FiveComply

NAYIA XIARI

Global Head of Licensing and Compliance Support Department at FiveComply

2022 has come to an end; in terms of regulatory developments, one can say that the year was packed. FiveComply in this GameChangers issue, is here to share some useful tips on what could be the 2023 licensing and regulatory trends.

Q It is really great to have FiveComply here with us again! So how was 2022 for you?

Likewise! It is really great, ending this year together in this closing issue of GameChangers Magazine. 2022 was a milestone year for FiveComply; we have achieved quite a lot. For us, this was a year of great developments and expansion that of course, was the result of hard work, dedication and consistency.

Q We have seen that FiveComply has expanded a lot within 2022. Have your expectations been met?

Indeed, FiveComply has expanded a lot within 2022. We have managed to establish our presence in two additional jurisdictions. In Seychelles, with local offices and our approved Outsourced Compliance Officers by the Financial Services Authority (FSA) Seychelles and in Mauritius with the establishment of a local office. We have also enhanced our team of professionals in Cyprus, as our target is to offer the best possible service to our clients in the most efficient manner. If we backtrack to 2022, we can say that not only we have met our expectations, but in my opinion, we exceeded them.

Q Is there any specific reason that FiveComply decided to strategically focus on Seychelles, Mauritius and Cyprus?

Our choice of jurisdictions has not been randomly made, but is the result of years of experience in the regulatory scene and more specifically in the licensing sector. Our CEO, Gabriel Styllas, has been specialising in licensing for numerous years and has acquired licenses in over 15 jurisdictions, so he is well-aware of the peculiarities, benefits and disadvantages of various jurisdictions and he can easily make the comparison. Based on his experience, the ever-evolving regulations and developments, he decided along with our team to strategically focus in three jurisdictions that in terms of cost, time efficiency and flexibility outperform other jurisdictions. In addition, as we have been specialising for numerous years in the said jurisdictions, we are also in a position to know that particularly the specific offshore licenses i.e. Seychelles and Mauritius, address our customer’s wants and needs outside the EU.

Q In terms of licensing, are there any regulatory challenges that should be noted and how these might affect the regulatory scene?

What we have seen so far is that, licensing is becoming more complex in nowadays. Regulators introduce new requirements and become stricter. If one does not possess the experience and knowledge on how to approach and prepare an application, this might have adverse results for example, delay in acquiring the license, or even rejection of the application. In addition, we have seen that regulators introduce new requirements (e.g. fitness and propriety of shareholders/directors) and restrictions (e.g. cap on leverage); as a result, a license might become less popular or more popular according to the flexibility it offers. This makes of paramount importance the role of FiveComply, as we are able to guide the client and assist him to overcome the obstacles and regulatory challenges that are imposed and help him choose the right jurisdiction to set-up his brokerage and operate successfully.

Q Based on what you have seen in 2022, what developments do you expect in the regulatory scene of 2023?

We believe that the fact that Apple has decided to remove Metaquotes from its App store and the fact that Metaquotes decided to enhance its due diligence process in order to meet higher compliance standards and potentially be re-added into the App Store, will be a factor of paramount importance in the evolvement of the market and the developments of 2023. As a consequence, we expect that, Apple will be targeting other trading platform providers as well, with Metaquotes being only the starting point. As Metaquotes will now award rights to its platform only to regulated providers, we believe that applications will increase, as more brokers will need to shift to regulated jurisdictions in order to be able to use Metaquotes. This will apply mutatis mutandis to other platform providers as well.

The FTX collapse will also affect the global cryptoscene of 2023, with regulators and stakeholders considering this as a cautionary tale. Recently, ESMA has issued its November newsletter that includes its initial analysis on the FTX collapse and the implications that the latter will have in the European Union. ESMA made sure to emphasise the urgency to implement protections and rules around the crypto-assets market, so to achieve the protection of investors

and market participants and also raise its concerns about the fundamental risks involved in crypto-assets markets (e.g., market risk, liquidity and operational risks) which were also the basis of the rationale for the implementation of MiCA Regulation. Thus, we expect to see more crypto-exchanges to acquire licenses in reputable jurisdictions, as firstly, investors will be more cautious but also the global crypto-industry will be highly supervised, as it will be under the microscope for some time. In 2022, we have already seen the first CASP licenses to be submitted for approval under CySEC and the first crypto-license to be approved in Mauritius.

