Regulatory obstacles: Find out how brokerage firms can ensure compliance in new markets

When expanding to the Latin American market, a brokerage company may encounter regulatory obstacles that prevent it from establishing and operating. Below, we will learn a little more about the legal aspects of trading in LATAM, as well as the alternatives to respond to them, to ensure compliance in the new markets.

Regulatory obstacles for brokerage companies in LATAM

In different countries of Latin America, there are both restrictions and regulatory obstacles, which in some cases limit or even prevent operations if the regulations in this regard are not complied with. In particular, the following cases can be pointed out.

Creation of brokerage companies

Although a foreign company can operate in certain countries, from its platform, without major problems, in others it is necessary to create the company, under the figure established by the law, whether it is a public limited company, limited liability company or any other denomination.

Regarding this process, there are differences between Latin American nations. In Chile, for example, the procedures are not cumbersome, but very simple. First of all, the registration of the Unique Tax Role (RUT) before the SII (Internal Revenue Service).

On the contrary, there are several Latin American countries in the top 10 of the most difficult countries to do business in, due to regulatory obstacles, related to the need to deal with different government agencies and due to constant changes in legislation. These include Brazil, Mexico, Colombia and Argentina.

Permission to operate

In the Capital market law from Argentina, it is pointed out that only the National Securities Commission may authorize the use of denominations as a Brokerage House or other similar ones.

Therefore, an application must be submitted in this sense, to operate under this figure; and wait for approval. This also applies to companies or people interested in acting as agents or intermediaries (brokers).

The same thing happens in Chile, where to be a stockbroker in the Santiago Stock Exchange, it is necessary to have accreditation of studies related to the subject, as well as to register in the respective registry, subject to compliance with the requirements that for such purposes are demanded.

For its part, there is no special law regarding trading activity in Colombia. However, the SFC (Financial Superintendency of Colombia) is responsible for verifying and, consequently, regulating or approving the trading platforms and the operations that are carried out from them.

Investment records

This is another situation that brokerage companies must observe to ensure compliance in new markets when they want to expand and open operations in Latin American countries.

For example, the laws of Argentina stipulate that a securities brokerage agent, duly registered with the National Securities Commission to act as a broker, must provide full details regarding the system it uses to operate.

Likewise, in  Resolution 731 from said Commission, it is established that there should be a daily record of the operations, informing about the traded volume, and presenting lists of users who enter offers on the platforms, since anonymous investors are not allowed.

Markets with restrictions

In some countries, specifically in the case of Brazil, there are regulations regarding CFD trading and operation on the foreign exchange market, even Bitcoin trading is restricted. And this applies to both domestic brokers and foreign companies.

In this matter, the Securities and Exchange Commission of that country has prohibited some companies from making offers or advertising their services, seeking to attract domestic investors, since they must have a brokerage firm licensed to do so, as futures and CFDs are considered securities, according to their legislation.

How to ensure compliance in new markets?

These and other regulatory obstacles can limit the operations of brokerage companies with Latin American investors. However, it is possible to ensure compliance in new markets, as long as the laws are followed.

One way to make sure that you are operating within the framework of the legality established by the authority of each country is to have a local team, who has better knowledge of these protocols. It can provide the necessary support, offering advice on legal matters, to avoid potential irregular situations that could lead to sanctions.

This is, precisely, what is offered with the service of legal consulting of LFXS: the handling of legal instruments and experience from an organization established in Latin America, with knowledge of trading, as well as the market and the local economy.

Latam Forex Solutions has an answer to every need, as we provide specific advice to brokerage firms and have the support of lawyers specialized in finance and fintech in the main countries of the region.