Brokers Are Still Sending Clients Offshore

We spoke to ten brokers asking for high leverage. Seven were happy to send us to non-EU entities.

In February of this year, Finance Makers CEO Konstantin Rabin wrote a guest article on this site detailing his efforts to get brokers to provide him with more than 30:1 leverage.

When speaking to brokers, Rabin made it clear that he was based in the European Union and didn’t provide any evidence that he was a professional trader.

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Of the twelve brokers that he spoke to, ten were happy to transfer Rabin to another entity outside of Europe and provide high leverage.

We decided to repeat the experiment this Tuesday. Unlike Rabin, however, we did not speak to brokers with Australian licenses. We wanted to go really offshore – whether it be in Vanuatu or the Marshall Islands.

High leverage? Happy to help

All ten of the brokers we spoke to have their headquarters in Europe and are regulated in Cyprus or the UK.

Five of those companies were happy, in most cases within about twenty seconds, to provide links that went directly to an offshore website or registration page.

One company did not directly link to an offshore website but sent us to a page that had leverage comparisons between the different entities. Given that the only request we had made was for higher leverage, it’s pretty obvious what the intention of this was.

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Another broker initially said that we could only trade with their European entity. But not long after that, the customer support agent sent a message saying that, if we wanted to, we could send them a request to join their Vanuatu-based subsidiary.

To their credit, three brokers refused entirely to help us go offshore. They also said that, if we did sign up to their overseas subsidiaries, they would just redirect us to their European entities.

Breaking the rules…or not

What is confusing about all of this is that no one even seems to be sure if this is a breach of regulations. Some executives that Finance Magnates has spoken to seem to think that it’s not a problem to redirect clients to an offshore entity. Others have said the opposite.

The European Securities and Markets Authority has said in the past that offshore firms are not allowed to advertise directly to European clients, but it’s not obvious how that applies to a firm based in the EU that has an offshore subsidiary.

Whatever the case, it’s clear that ESMA has not succeeded in establishing a synchronized regulatory regime for the retail trading industry across Europe. If they had, all brokers would be happy to send clients offshore or none would.

As it stands, some brokers clearly see sending clients to Vanuatu as being against existing regulations. Others do not or – something which can never be ruled out – they don’t care about breaking the rules.



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