Capital Market Intermediaries

There are four types of licences covered under the category of Investment Dealer which are, Discount Broker, Broker, Full Service Dealer (excluding Underwriting) and Full Service Dealer (including Underwriting).

Each of these types of licences allows for the provision of specific services:

• Discount broker
  The licensee is permitted to execute orders for its clients without giving advice.
• Broker
  The licensee can execute orders for its clients, manage portfolio of clients and give advice on securities transactions to its clients.
• Full Service Dealer (excluding underwriting)
  Such licence allows the licence holder to provide the following services to its clients:
  – Act as an intermediary in the execution of securities transactions;
  – Trade in securities as principal with the intention of reselling these securities to the public;
  – Give investment advice which is ancillary to the normal course of its business activities; and
  – Manage portfolio of clients.
• Full Service Dealer (including underwriting)
  A licence that gives a licensee the ability to cover a broad range of investment dealing activities where the licensee is authorised to:
  – underwrite and distribute securities on behalf of an issuer or a holder of securities; and
  – provide the same services as a holder of a Full Service Dealer (excluding Underwriting).

Investment dealers, in most cases, allow access to their securities portfolio to be traded on the MT4 and MT5 trading platforms. The secured platforms enable the licensee’s clients to transact in the securities the licensee offers.

Since the MT4 and MT5 and other trading platforms are only software for trading purposes, the FSC is stringent on the ability of the investment dealer to maintain a high level of care and diligence in terms of security, anti-money laundering, financing of terrorism and operation. Safeguards from a compliance perspective as well as cybersecurity are crucial.

In line with the above, the FSC expects an investment dealer to offer its online trading service on a regulated platform or on a platform linked to a regulated exchange. Documentation on the trading platform will definitely be required during the application process.

Where the investment dealer uses the platform of another entity, it should evidence that the platform provider is a regulated entity and provide a draft copy of the agreement to be entered into between the platform provider and the investment dealer. The corporate profile of the platform provider is also needed during the application process.

There are three types of licences available under the investment advisory section of the codified list of the FSC: Investment Adviser (Unrestricted), Investment Adviser (Restricted) and Investment Adviser – Corporate Finance Advisory.

This is the most sought licence by investment professionals.

By obtaining this licence, an investment adviser firm will be permitted to manage an investment portfolio under a mandate and to provide advice on transactions that relate to securities.

Furthermore, under the unrestricted licence, the investment adviser is also entitled to manage an investment fund that is established in Mauritius and/or in another jurisdiction.

In the case of a restricted licence, the investment adviser is allowed to provide advice on transactions in securities that are unrelated to those that are permitted by the Corporate Finance Advisory licence.

The holder of such licence is permitted to provide advisory services on:

• compliance with the listing requirements of any securities exchange.
• raising of funds through the issue of securities.
• arrangement or restructuring including takeovers, mergers and acquisitions, of corporations, as far as it relates to securities transactions.

As one would expect, obtaining a financial licence is not an easy task to say the least. And, although the process is strict enough to ensure that only legitimate intermediaries are allowed, it is flexible enough to ensure that it appeals to a wide range of professional investment dealers and advisers.

According to the Income Tax Regulations (consolidated up to April 2022), 80% of the income of a holder of an investment dealer or adviser licence is eligible for income tax exemption subject to certain conditions. A section regarding taxation is available in our brochures. Contact us for a copy.