent brokers who use customer deposits for funding if their company is in trouble. This also may be the reason why so many scam brokers are hesitant to refund clients’ money; they may be using it to run their business.
In addition, brokers who sign up with the IFSC must send clients monthly reports of their funds to confirm that their operations are legitimate. Finally, customers must have access to filing formal complaints against the broker if needed.
All brokers and investment firms signed up with the IFSC must submit regular reports detailing trade volumes and unimpaired capital. In the past, the IFSC has been criticized for not asking for thorough reports and requesting minimal information. It can be fairly easy for a broker to skate by on a fairly skimpy report.
Belize IFSC has shown some effectiveness and willingness to enforce regulations and in 2017 released a warning that Fixed Star Investment was falsely claiming to be licensed by IFSC Belize but had no license. The scam broker showed a forged document on its website to persuade potential customers that they were indeed regulated by the Belizean organization.
Earlier in 2017, IFSC also caught other financial services scammers, Club Fast Coin and TRADEEX LTD and Premier Point Marker for showing false licenses on their websites. It is uncertain whether the brokers themselves had forged the documents or if another body is responsible for manufacturing false licenses.
Although the IFSC Belize claims it has tight standards, there is a reason brokers who have their license from this regulatory body are often viewed with suspicion. Although no regulatory body can put out every fire, there are enough complaints about associated brokers to cast some doubt over the strength of its regulatory power.
Examples of investment brokers with a Belize IFSC forex license include HotForex, FXTM, XM, FBS, Avatrade, and Alpari. A number of these brokers receive good reviews, but the amount of negative feedback can be troubling.
For instance, there were many reviews of AvaTrade that discussed its reluctance to allow clients to withdraw money and the fact that brokers pushed customers into making investments they did not want to make even after they lost money.
HotForex also received similar negative complaints. Although there are some alleged that negative reviews may be created by recovery companies, the broker did not respond to the reviews and the sheer number and authenticity of negative comments deserves some attention.
However, it is entirely possible these claims were investigated by IFSC Belize, but there was also no evidence that this was done.
IFSC Belize has a mixed reputation as a regulatory body for offshore brokers. It requires companies to have minimum capital rates, but some feel these minimums are too low. Members must submit reports, but these reports do not require comprehensive information. They do require sending statements to customers and providing a forum for customer complaints.
However, the regulatory body has a long way to go before it can be considered to be a regulatory body with high standards. It seems that many of its members are attracted to the generous tax breaks provided in Belize and the secrecy laws rather than to providing fair returns for their clients.
Customers who have been scammed by brokers with a Belize IFSC license can file a complaint on the IFSC website and recover their funds with the help of Trader Defense Advisory professionals.
Here is a list of related major financial regulators to choose from.