Concept
A broker licence is the state's permission to provide investment services in financial instruments: receiving and executing client orders, dealing on own account, advising and managing portfolios. A broker holds client money and securities or becomes the counterparty to client trades, so the law requires capital, qualified management and client asset protection before it starts.
Every regime on this map licenses specific activities, which gives the first rule: the list of services in the application sets the capital, the people and the timeline. In the EU, MiFID II names nine investment services and the Investment Firms Directive (IFD) ties initial capital of €75,000, €150,000 or €750,000 to them (IFD art. 9).
The second rule is that a licence works where the clients are. The map has one passport, the European one: an investment firm authorised in one EU state reaches the others by notification. UK, Hong Kong, Singapore and US licences work in their own markets, and the laws of Hong Kong, Singapore and the US also reach a foreign firm that deals with the local public. Payment services, e-money and crypto-assets that are not financial instruments are licensed under other regimes.
The service sets the capital
An intermediary holding no client assets starts at €75,000 in the EU and £75,000 in the UK; dealing on own account lifts the minimum to €750,000 and £750,000. In the US net capital runs from US$5,000 to US$250,000 depending on whether the broker holds client assets.
Only the EU has a passport
A licence from one EU state extends to the others by notification. The UK left the passporting system at the end of 2020, and Hong Kong requires a licence even from a foreign firm that actively markets its services to the Hong Kong public.
Client protection differs
EU compensation schemes cover at least €20,000 per investor, the UK's FSCS up to £85,000 and SIPC in the US up to US$500,000. In Singapore client money sits in a trust account with a local bank; in the Astana International Financial Centre (AIFC) it is kept apart from the broker's own funds.
One broker, three markets
A broker that executes orders for retail clients and holds their money needs three different licences in the EU, the UK and Hong Kong. Cyprus stands for the EU in the example; the figures follow MiFID II, MIFIDPRU 4.4.1R and the SFC Licensing Handbook.
| Parameter | EU (Cyprus) | United Kingdom | Hong Kong |
|---|---|---|---|
| Licence | CySEC investment firm under MiFID II | FCA permission under FSMA Part 4A | SFC Type 1, dealing in securities |
| Capital with client assets | €150,000 | £150,000 | HK$5 million paid-up and HK$3 million liquid capital |
| Timeline | Up to six months from a complete application | Six months by statute; median 138 days | About 15 weeks on the SFC's estimate |
| People | At least two persons directing the business | Head office and registered office in the UK | At least two responsible officers per activity |
| Client compensation | 90% of the claim, up to €20,000 | Up to £85,000 | Up to HK$500,000 on Hong Kong exchange products |
| Territory | The whole EU by notification | The UK; no EU passport | Hong Kong, including active marketing from abroad |
Three licences bring three capital measures in three currencies, and the EU passport replaces neither of the other two. The choice therefore starts with where the clients live and only then turns to the price of the licence.
Payment, e-money and bank regimes are collected in “Financial Licenses by Jurisdiction”, crypto regimes in “Crypto Licences by Jurisdiction” and lending in “Lending licences: EU, UK, Hong Kong, Singapore and Kazakhstan”. The same brokers seen from the client's side — which entity signs the contract and which scheme covers it — are in “International Brokerage Account”. The “Financial Licences” hub places broker licences among the rest, and UAE broker regimes are in the UAE licence map.
What a broker licence covers
Each regime splits brokerage into activities: the nine MiFID II services in the EU, Part 4A permissions in the UK, SFC types in Hong Kong, activities and product types in a Singapore capital markets services (CMS) licence, broker and dealer in the US, and separate activities in the AIFC.
Capital follows the riskiest activity applied for, and the Singapore and AIFC rules say expressly that where several activities are licensed, the highest requirement applies (MAS, AFSA). The steps are much the same everywhere: an intermediary that never touches client money or securities; a broker that receives or holds them; a firm that deals on own account. Capital by licence type is covered in detail in “Regulatory Capital”.
