22/09/25
This article highlights the five most common and serious mistakes applicants make: inadequate technical infrastructure, incomplete business plans, insufficient qualified staff, poor organisational structuring, and weak compliance frameworks. Drawing on regulator guidance and comparative practice, we show how to avoid these pitfalls.
🛡️ Regulatory Requirements and Official Standards
Regulators worldwide expect applicants to demonstrate a fully functioning technical setup before approval. This includes secure trading platforms, tested order execution systems, cyber-security measures, data back-up, and disaster recovery planning. The UK Financial Conduct Authority (FCA) and EU supervisors under MiFID rules expressly assess IT and operational resilience as part of licensing.
Business plans must be comprehensive and detailed. CySEC, for example, requires projections on revenue and capital adequacy, AML/KYC procedures, risk management strategies, and disclosure of client onboarding processes. Incomplete or generic business plans are a frequent reason for license rejections.
Staffing requirements are equally strict. Regulators such as CySEC and the FCA demand that directors and key function holders be fit and proper: experienced in financial services, free of criminal records, and often resident locally. Compliance officers and risk managers must be named and their responsibilities clearly documented.
Organisational structures must also demonstrate clear lines of responsibility. Regulators review whether governance separates executive, compliance, and risk management functions, with transparent reporting lines to the board. Weak or unclear structures frequently trigger follow-up requests.
Finally, a strong compliance framework is indispensable. AML and KYC systems must comply with FATF standards, including beneficial ownership disclosure, transaction monitoring, and reporting mechanisms. The U.S. NFA, for instance, requires strict adherence to anti-money laundering rules and ongoing internal audits.
📊 Comparing Jurisdictions – EU, UK, Offshore, and U.S.
While the five problem areas are universal, regulators apply them differently. Within the EU, license applicants face tiered capital requirements: CySEC currently sets minimum own-funds thresholds of €75,000, €150,000 or €750,000 depending on services provided. The UK’s FCA applies its MiFIDPRU framework, with thresholds varying according to firm class and activities.
By contrast, offshore jurisdictions may set lower financial thresholds and accept more flexibility in staffing or organisational structure. However, this leniency comes at a cost: lower credibility with counterparties, stricter banking due diligence, and reputational risk in the global market.
The U.S. regime is the most demanding. Forex Dealer Members (FDMs) must register with both the CFTC and NFA and maintain adjusted net capital often exceeding $20 million. This high barrier explains why many firms operate in alternative jurisdictions, but it also underscores the regulatory emphasis on financial soundness.
Technical standards also vary. In the EU and UK, cybersecurity, order-execution transparency, and platform resilience are mandatory; regulators conduct ongoing supervision and audits. In lighter regimes, requirements may be less prescriptive, but applicants remain vulnerable to sudden regulatory tightening or compliance failure risks.
Comparative analysis shows that firms that prepare to exceed, not just meet, minimum standards secure approval faster and face fewer regulator queries. Whether applying in Cyprus, the UK, or offshore, regulators respond favourably to well-documented compliance and IT frameworks that go beyond the basics.
⚖️ Real-World Examples of Mistakes and Consequences
A frequent real-world example is the regulator demanding resubmission of IT policies because applicants failed to evidence encryption standards, penetration testing, or backup protocols. This has delayed applications by several months.
Another common case is incomplete financial planning. Regulators have refused licenses where business plans underestimated compliance staffing costs or omitted cash-flow projections to cover the first year of operations. Authorities treat such omissions as proof of insufficient preparedness.
Governance failures are equally problematic. Some applicants submit unclear charts where compliance, audit, and operations roles overlap or report to the same person. Regulators often return such structures with instructions to separate responsibilities before considering approval.
In the U.S., NFA examinations highlight deficiencies in AML/KYC procedures as a recurring ground for enforcement actions, including suspensions. In Europe, CySEC has repeatedly sanctioned firms for weak AML controls even post-licensing, underlining that compliance must be not only designed but actively enforced and maintained.
These examples demonstrate that the five error categories are not abstract - they are the primary stumbling blocks causing delays, rejections, or sanctions in forex licensing processes worldwide.
📌 Conclusion
Applying for a forex license is far more than paperwork. Regulators demand evidence of strong technical systems, full business plans, fit-and-proper staff, clear governance structures, and reliable compliance frameworks. Failure in any of these areas can mean months of delay, higher costs, or outright refusal.
At NUR Legal, we advise clients on meeting these exacting standards, navigating jurisdictional differences, and structuring applications that meet regulator expectations the first time. Contact us if you are considering a forex license and want to avoid costly mistakes.
#Forex #Licensing #FinancialRegulation #Compliance #ForexBroker #AML #BusinessPlan #CorporateGovernance #FCA #CySEC
Emil Korpinen