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New Zealand Mandates Forex Brokers To Maintain Physical Offices

Feb 05 2013
By
Forexbrokerz.com

New Zealand is one of the countries preferred by forex brokers for their headquarters location – or rather, used to be. Recently, we saw one of the bigger brokers registered there, ThinkForex, move its main office to Australia after acquiring an ASIC license. Apparently, many other brokers are to follow this trend of relocating – but not because they wish to do so; New Zealand's financial regulator, FSP, has recently changed its rules and has now removed over 250 companies from its registry. 

 
The biggest regulatory change in the country is the physical office requirement. Up until now, brokers were not mandated to have an actual office there but this rule has now changed. This means that in order to remain FSP-registered, every broker is obliged to have a brick-and-mortar office in New Zealand – otherwise its license is revoked. What's more, a compliance officer or an entire compliance department in the office is required as well to make sure that no shady operations go on and that customers are protected.
 
I cannot say for sure whether this was the reason for ThinkForex to fully relocate to Australia. All I can say is that initially it was the broker's plan to maintain its New Zealand headquarters and run its Australian office as a subsidiary; then, all of a sudden, it announced that Melbourne will be the location of its new main office. You draw the conclusions. 
 
ForexMagnates who were the first to come up with the news, claim to have it on good authority that the 250 companies which lost their FSP licenses were warned in advance about this new rule, and that the potential losses for them could reach $5,000,000 in fees paid for registration with the regulator. Many of the affected brokers already have headquarters in other locations and were simply using their FSP registrations for more credibility anyway, so I don't believe they'll take a big hit. 
 
It is still unclear whether these companies will be allowed to re-apply for registration at a reduced fee if they manage to comply with FSP's new rules but I am guessing many of them will simply follow ThinkForex's lead and choose another country, from where they can run their operations. Either way, we will be keeping a close eye on RoboForex and PFD-NZ – two forex brokers that adhere to the FSP's new requirements and were therefore not influenced by the change; what they do (or don't do) will probably be indicative of the market trend. 
 
Michael Chai, co-founder and CEO of Blackwell Global, one of the companies that has managed to keep its FSP license, made the following statement quoted by ForexMagnates: What was lacking in New Zealand is a well-known financial institution, so we seized the opportunity and filled that gap. It helps that it was an opportune time for entering NZ because they are starting to firm up the regulatory scene and Blackwell Global was there at the right time and place to help with the process. We are still working closely with the New Zealand authorities in this aspect, a fact we are very proud of. We are fortunate to have the first-mover advantage”. 
 
Now, I might be going into a wild speculation here, but Chai's statement gives me the feeling that bigger players on the New Zealand financial market have meddled with the situation to apply some pressure on FSP and push smaller and less credible companies out of the country. Even if that's the case, I do think that the new regulatory requirements will have a positive impact on the forex landscape in New Zealand, encouraging registered brokers to keep up with higher compliance, transparency and security levels for the customers. FSP also promises to conduct regular inspection of licensed companies in order to enforce compliance with its rules. 
TAGS: New Zealand  FSP  forex regulation  ThinkForex  PFD-NZ  RoboForex 
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