The map: 16 regimes on eight axes
Sixteen regimes — seven EU states, the UK, Hong Kong, Singapore, the US, two in Kazakhstan (the AIFC and the domestic market) and three offshore — are compared on eight axes in three tables. The seven EU states share one row because their services, capital and passport are common; how they differ is the subject of the next section. The first table shows the perimeter: who grants the licence, for what, and where it works.
| Regime | Regulator and act | What is licensed | Passport and territory |
|---|---|---|---|
| EU: seven states | National regulator; MiFID II and the IFD | The nine investment services of MiFID II Annex I | Passport by notification; a third-country firm without authorisation only at the client's own exclusive initiative |
| United Kingdom | FCA; FSMA 2000, Part 4A | Regulated investment activities | The UK; the EEA passport ended on 31.12.2020 |
| Hong Kong | SFC; Securities and Futures Ordinance (SFO) | Types 1, 2, 4, 9 and others among 13 types | A licence is also needed to market actively to the Hong Kong public from abroad |
| Singapore | MAS; Securities and Futures Act 2001, Financial Advisers Act 2001 | CMS licence by activity; financial adviser's licence | The Act may apply to acts abroad with a substantial effect in Singapore |
| United States | SEC and FINRA; Securities Exchange Act 1934 | A broker effects securities trades for others, a dealer trades for its own account as a business | Registration for trades using the mails or interstate commerce; Rule 15a-6 exemptions |
| Kazakhstan: AIFC | AFSA; General Prohibition in s.24 of the AIFC Financial Services Framework Regulations (FSFR) | Dealing as agent or principal, managing, custody, arranging, advising | AIFC participants and non-residents; residents only per Schedule 2 of the currency rules |
| Kazakhstan outside the AIFC | ARDFM; Law on the Securities Market | One broker-dealer licence, with or without the nominee-holder right | The Kazakh domestic market |
| Seychelles | FSA; Securities Act 2007 | Business as a securities dealer | Notice to the FSA of every country served, with assurance that it allows its residents to deal with the firm |
| BVI | FSC; Securities and Investment Business Act 2010 (SIBA) | Dealing as agent or principal, arranging deals | A licence is needed by a BVI company even abroad and by anyone soliciting persons in the BVI |
| Cayman Islands | CIMA; Securities Investment Business Act (SIBA) | Broker-dealer, securities arranger, restricted licence for up to 20 clients | Operating without a licence or registration is an offence: a $100,000 fine and a year in prison |
The second table covers entry: capital, regulator's fee, timeline and route. Timelines are labelled: “by statute” is the rule in the act, while “estimate” and “median” are the regulator's own figures.
| Regime | Capital by statute | Fee and timeline | Entry route |
|---|---|---|---|
| EU: seven states | €75,000 without client money or securities, €150,000 with them, €750,000 for dealing on own account and underwriting | Fees from €947 in Lithuania to €50,000 in Luxembourg; up to six months from a complete application by statute | A licence in one state; tied agent of another investment firm |
| United Kingdom | £75,000, £150,000 or £750,000 on the same steps | £280–225,170 by category; 6 and 12 months by statute, median 138 days | Part 4A permission; appointed representative for arranging and advising |
| Hong Kong | Type 1: HK$5 million paid-up and HK$3 million liquid capital; Types 4 and 9 without client assets — HK$100,000 liquid | HK$4,740 per activity; about 15 weeks on the SFC's estimate | SFC licence; Type 1 covers wholly incidental advice and management |
| Singapore | S$50,000 – S$5 million by type of dealing, exchange membership and client base | S$1,000; up to six months on MAS's estimate, median 5.5 months in 2025 | CMS licence; exemptions, including for proprietary trading |
| United States | Net capital from US$5,000 without client assets to US$250,000 for carrying customer accounts; dealer — US$100,000 | SEC decision within 45 days; FINRA within 30 days of the membership interview | SEC registration and FINRA membership |
| Kazakhstan: AIFC | US$50,000 for dealing as agent, US$500,000 for dealing as principal and custody | US$14,000 for dealing; two to three months on the AFSA's estimate | AFSA licence; Recognised Non-AIFC Member status to reach the AIX exchange |
| Kazakhstan outside the AIFC | 10,000 monthly calculation indices, MCI (KZT 43.25 million), without the nominee-holder right, 50,000 MCI (KZT 216.25 million) with it, plus operational risk | 30 working days by statute | ARDFM licence with or without the nominee-holder right |
| Seychelles | US$100,000 paid-up capital held in a bank account | US$3,000 and US$6,000 a year; 30 working days under the FSA's service standard | FSA licence |
| BVI | No general minimum; set by the FSC case by case | US$2,200 to apply and US$3,300 on grant and yearly | FSC licence by category |
| Cayman Islands | Greater of ¼ of annual expenditure and $100,000, plus risk requirements | CI$1,000 to apply, CI$10,000 on grant and yearly | Licence, or registration as a registered person |
The third table covers operation after grant: who must run the firm and what the law does with client money and assets.
