SIBA Regulatory Authority of Seychelles – Can You Trust It?
Seychelles regulatory authority finds it difficult to prove its worth in the huge pool of Forex market regulatory bodies around the world. It has struggled to set SIBA regulations that attract Forex brokers and traders from different parts of the world.
The regulations adopted by the financial services authority of Seychelles put strict control on the way the financial brokers perform their business to help against fraud and money laundering activities, which is considered the main concern of all traders and brokers alike.
Many classify the SIBA license as minimal against internationally recognized licenses issued by bigger countries. However, despite the fact that Seychelles International Business Authority (SIBA) is relatively new, there are serious efforts taken to improve its position.
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Seychelles islands are located in a remote area east of the coast of Africa. The islands have grown to become a destination for offshore financial market brokerage services, due to the lack of regulations that control financial trading.
Seychelles International Business Authority was founded in 1995. It was established in a collaboration of governmental agencies and private institutions which was a great idea to make decisions that benefit both sectors, which overall contributes to the country’s economy.
The aim of SIBA was to attract foreign direct investments to Seychelles to open their companies offshore and enjoy tax benefits and an easy business setup structure.
Thus, SIBA was the main regulator for all the firms that work offshore, setting the rules and regulations for the companies working offshore. It has also managed to promote a more transparent and healthy working environment.
The Foundation Of The FSA SIBA
Given the rapid changes in the global financial markets, SIBA had to adapt quickly to address the global developments. This happened by promoting more safety and security on the practices of financial markets to help in the fight against financial crimes.
Later on, Forex brokerage, non-bank financial companies, hedge funds, and other financial services became also regulated by SIBA according to the Financial Services Authority Act of 2013.
SIBA Financial Services Authority was created to closely watch and regulate every non-bank financial activity, in cooperation with the central bank, the Seychelles Investment Board, and the Fair Trading Commission.
In order to regulate these activities, the SIBA FSA regulations are being discussed by the coalition of the central bank, the Seychelles Investment Board, and the Fair Trading Commission through periodic conferences and meetings.
SIBA FSA Regulations
The rules and regulations established by SIBA have evolved from being generic. covering the overall business practices in the islands, to addressing all the financial services provided by companies that are operating in Seychelles.
SIBA strives to uplift its regulations to get on the same level as any other financial service regulator, in order to polish the image of the Islands of Seychelles as a destination for offshore companies.
Developments Of The Regulations
Initially, foreign companies enjoyed the benefits offered by SIBA license from operating offshore offices in the Seychelles islands, as the state facilitated the procedures for opening businesses in Seychelles, and imposed few bureaucratic processes there.
With tax benefits, other privileges, and welfare benefits, it seemed like a good deal for companies to operate in Seychelles. However, with the lack of strict disciplinary regulations, several companies abused that for illicit practices.
More companies noticed the gap in the regulations, and Seychelles would become a hotspot for financial scam activities and money laundering practices.
The latest developments in SIBA regulations would place the Seychelles regulatory authority at a higher recognition level, which could be compared to the IFSC of Belize, or even the FSCA by South Africa.
However, the SIBA financial trading license is faced with heavy competition from the already established giants, majorly the FCA by the UK, and the NFA and CFTC of the United States.
The SIBA is fully aware that Forex licenses in the USA, UK, and European countries are more appealing for traders, and to attract more investors for Seychelles, they must make an undeniable proposition that offsets the reputation of the Seychelles regulations.
The Restrictions Of SIBA Forex License
The developments in the SIBA Forex regulations incorporate stricter guidelines in the fight against financial crime and money laundering which became the main concern of all the financial associations worldwide.
SIBA’s financial service authority started to punish every financial firm for any suspected malpractice, or abuse of the trader’s funds, which is strictly observed and controlled by the FSA.
The FSA Forex brokers regulations set low requirements in some aspects which gives the broker freedom to operate and to offer a wider variety of financial services to the traders.
It could be a reasonable decision by the FSA to impose low operating requirements in terms of the use of leverage, segregation of accounts, etc. because that might be the only reason for Forex brokers to operate in Seychelles.
The SIBA regulator is faced with fierce competition, and any implementation of stringent rules is going to push the brokers outside the borders of the islands.
Therefore, the relaxed restrictions on the way the brokers operate are the key to hosting as many FX brokers as possible, besides the fight against fraud and financial crimes.
However, here lies the paradox for the FSA. თhe lack of strict rules can definitely attract more Forex brokers to the country, to operate in the Seychelles islands and enjoy the opportunity to offer more bonuses, higher leverage, and other benefits that are restricted under other licenses.
On the other hand, this does not work for the welfare of the traders, who look for a strict framework that guarantees the security of their funds and keeps them safe against any illicit broker.
Why Forex Brokers Avoid SIBA?
Despite the efforts made by the FSA to enhance the image of the SIBA-regulated Forex brokers as reliable and trustworthy brokers, the SIBA license is still stained by the fact that it is geographically distant, and the rules do not really attract traders for the SIBA brokers.
In addition to that, the lack of deterring mechanism imposeს a threat to the trader’s capital, because the broker cannot be penalized in case of evident illicit activities, which eventually hinders SIBA-regulated brokers from operating beneficially in Seychelles.
It could be reasonable for a Forex broker to go for a popular financial trading license, such as FCA or CySEC since the regulations there are clear and established for a long time now.