Becoming introducing broker in UK-need help!

[disi]

Hello there,

Listen-I really need some help from you! I would like to become introducing broker for some forex company from US(NFA registered). I have Ltd company registered in UK. Now-my target group of clients is EU, but without UK clients. Do I need any form of license/authorization from FSA? I am the only person in this company and I owe this Ltd company. I only introduce clients to NFA broker-I do not deal with money, orders and even agreements.

Do I need some kind of authorization from FSA? Do you know any examples like that? Maybe you know a place where I could seek for help? Any UK lawyers familiar with FSA subject? Becasue FSA itself can not give me any opinion-they send me to legal advisors. You can PM also.

Thanks for your input and any help guys.

 

[ns1000]

If you're really just introducing clients to a company, you don't need any authorisation in the UK. However, if you're offering any advice this may be construed as selling a financial product.

Chances are you're fine without authorisation as long as you're just saying 'here's the website, open with them'.

 

[disi]

If you're really just introducing clients to a company, you don't need any authorisation in the UK. However, if you're offering any advice this may be construed as selling a financial product.

Chances are you're fine without authorisation as long as you're just saying 'here's the website, open with them'.

Thanks a lot mate! Are you familiar with UK financial law? Do you know any 'not too expensive' lawyers who know FSA law? I need to "have it on paper"...I need someone that could write e interpretation of it. Any knowledge on such lawyers?

 

[ns1000]

Your best bet would be to look at the Law Society's website, and search for a solicitor who practices in Financial Services. Someone outside the South East will probably be cheaper than one in London. It really depends what you need in writing, and what you're going to use it for.

 

[anley]

I would help if you're dodgy, that's usually a good qualification for an IB especially one that's introducing Continental clients

 

[disi]

Thank you both very much. ns100 - what do you mean by "Law Society's website"? You mean websites like linkedin.com or something?

 

[azdo]

If you're really just introducing clients to a company, you don't need any authorisation in the UK. However, if you're offering any advice this may be construed as selling a financial product.

Chances are you're fine without authorisation as long as you're just saying 'here's the website, open with them'.

What makes you say that? Doesn't sound right.

 

[ns1000]

What makes you say that? Doesn't sound right.

Cos you're not performing any regulated function.

 

[azdo]

The above poster seems to want to become an introducing broker. Yes he says he is not dealing with agreements, but if he is still taking fees from that introduction, I would have assumed that it is a regulated function. If he emails/phones the FSA, we should find out.

 

[ns1000]

As long as he has no involvement in the trading once the account is opened, there is no regulated function being performed, irrespective of any rebate paid.

If he offers advice, or trades for people he introduces, he needs to be regulated.

 

[azdo]

As long as he has no involvement in the trading once the account is opened, there is no regulated function being performed, irrespective of any rebate paid.

If he offers advice, or trades for people he introduces, he needs to be regulated.

Surely, if I set up a business involved in approaching people re investments, even if they are with a third-party, I need to be regulated... I much the same way an IFA that does not manage funds themselves, but has clients invest solely with third-party funds... Am I wrong?

 

[ns1000]

You are wrong I'm afraid. Merely advertising someone else's service does not consitute a regulated service. IFA's are offering financial advice, based on an indidual's financial circumstances. Assisting people to sign up to a CFD company does not necessarily involve offering advice on regulated products.

As long as theCFD provider will do the necessary appropriateness checks and not the IB there is no regulated function being performed..

 

[azdo]

I am sorry for being anal about this, but I feel I must. Please note I am not an FSA person, so I implore anyone to seek FSA and legal advice before anything involving investments...

FSA Handbook - Perimeter Guidance
PERG 8.2.1
01/07/2005
The effect of section 21 of the Act (Restrictions on financial promotion) is that in the course of business, an unauthorised person must not communicate an invitation or inducement to engage in investment activity unless either the content of the communication is approved for the purposes of section 21 by an authorised person or it is exempt. Under section 25 of the Act (Contravention of section 21), a person commits a criminal offence if he carries on activities in breach of the restriction in section 21 of the Act. A person who commits this criminal offence is subject to a maximum of two years imprisonment and an unlimited fine. However, it is a defence for a person to show that he took all reasonable precautions and used all due diligence to avoid committing the offence.

Definition of Communicate from FSA
communicate(in relation to a financial promotion)3, 4 to communicate in any way, including causing a communication to be made or directed.
[Note: section 21(13) of the Act (Restrictions on financial promotion) and article 6(d) of the Financial Promotion Order (Interpretation: communications)]4

PERG 8.2.4
06/01/2008
A person who is concerned to know whether his communications will require approval or, if he is an authorised person, whether 1 the appropriate financial promotion rules1 will apply to his communications will need to consider the following:
(1) am I making a communication or causing a communication to be made? (see PERG 8.6);

(2) if so, is it an invitation or inducement? (see PERG 8.4);

(3) if so, does the invitation or inducement relate to a controlled investment? (see PERG 8.7);

(4) if so, is the invitation or inducement to engage in investment activity? (see PERG 8.7);

(5) if so, is it made in the course of business? (see PERG 8.5);

(6) if so, and the financial promotion originates outside the United Kingdom, is it capable of having an effect in the United Kingdom? (see PERG 8.8);

(7) if so, or if the answer to (5) is yes and the financial promotion was made in the United Kingdom, is the promotion exempt? (see PERG 8.12 to PERG 8.15 and PERG 8.21);

(8) if not, am I an authorised person?

... Where 'yes,' a person needs to be authorised.

I'd be very interested in hearing how an IB does not require authorisation?

 

[ns1000]

I am sorry for being anal about this, but I feel I must:

FSA Handbook - Perimeter Guidance
PERG 8.2.1
01/07/2005
The effect of section 21 of the Act (Restrictions on financial promotion) is that in the course of business, an unauthorised person must not communicate an invitation or inducement to engage in investment activity unless either the content of the communication is approved for the purposes of section 21 by an authorised person or it is exempt. ..

I'd be very interested in hearing how an IB does not require authorisation?

Because merely opening an account is not an investment activity. It does not become one until you trade. If you're involved in trading or providing financial advice, that is regulated. Telling someone to open an account is not. As long as you don't induce someone to trade (or otherwise participate in an investment activity), you do not need to be regulated.

 

[azdo]

an unauthorised person must not communicate an invitation or inducement to engage in investment activity

I believe that opening an account would indeed be seen as a communication as you are inviting that person to engage in investment activity...

 

[ns1000]

You seem to have very fixed ideas about this. Did you actually ready my reply?

Suggesting someone opens an account is not an investment actvity. and therefore does not require authorisation.

Investment activities are
accepting deposits;
issuing e-money;
effecting or carrying out contracts of insurance as principal;
dealing in investments (as principal or agent);
arranging deals in investments;
arranging home finance activities;
operating a multilateral trading facility;
managing investments;
assisting in the administration and performance of a contract of insurance;
safeguarding and administering investments;
sending dematerialised instructions;
establishing etc collective investment schemes;
establishing etc stakeholder pension schemes;
providing basic advice on stakeholder products;
advising on investments;
advising on home finance activities;
Lloyd's market activities;
entering funeral plan contracts;
entering into a home finance activity;
administering a home finance activity;
agreeing to do most of the above activities.


None of which you are conducting by introducing a client to a regulated firm.

 

[azdo]

I understand your point and I think it would be valid if it was just introducing a few people. But if one's main business activity was approaching individuals and recommending they trade via another company, it would be my guess that the FSA would find an issue with that.

 

[findyourfx]

I have the similar question, can anyone provide any suggestions?