| Regime | Management and presence | Client assets, compensation, oversight |
|---|---|---|
| EU: seven states | At least two persons directing the business; head office in the state of registration (MiFID II arts 5(4)(a) and 9(6)) | Protection of client ownership rights on the firm's insolvency; compensation of at least €20,000 |
| United Kingdom | Head office and registered office in the UK; FCA threshold conditions | FSCS — up to £85,000 per person per firm |
| Hong Kong | At least two responsible officers per activity, at least one an executive director | Investor Compensation Fund — up to HK$500,000 on Hong Kong exchange products and Stock Connect |
| Singapore | Two directors, one resident; resident CEO; MAS approval | Trust account with a Singapore bank by the next business day |
| United States | Two General Securities Principals where there is more than one associated person | SIPC — up to US$500,000, of which up to US$250,000 for cash claims |
| Kazakhstan: AIFC | AFSA-approved Senior Executive Officer, Finance Officer, Compliance Officer and MLRO; the MLRO generally resident | Client money segregated; professional clients may opt out in writing |
| Kazakhstan outside the AIFC | Legal entities from offshore zones on the ARDFM list generally may not hold voting shares | Client accounts as nominee holder only under a licence with that right |
| Seychelles | Two natural-person directors, one a full-time resident; a licensed representative | Retail CFDs: money-only margin, negative balance protection |
| BVI | The board answers for capital adequate to the business | The FSC sets each licensee's capital requirement individually |
| Cayman Islands | Registration of a firm serving only sophisticated and HNW persons requires an office in the islands serviced by a licensed provider | Financial resources above the requirement; a broker-dealer reports monthly |
What the map shows
The lowest capital minimum set by law is US$5,000 of net capital for a US broker that neither receives nor holds client assets; the BVI sets no general minimum. The highest thresholds are HK$5 million paid-up for Hong Kong Type 1 (HK$10 million with securities margin financing), S$5 million for a Singapore clearing member and for a leveraged FX dealer with retail customers, and €750,000 and £750,000 for dealing on own account in the EU and the UK.
The shortest statutory timelines are 30 working days in Kazakhstan outside the AIFC and 45 days at the SEC, though US registration takes effect only with FINRA membership; the EU and the UK allow the regulator six months from a complete application. In practice the FCA's median was 138 days in January–March 2026 and MAS's 5.5 months in 2025, while the SFC and the AFSA give guide figures of about 15 weeks and two to three months.
Territory constrains more than money: only an EU licence passports, and only within the Union, and the Seychelles licence also requires the dealer to confirm that each client's country allows dealing with it.
EU: seven states, one passport
MiFID II and the IFD make services, capital, the six-month decision period, client asset protection and the passport the same in all seven states. How these rules work, including investment firm classes, is explained in “MiFID II Investment Firm”, and the passport in “EU Passporting”. The states differ in regulator, fee, how the timeline is counted, presence requirements and compensation scheme.
| State | Regulator, act, presence | Timeline and application fee | Investor compensation |
|---|---|---|---|
| Cyprus | CySEC | Up to six months (MiFID II); fee €7,000 for services 1–7, €25,000 for an MTF or OTF; +€500 per ancillary service, +€2,000 for algorithmic trading | Compensation fund: the lower of 90% of claims and €20,000 |
| Malta | MFSA; Investment Services Act (Cap. 370): a licence is needed for services “in or from within Malta” | Six months from a properly completed application; fee by range of services — €4,250–15,000 in 2026, €5,000–19,000 from 2027 | Compensation scheme: 90% of the loss, up to €20,000 |
| Bulgaria | Financial Supervision Commission (FSC); Markets in Financial Instruments Act | Three months from confirmed completeness; fee €10,225.84 for a full licence | Compensation fund: 90%, up to €20,000 from 01.01.2026 |
| Lithuania | Bank of Lithuania; Law on Markets in Financial Instruments | Up to six months from complete documents; €947 | Value of assets not returned, up to €22,000 |
| Estonia | Finantsinspektsioon; Securities Market Act; public limited company (AS) only, applications through the portal since 18.03.2026 | Two months from complete information, no later than six from filing; €1,000 | Guarantee Fund: up to €20,000 |
| Ireland | Central Bank of Ireland; S.I. No. 375 of 2017 | Six months from the formal application, which follows a meeting and a Key Facts Document and is filed only on the Central Bank's invitation | ICCL: 90%, up to €20,000 |
| Luxembourg | CSSF; Law of 5 April 1993 on the financial sector; two managers resident in Luxembourg or the Greater Region | Six months, 12 at most, silence counts as refusal; fee €50,000 | SIIL: up to €20,000 |
ESMA considers that the absence of the persons directing the business and of key compliance and risk staff from the state of registration may be a ground to refuse or withdraw authorisation (ESMA35-43-762).
