VFSC is an abbreviation for Vanuatu Financial Services Commission. It is a financial regulator responsible for upholding the country’s financial laws and holds any wrongdoers in this industry accountable for their actions. One of the many sectors that the VFSC regulates is the foreign exchange market. This means that any forex broker registered in Vanuatu has to directly report to the VFSC and operate based on outlined guidelines.
According to the VFSC website, this organization was founded in 1993 and is the leading authority in regulating financial markets and services in Vanuatu.
VFSC was established after the act of 1993. It is in charge of administering several tasks and pieces of legislation, including, Business Names ACT, companies, E-Business, Credit Union ACT, International Banking, Electronic Transactions, Financial Institutions, Anti-Money Laundering, and Counter-Terrorism financing, Mutual Funds, Parnetsrhip, Trade Union, Offshore Limited Partnerships, Declare in Securities (Licensing), and so forth.
Moreover, VFSC as an authority is responsible for controlling VFSC-registered Forex brokers. So, how are they regulated? What are the main things that you need to know about VFSC to decide whether it is worth it to start trading with these authority-regulated FX brokers or not? You can get further information as well as a list of the best VFSC-registered forex brokers further into this guide.
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VFSC as already mentioned is a regulatory body in Vanuatu and is famous for its lax regulation system. It is supported by a Deputy Commissioner, and four divisions, including Corporate Services, Insolvency, Legal Enforcement, Compliance, and Registration. These authorities split their functions and responsibilities to satisfy customer needs and interests.
What’s more, they are trying to make financial transactions and the environment more transparent and sophisticated for investors in order to attract them more effectively. Brokers that operate in Vanuatu are under the control of this regulator which is why they are called VFSC-regulated brokers.
The Securities License in Vanuatu allows brokers to provide exchange services by buying, selling, and trading securities such as stocks, shares, currencies, and so on, along with managing a range of investments with and on behalf of its customers.
Why do Brokerages Register With VFSC?
The VFSC licenses have recently become popular, especially for FX/CFD brokers whose status (both financially and in terms of brand image) is not actually too bad.
So the main question is, why do such operators want to register with a regulatory body which is located on a tiny island?
The answer is quite simple: it’s cheap and it’s easy.
The main idea for the brokers that are registered with VFSC is that there is no capital gain tax, as well as, income tax and inheritance tax in Vanuatu. Moreover, launching a business is relatively fast and far less expensive than anywhere else. So, VFSC-registered brokers have a lot more benefits than other more strictly regulated companies and can provide additional features to their traders.
In terms of financial transaction legislation, a Forex license covering each brokerage’s digital operations is granted in 2-3 months, which is quite fast. Furthermore, authorization only includes a $2,000 capital requirement, which is dirt cheap by license standards.
VFSC-registered brokers also have combined organization licenses with EU-based regulators, including CySEC. The VFSC’s primary role is to maintain a reliable Registry. What’s more, it is in charge of regulating the non-deposit-taking banking industry on the islands. This is where its link to the online trading industry comes into play.
Should You Trade With a VFSC-licensed Broker?
One benefit you will definitely receive when trading with a VFSC-licensed broker is a much larger bonus. Some companies may also hike their leverage ratios to the max without any restrictions from the regulator while also keeping spreads to a minimum.
Overall, VFSC-regulated brokers have the luxury of allowing you to take on more risk than any other broker would dare to. Therefore, if you’re an experienced trader with years of experience under your belt, then a VFSC-listed broker may be the perfect fit for you.
However, if you’re just getting started with FX trading, then so much risk is not within your interests. We suggest you take it slow as you’re just beginning to trade. Get to know the market a bit better in a safer environment provided by an FCA-regulated broker for example and only then subject yourself to so much risk, but equal amounts of reward.
How to Know a VFSC-regulated Broker is Legit
The best way to figure out if a broker is indeed regulated by the VFSC is to check their license number on the regulator’s official website. Every broker that has a legit license is assigned a license number. It is usually 8 digits. All you have to do is copy that number (which you can find at the bottom of the broker’s website) and search it on the VFSC website. If you can’t find it, then it’s best to call the regulator and ask them to manually identify the company. If even the operator can’t find it, then it’s like getting two birds with one stone. You get to avoid an obvious scam, and the regulator gets to warn everybody else about them or maybe even shut them down.
However, make sure to ask the operator to double-check the license before confirming it. Sometimes they make the mistake of confirming an existing license when in reality it has already expired.
How hard is it to find a VFSC regulated broker?
It is extremely simple to locate a VFSC-regulated Forex broker, as it is relatively simple to establish a brokerage in Vanuatu. Several brokers choose Vanuatu as their base of operations due to the comparatively low amount of operating capital required and the ease of doing business.
In reality, VFSC promotes healthy competition among Forex brokers by providing a stable atmosphere in which brokers can provide the best services without sacrificing efficiency or transparency of operations. Financial markets such as spread betting and binary options trading have since been made legal in Vanuatu, which is directly regulated by the VFSC.