Should you get an EU license for your brokerage company? Pros and cons.

Author: Baiana Kashaeva

There is a moment in every broker’s life when they have to decide where to register their company. Most of the time, the decision is made between going for an offshore or European Union.

Today we would like to go through main points that tend to come up when considering an EU brokerage license. Let’s start with the positives.

Reasons for getting an EU license

Prestige

Whether we admit it or not, having your business registered within the European Union adds many points to the reputation. European countries have well established democracies, legal systems, and they have earned people’s trust over many years of consistent fair policies.

Marketing

Your marketing team will love you for having the European license. This is a huge selling point that will attract leads, partners, and will help get into all kinds of lists and ratings posted online.

Big clients

Clients with large disposable income generate good revenue but they are hard to come by. If your team is negotiating with a potential investor, they are more likely to go ahead and partner with your brokerage, should it have a reputable license.

Safety

The trustworthy license is not only good for brokers’ clients but for the brokers themselves. Any disputes will be handled by the EU court, so that will scare off scammers and will help deal with any real issues in a transparent and efficient way.

Reasons against getting an EU license

The cost

The biggest and the most obvious downside of having an EU license is its price. Not only is it a huge upfront cost but it also has to be maintained annually.

Reporting

Business within european countries is very regulated. The same goes for brokerages. If you decide to go ahead with the license, you must be prepared to provide periodic reports to the regulating authorities. Often, these reports require extra software and human resources investment, as they are comprehensive and EU financial institutions do not tolerate missing or incorrect information.

Time

Good things come to those who wait. Same goes with EU licensing. It is a great license to have but with all preparation, data gathering and bureaucratic processes, it can sometimes take a year and even longer before companies get approved.

Another point to consider is due diligence which can go both into pros and cons. European license requires a lot of preparation which often causes frustration and takes up all free time. However, this internal audit is ultimately good for a company in the long run. Not only does a business gather all information needed to get licensed, but they also receive a comprehensive overview of their current state which can later be used for strategic review and planning.

Ultimately, there is no right or wrong when it comes to where your firm is legally registered. Every scenario brings its benefits, as well as limitations, so we recommend each broker to assess their individual situation and not look at other fellow brokers' business models.

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