Annual fees come on top of the application fee: the CSSF, for example, charges €37,125 a year for reception and transmission of orders as a class 2 firm (€24,750 as class 3) and €123,750 for dealing on own account.
Under Directive 97/9/EC cover is at least €20,000 per investor, and a state may cap the payout at no less than 90% of the claim. The schemes restore money and instruments the firm cannot return; they do not cover market losses. Schemes across countries are compared in the “Client Asset Protection Map”.
Since 18 August 2026 every Maltese licence holder in Class 1, 1 Minus, 2 or 3 under the Investment Firms Regulation (IFR) must participate in the scheme, including firms without client money; only firms serving exclusively non-retail investors are exempt (L.N. 224 of 2026). From the second year after licensing a participant pays a fixed contribution of €5,000 (Class 3) to €40,000 (Class 1 and 1 Minus), and firms with retail clients also keep reserves of 0.1% and 1% of investment-services revenue.
A detailed comparison of the seven states for choosing where to set up an investment firm is covered in a separate article.
The UK, Hong Kong, Singapore and the US
The four national regimes differ in actual timelines, fees and the line the law draws for foreign firms and individuals.
| Regime | Timelines, fees and capital in practice | Regime boundary and people |
|---|---|---|
| United Kingdom | Median for January–March 2026: 241 days for consumer investments firms, 209 for wholesale; fee £11,260 for most MiFID investment managers, £2,820 for advisers | Operating without authorisation is a criminal offence punishable by up to two years' imprisonment; the temporary permissions regime for EEA firms ended on 31.12.2023 |
| Hong Kong | Responsible officer approval — about 10 weeks and HK$2,950 per activity; Type 1 with margin financing — HK$10 million paid-up capital | The SFC licenses individuals only if they come to work in Hong Kong; a responsible officer stationed overseas receives a non-sole condition |
| Singapore | After in-principle approval, six months to meet the conditions; median 5.5 months in 2025 against 6.5 in 2024; the annual fee adds up by activity | Advice and research need a separate financial adviser's licence; the Act reaches conduct abroad (SFA s.339) |
| United States | FINRA decides within 30 days of the membership interview; with no decision after 180 days the applicant may go to the FINRA Board | SEC registration takes effect only with FINRA membership; without it a foreign broker-dealer relies on the Rule 15a-6 exemptions |
The regimes are covered in detail in the articles on the FCA investment firm, on SFC licensing in Hong Kong, “Singapore: CMS Dealing Licence and Financial Adviser's Licence” and on the US broker-dealer. The other UK authorisations are in “UK: the FCA Authorisation Map”, and the country context in the hubs “Hong Kong: Companies, Residency, Banking and Licences” and “Singapore — Business, Investments, Residence, Banking”.
Kazakhstan: the AIFC or the domestic market
Kazakhstan runs two separate regimes. In the AIFC the AFSA licenses brokers under the Centre's own law, capital is set in dollars and clients are Centre participants and non-residents. On the domestic market the Agency for Regulation and Development of the Financial Market (ARDFM) grants the licence and capital is set in monthly calculation indices (MCI), with one MCI at KZT 4,325 in 2026 (budget law). In the ARDFM adequacy ratio operational risk is added to the minimum capital, and its absolute part is 15,000 MCI, or KZT 64.875 million (methodology).
A foreign broker licensed to trade on an exchange in an acceptable jurisdiction can reach the AIFC exchange AIX without a Kazakh company: the AFSA recognises it as a Recognised Non-AIFC Member where the regime is broadly equivalent and a cooperation arrangement with the home regulator exists (FSFR). Both regimes are covered in detail in “Broker licence in Kazakhstan: AFSA in the AIFC or ARDFM onshore”, and the Centre's law in “AIFC”.
Offshore dealers: Seychelles, the BVI and the Cayman Islands
The three offshore regimes define their own territory differently and allow different ways to work without a full licence.