All things considered, we expect an increase in applications especially in offshore jurisdictions, as acquiring a license is becoming an issue of necessity rather than a reputational issue for brokers. Under the circumstances we expect that the applicants will face even stricter due diligence requirements by local regulators, whereas existing licensed entities will face increased ongoing regulatory requirements.

Q How does Apple’s decision to remove MetaQuotes from its App Store affect the forex brokers and the CFDs industry in general?

I believe this is just the beginning and more measures will follow by Apple that at the end of the day will require the non-regulated brokers in SVG, Marshall, Bermuda and other jurisdictions to proceed with proper licensing and substance, based on minimum regulatory organisational requirements. This is a result of a chain reaction, where the US and other local authorities put a lot of pressure on Apple for more thorough due diligence, then Apple in turn puts pressure to trading platform providers for enhanced due diligence measures and then unavoidably trading platform providers like MetaQuotes introduce additional due diligence requirements to online brokers.

In the long run, this will create a level playing field among online brokers and will enhance investors’ protection. However, in the short run, this creates uncertainty and confusion while some market participants are not ready to fully accommodate these drastic changes and sometimes use temporary solutions.

Eventually, only the properly licensed brokers will survive and will benefit from the demanding regulatory environment. The sooner they realise that they must get properly licensed, the more they will benefit in the long-term.

Q As a license expert, which type of licenses do you expect to be more popular during 2023?

As we are talking about trends here, allow me to say that CFD brokers can be defined as the ‘all-time classic’. We truly believe that the CFD industry will continue to grow especially in the offshore part, as it has been proven over time that, this industry is more robust and cannot be easily affected by external factors, such as Covid-19. In addition, EMI / PSP licensing is becoming very popular and we expect increased demand, due to the fact that the industry needs more payment solutions. Conversely, we expect some hesitation in regards to the crypto-licensing scene, as the FTX collapse might negatively affect the decisiveness of potential investors.

Q What are FiveComply’s goals for 2023?

FiveComply intends to continue its steady but upward progression to expand its team and enhance its expertise in our three offices; Cyprus, Seychelles and Mauritius. Of course, this goal is directly connected with our utmost goal which is to perform and deliver the best results to our clients. We will have some more exciting news on FiveComply’s expansion, so please make sure that you follow us on Linkedin (www. linkedin.com/company/fivecomply/) to be updated on a constant basis on our plans but also for regulatory / compliance updates.

In addition, our goal is to continue maintaining strong relationships with regulators across the globe, especially in Cyprus, Seychelles and Mauritius, as we believe that our regular face-to-face meetings help in achieving better coordination and efficiency for applications but also compliance matters. We have also started discussing with more EMIs and PSPs in order to be able to offer more specialised solutions to our clients.

Lastly, we want to offer to our clients the possibility to meet us in person, so we try to travel on a regular basis across the world to meet with existing and potential clients. Actually, you can find us in a few days at the Dubai World Trade Centre Za’abeel Hall 6, where we will be exhibiting at iFXEXPO Dubai with Booth 21; there, you will have the chance to meet some of the key members of our team and discuss potential business opportunities, licensing options, group structuring / re-structuring and other compliance matters.

All in all, what this year has taught us is that, everything can change in the blink of an eye. Thus, our role as consultants, is to be pro-active and be constantly updated on all regulatory developments; this is the only way that we can assist our clients in making the best choices, based on their circumstances and operational model. Our priority throughout 2022 was our clients’ welfare, and this will continue to be the case for us in 2023, as this is part of our values and principles.

You can find more about us by contacting us on: Email: info@fivecomply.com Website: www.fivecomply.com