Forex Trading: Why Avoid Brokers from Vanuatu

December 19, 2018 at 05:34 PM

VFSC Regulator

Formed: December, 1993

Jurisdiction: The Republic of Vanuatu

Website: www.vfsc.vu

VFSC is responsible for administering the following pieces of legislation:

  • Anti-Money Laundering And Counter-Terrorism Financing
  • Business Names Act
  • Companies (Insolvency and Receivership)
  • Companies
  • Company and Trust Services Providers
  • Charitable Associations (Incorporation)
  • Credit Unions Act
  • Dealers In Securities (Licensing)
  • Electronic Transactions
  • E-Business
  • Financial Institutions
  • Foundation
  • International Banking
  • International Companies
  • Insolvency (Cross-border)
  • Mutual Funds
  • Offshore Limited Partnerships
  • Partnership
  • Personal Property Securities
  • Protected Cells Companies
  • Trade Unions
  • Unit Trusts

Introduction

The Vanuatu Financial Services Commission (VFSC) was formally established in December 1993, as a regulatory body to oversee investment and credit services, as well as other financial providers. Vanuatu itself gained its independent status since 1980 and is an archipelago of approximately 83 islands situated in the South-western Pacific Ocean. Recently

VFSC supported by a Deputy Commissioner while four departments divide their functional responsibilities, including Corporate Services, Insolvency, Legal Enforcement and Compliance and Registration. Each of the departments performs with a purpose to meet obligations and ensure the current administrative and support assignment with an aim to establish recognized internationally reputable and commercially attractive Vanuatu’s Financial industry.

The Securities License in Vanuatu allows to carry out international brokerage service with the ability to buy, sell and trade securities such as shares, bonds, options etc, as well as manage a portfolio of investments for and on behalf of clients. 

https://www.vfsc.vu/about-us/

Why not trade with a VFSC registered broker?

Indeed, the Vanuatu jurisdiction gained its popularity among the investors and business owners in the Forex industry looking to become a regulated broker, yet obtain its status through a simplified process and operate almost without supervision. Eventually, small Pacific island Vanuatu became very well-known and a paradise of financial industry owners, as Vanuatu proposed not only opportunity to become an official financial service firm but to enjoy a variety of tax benefits and avoid legal challenges. Therefore, many international companies looking for a solution and an offshore zone to enable their business ideas placed their interest in Vanuatu and incorporate their firms there.

Increasingly popular regulation of Vanuatu shows its demand specifically among the Binary Options and other FX Brokers since the set of VFSC demands to establish a business is a very attractive opportunity, while more from the companies understands the necessity of regulation status. Brokers understand that regulatory improve their reputation, trust increases dramatically among the traders, as well as other additional benefits are enjoyed, alike international payment providing acceptance.

However, in a matter of fact that the main responsibility of the VFSC is a registration process only, which is merely implemented through low setup requirements. Consequently, easy registration process with low costs, and very quick establish invites various brokerages to be registered out there. Perhaps, Vanuatu is the easiest jurisdiction to open a brokerage, as the opening requires the company to submit a register online, prove initial establish capital which is $2,000 only!, to pay a fee, and within a 2-3 month, the firm is crisp and registered. The VFSC regulator does not require strict proof of the company background, nor check on the implementation of the secure fund management or operation guidelines, does not require regular reporting and further on never impose fines in case of the fraud operation. The authority is in charge of the official reporting of the company legitimate issues only, means the broker should submit a report once a year only, with no details of services provided. In return, compared to the industry-leading authorities’ legislation (alike UK FCA or Australian ASIC), the VFSC report requirement is far beyond the necessary level that may protect from the company’s fraud operation and reveal the cold-hearted acts. In fact, the report submits only the company returns and expenses, as well the general activity and has nothing to do with protective measures towards the clients.

Consequently, the cost of the brokerage becomes very low compared to industry leading licensing or even to some other offshore financial centers, while the firm may set up operation even without the need to maintain a physical office. Obviously, it comes to the point that the investment and trading with VFSC brokers do not provide any guarantees of the company sustainability, its serious measures and what is extremely risky, does not implement any protection that protects from fall to the scam or fraud.

Overall, the VFSC regulation and Vanuatu itself might be an attractive opportunity to open a business, but is not a likable regulation for traders or investors. With growing demand and popularity of trading and the Forex industry itself, before you entrust any broker your funds, strongly consider sharp check on a broker and engage only with those that are regulated through a recommended authorities alike FCA, FINMA, ASIC or others. Remember also that not every company stated its regulation is indeed regulated one, as many brokerages mention its regulated nature but in fact holding an offshore license only. We do not recommend trading with an offshore, non-regulated or brokers that holds no license, as such these offerings should be avoided by every mean!

Complaints and scams

While the main duties of VFSC, as mentioned by the authority, concern about the provision of effective services for the supervision of financial business to protect the public against financial loss out of dishonesty. Yet, the authority does not assist in case the trader was victimized or fall under scam by a Forex Broker incorporated in Vanuatu. In the scenario of funds lost, the trader remains alone and unprotected to recover funds from the VFSC Broker, while the chances of refunds are minimized.

However, In case you not satisfied with the investment transaction, you can submit a complaint through an VFSC contact form https://www.vfsc.vu/fees-help-support/contact-us/

Yet, most often the regulation is not able to assist and will refer to the point that the trader using the services at his own risk.

Even though, the VFSC authority tries to promote the development of the Vanuatu financial service industry by submitting from time to time warnings against those companies that mention their registration by VFSC, mislead or false information about service providing. However, this is the maximum the authority can do to protect clients.

List of Vanuatu Forex Brokers:

Currently, we have reviewed about 50 Vanuatu Forex Brokers, in fact none of them included into the list of trusted or regulated brokers which we recommend trading with due to lack of safety measures.

The list of Vanuatu licensed brokers, as well as additional information about companies available to check through an official online source: http://www.vfsc.vu/70-prevention-of-fraud-investments-act/

The protection of funds always stands first while trading, therefore, check on the broker carefully, revise the broker’s regulation status, updates and other information, along to the reputation by reading reviews and checking on the legit documentation. And of course, choose only reputable companies that were established in known financial centers through implemented strictest regulation of forex business and financial service itself.

Verify company reputation through the list of Brokers to avoid, or contact us in case you can’t find particular one and better do not respond or keep a distance from any cooperation with Vanuatu brokers, offshore brokers or non-regulated entities at all cost.

Conclusion:

Obviously, Forex Brokerage service, as becoming popular, must be issued with a respected regulation of Forex Broker License. It is not a matter of the protection only, but the international banks or payment providers do not accept applications from unlicensed companies. However, the licenses can be granted either by an offshore jurisdiction, which has no ability to implement the strictest qualification of the financial firms or an onshore regulatory body through imposed sharp and high requirements or legislation towards brokerages. As such, offshore brokerages may fall on various possibilities of the company operation, while in fact many of them are pure frauds.

Such investment service firms, including Vanuatu Broker and those registered by VFSC bypassing legal constraints and do not comply with costly compliance of the jurisdictions that solicitude at first about customer-oriented offering through protecting tools. 

So when it comes to the point of choosing the best firm to trade with, the trader or investor should protect himself and better to consider brokerages from reputable jurisdictions that maintain a sustainable level of protection. The financial investment and trading providing itself require the strictest overseeing by the industry authorities, otherwise the risks may incur traders to lose capital or fall under scams. To assist you and discover more about the differences or applicable management of the regulated brokers check out the ASIC Regulator or FCA Regulator articles by the links.