- In Seychelles a dealer must notify the FSA of every country where it offers services, declare through its board that it will comply with that country's laws and confirm that the country allows its residents to deal with it (conduct of business regulations).
- In the BVI a licence is needed by a BVI company even when it does business abroad, and by anyone soliciting clients in the islands.
- In the Cayman Islands a firm can register instead of taking a licence if it serves only its own group, only sophisticated and high-net-worth persons through an office in the islands, or is regulated for that business by a recognised overseas regulator (SIBA); a restricted licence allows no more than 20 named clients and costs CI$5,000 (CIMA fees).
The detail is in “Offshore Broker Licences: Seychelles, BVI and Cayman”.
Choosing by product
The product decides the services, the services decide the capital, and the clients decide the territory.
Execution broker
A broker that receives, transmits and executes orders crosses the same line almost everywhere: whether it touches client money and securities (IFD art. 9, Rule 15c3-1).
| Regime | No client money or securities | With client money or securities |
|---|---|---|
| EU and UK | €75,000 and £75,000 | €150,000 and £150,000 |
| United States | US$5,000 | US$50,000 if the broker receives client securities without holding them; US$250,000 if it carries their accounts |
| Hong Kong, Type 1 | Introducing agent: HK$500,000 of liquid capital | HK$5 million paid-up and HK$3 million liquid |
| Kazakhstan outside the AIFC | 10,000 MCI without the nominee-holder right | 50,000 MCI with it |
In Singapore the line runs by exchange status: an introducing broker holds S$500,000 of base capital, a trading member or non-member S$1 million, a clearing member S$5 million. In the AIFC dealing as agent requires US$50,000 and custody US$500,000.
CFDs and leveraged FX
A broker that executes client orders in contracts for difference (CFDs) by dealing on own account provides MiFID II service 3, and its capital is €750,000.
The product is also restricted for retail clients: ESMA's 2018 measures set leverage limits from 30:1 on major currency pairs to 2:1 on cryptocurrencies, a 50% margin close-out, negative balance protection and a ban on incentives (ESMA). Since 2019 every national regulator in the EU has applied permanent measures mostly mirroring them, and in ESMA's 2026 view leveraged perpetual futures, including on crypto-assets, are likely in scope (ESMA35-243228190-8024).
| Regime | Capital | Rules for retail CFDs and FX |
|---|---|---|
| EU | €750,000 for dealing on own account | National measures modelled on ESMA's: leverage from 30:1 to 2:1 |
| United Kingdom | £750,000 for dealing on own account | COBS 22.5, including for branches of third-country firms: margin from 3.33% on major currency pairs to 20% on shares |
| Singapore | S$5 million with retail leveraged FX customers, S$1 million without | FX CFDs and leveraged FX: minimum margin 5%, leverage up to 20:1 |
| Seychelles | US$100,000 | Appropriateness test, money-only margin, negative balance protection; no leverage limits |
Prop trading: the legal tests
For a firm trading only its own money the map offers three tests. The outcome depends on whether the firm does anything for clients or in the market beyond trading its own capital.
| Regime | No licence needed | Licence needed |
|---|---|---|
| EU | Dealing on own account with no other investment services, outside commodity derivatives and emission allowances (MiFID II art. 2(1)(d)) | Market maker, member or participant of a regulated market or MTF, high-frequency trading, executing client orders on own account |
| Singapore | Trading for its own or a related corporation's account with or through regulated financial institutions | Dealing with customers or outside that circle |
| United States | Trading for its own account but not as part of a regular business: not a dealer | Buying and selling securities for its own account as a business: dealer registration and US$100,000 net capital |
Advisory
Investment advice without client assets sits on the lowest capital step, and in two regimes it can be given under someone else's licence.
| Regime | What an adviser needs |
|---|---|
| EU | MiFID II service 5; €75,000 without client assets |
| United Kingdom | £75,000 under its own permission, or appointed representative status under a principal's responsibility |
| Hong Kong | Type 4 with HK$100,000 of liquid capital; not needed by a Type 1 firm if the advice is wholly incidental to dealing |
| Singapore | A financial adviser's licence unless exempt; median admission time 4.1 months in 2025 |
| United States | A broker-dealer needs no adviser status while its advice is solely incidental to brokerage and earns no special compensation |
| AIFC | Advising on Investments: US$10,000 of capital, fee US$7,000 |
The US carve-out is in Advisers Act s.202(a)(11)(C); beyond it the firm needs registered investment adviser (RIA) status.
