With the latest batch of changes in Vanuatu making the regulatory destination much less attractive, the industry has been looking at other jurisdictions for offshore subsidiaries. That said, the new framework in the country is not closing its doors to the industry, and some firms may yet find it prudent to support the local license despite the regulatory reform.
To find out the deepest details about the framework we sat down with Tal Itzhak Ron and Stephanie Attias from Tal Ron, Drihem & Co. The duo has extensive knowledge about this and other jurisdictions and was keen to share the details that brokers should have in mind if they decide to explore Vanuatu as a regulatory home.
With the new mandate for local directors kicking in, the main question for brokers who are holding local licenses has been if they can find enough staff to be locally based and cover the regulator’s requirements for locally-based directors.
“It is not an easy task, but we have successfully managed to hire several qualified personnel from Australia, Fiji, France, and New Zealand for this job,” Tal and Stephanie explain.
Local Office Requirements
With the requirements for a local office adding to costs of maintaining the license active, the pool of local directors who are a natural person, and have at least five years of experience dealing in securities is very limited.
“It also became an obligation for such director(s) or manager(s) of the company to reside in Vanuatu for six months within each year. The purpose of this new amendment is to allow the VFSC to monitor licensees under the Act and to conduct onsite inspections locally,” the duo from Tal Ron, Drihem & Co elaborated.
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Asked about the systems which the company would have to maintain, Tal and Stephanie explained: “Each company listed under the VFSC will have to operate from a physical premise located in Vanuatu, which maintains the following systems: a filing system; a management and accounting system; a business continuity system; and a software system with a server.”
Despite the local office, the company is not allowed to offer its products within the country.
Time to Adjust & Alternatives
The transitional period which the VFSC outlined for brokers to adapt to the new regulations expires in less than three months on the 7th of July, 2019. Companies which are already authorized before the commencement of the new regulation must apply within six months from the commencement for a Class A, Class B or Class C Principal’s License.
Our interviewees outlined that if a company fails to make such an application, the principal’s license issued to that company will expire after six months from the commencement of the new Act in July. The new classes of dealer licenses are for different sorts of securities.
“Class A Licenses deal with: debenture stocks; loan stock, bonds; certificates of deposit; or proceeds of foreign exchange. Class B Licenses deal with: future contracts and derivative products but not limited to futures and options. Class C Licenses deal with: shares in share capital of a corporation; proceeds of precious metals; proceeds of commodities; a right under despite whether or not conferred by warrant, subscriptions for shares of debt securities; a right under depository receipts; an option to acquire or dispose of any security falling within any other provision of the Act; a right under a contract for the acquisition of securities,” Tal and Stephanie explained.
With the strict new guidelines, the attractiveness of Vanuatu’s regulatory framework has diminished materially. When it comes to cryptocurrency-oriented jurisdictions, Tal and Stephanie are recommending to look at Estonia and Malta. As for brokers, Marshall Islands, Bermuda and Belize remain attractive. In the meantime, St Vincent has lost its importance after recent local developments and their implementation by banks.
“The final choice is up to personal preferences and business goals, but companies should always make sure to get efficient legal, compliance and banking support in order to set up a business with the most appropriate regulatory regime,” Tal and Stephanie said in conclusion to our talk.