Managed accounts
Portfolio management without client assets costs €75,000 and £75,000 in the EU and the UK, and €150,000 and £150,000 with them; in the AIFC managing investments requires US$150,000. In Hong Kong the Type 1 incidental exemption does not apply where an assets-under-management fee is charged for discretionary accounts: that is a distinct service and needs Type 9.
In Singapore operating discretionary accounts for customers is fund management, so a dealer must add fund management to its CMS licence (MAS FAQs). More in the articles on the Singapore fund management licence and on where the fund manager sits; a comparison of Hong Kong Type 9 with Singapore fund management is covered in a separate article.
Crypto broker
A crypto broker first decides whether its tokens are financial instruments. In the EU MiCA does not apply to crypto-assets that qualify as financial instruments, so tokenised securities and crypto derivatives stay under MiFID II (MiCA art. 2(4)(a)). The CASP procedure is in “The MiCA CASP Licence” and the regime itself in “MiCA”.
| Regime | Rule for a broker |
|---|---|
| EU | An investment firm adds equivalent crypto-asset services by notifying its regulator 40 working days ahead (MiCA art. 60(3)) |
| Hong Kong | A Type 1 intermediary deals in virtual assets only through SFC-licensed platforms and only for its own Type 1 clients (SFC circular) |
| Singapore | A payment-token-only platform is outside the SFA; admitting securities tokens makes it an organised market (MAS) |
| United States | SEC staff statement of 17.12.2025 on broker-dealer custody of crypto asset securities; no legal force |
The new Hong Kong dealing and custody licences are covered in “Hong Kong: the new virtual-asset dealing and custody licences”. For tokens that are not securities the choice leads to “Crypto Licences by Jurisdiction”.
Models at a glance
| Model | Shortest route | Where it breaks |
|---|---|---|
| Execution broker without client assets | EU or UK on the lowest step; US$5,000 of net capital in the US | Taking client money moves the firm to the next capital step |
| Retail CFDs and leveraged FX | An EU licence with dealing on own account and a passport | €750,000 and leverage limits; an offshore licence does not open EU or UK retail |
| Prop trading | Trading only own capital within the exemptions | Client orders, exchange membership or high-frequency trading in the EU |
| Advisory | Appointed representative in the UK; Type 1 with incidental advice in Hong Kong | A separate fee for advice in the US; a separate licence in Singapore |
| Managed accounts | Portfolio management in the EU; Type 9 in Hong Kong | In Singapore it is fund management |
| Crypto broker | An EU investment firm with a MiCA notification | Hong Kong — only through licensed platforms |
Entry without a licence of one's own
Almost every regime allows work under someone else's licence, or without a licence in narrow cases. In the agent models the licence holder stays responsible and the product is limited by its permission.
| Route | Regime | What is allowed | Limit |
|---|---|---|---|
| Tied agent | EU | Soliciting clients, receiving and transmitting orders, placing, advising on the firm's behalf | The firm is fully and unconditionally responsible; the agent is on a public register |
| Appointed representative | United Kingdom | Arranging deals, advising, arranging safeguarding under the principal's responsibility | Managing investments and dealing in investments excluded |
| Client's own initiative | EU | A service to an EU client who made the approach | Any solicitation in the EU ends the exemption; no new product categories may be offered |
| Rule 15a-6 | United States | Unsolicited trades; research to institutions with over US$100 million in assets; institutional trades through a US broker-dealer | Solicitation only of institutional investors and through a registered broker-dealer |
| Recognised Non-AIFC Member | AIFC | Access to the AIX exchange without presence in the AIFC | An exchange licence in an acceptable jurisdiction and an AFSA arrangement with the home regulator |
| Registered person | Cayman Islands | Registration instead of a licence | Own group only, sophisticated and HNW persons only, or overseas regulation |
Tied agents are governed by MiFID II art. 29, appointed representatives by reg 2 of the Appointed Representatives Regulations 2001, and foreign broker-dealers in the US by Rule 15a-6. Licence-rental models are covered in “License for Rent” and UK hosting in the article on UK regulatory hosting. Buying an existing licensee is described in “Change of Control and Buying a Licensed Company”, and vetting of owners in “Qualifying Holdings and Fit & Proper”.
Popular, but ends badly
The costliest mistake on the map is treating an offshore licence as a basis for serving retail clients in the EU and the UK.
The other practices look lawful on paper, but each breaks on a specific rule.
| Practice | Rule and consequence |
|---|---|
| A “client approached us” clause in the terms of business or an “I agree” pop-up | ESMA calls such clauses questionable; any solicitation ends the exemption (ESMA35-43-2509) |
| An EU investment firm run from another country | The absence of directing persons in the state of registration may be a ground to refuse or withdraw authorisation (ESMA35-43-762) |
| Dealing with clients on own account under a licence to receive and execute orders | Dealing on own account is a separate service with €750,000 of capital (IFD art. 9(1)) |
| A prop firm executing client orders on own account | The MiFID II art. 2(1)(d) exemption does not cover it |
| A Maltese licence without client money counting on staying outside the compensation scheme | Since 18.08.2026 every Class 1–3 licence holder with retail clients participates |
| An assets-under-management fee for discretionary accounts under Hong Kong Type 1 | The incidental exemption fails; Type 9 is needed |
| Discretionary accounts under a Singapore dealing licence | This is fund management; the activity must be added to the CMS licence |
| Marketing to the Hong Kong public from abroad without a licence | Active marketing requires an SFC licence (SFO s.115) |
| Operating in the Cayman Islands without a licence or registration | A $100,000 fine, a year in prison and $10,000 for each day the offence continues |
Q/A
Choosing a licence
Which licence does a CFD broker need?
A broker that becomes the counterparty to client trades deals on own account: in the EU that is service 3 with €750,000 of capital, in the UK £750,000. Retail business faces leverage limits of 30:1 to 2:1 in the EU, margin from 3.33% in the UK and 5% in Singapore, where a leveraged FX dealer with retail customers needs S$5 million of capital.
What is the cheapest way into the EU?
Capital is the same in every EU state, so fees and timelines make the difference. Application fees range from €947 in Lithuania and €1,000 in Estonia to €50,000 in Luxembourg. Estonia runs its six-month outer limit from filing, Lithuania and Malta from a complete application. Since August 2026 Malta has a new compensation-scheme contribution model of €5,000 to €40,000 a year.
Does an offshore licence allow serving EU clients?
No. Without EU authorisation a third-country firm may serve only a client who approached it at the client's own exclusive initiative, and any solicitation in the Union ends that exemption. A Seychelles dealer must also confirm to the FSA that the client's country allows its residents to deal with it.
Timelines and capital
How long does a broker licence take?
By statute: six months from a complete application in the EU and the UK, 45 days for an SEC decision in the US, 30 working days in Kazakhstan outside the AIFC. On regulators' figures: a median of 138 days at the FCA in early 2026, 5.5 months at MAS in 2025, about 15 weeks at the SFC and two to three months at the AFSA.
How much capital does a broker without client assets need?
€75,000 in the EU, £75,000 in the UK and US$5,000 of net capital in the US. In Hong Kong a Type 1 introducing agent holds HK$500,000 of liquid capital with no paid-up minimum; in Singapore a firm dealing only with accredited, expert and institutional investors and holding no customer positions or money needs S$50,000.
Does a firm trading only its own money need a licence?
In the EU, no, if it provides no other investment services, is not a market maker or a member of an exchange or MTF, does not use high-frequency trading and does not execute client orders on own account. In the US a person trading for its own account but not as a regular business is not a dealer. In Singapore proprietary trading with or through regulated institutions is exempt from the CMS licence.
Client money and crypto-assets
What protects client money in each regime?
In the EU, compensation schemes covering at least €20,000 per investor; in the UK, the FSCS up to £85,000; in Hong Kong, the Investor Compensation Fund up to HK$500,000 on exchange products; in the US, SIPC up to US$500,000. Singapore requires a trust account with a local bank, the AIFC segregation of client money, and Seychelles negative balance protection for retail CFD clients.
Can an EU investment firm offer crypto-assets?
Yes. Tokenised securities and crypto derivatives already stay under MiFID II, and the firm may provide equivalent crypto-asset services under MiCA after notifying its regulator at least 40 working days in advance. In ESMA's view, retail perpetual futures on crypto-assets are likely caught by the CFD restrictions.
Can a Hong Kong broker deal in virtual assets?
Only in partnership with SFC-licensed platforms — by introducing clients or through an omnibus account — and only for its own Type 1 clients. The conduct requirements are imposed as licensing conditions.