The Beginner’s Guide to Financial Services – Types of Financial Licenses

In any country, a well-functioning financial system is essential for the economy, businesses, and consumers. Under the robust fiscal system, a financial regulatory regime is necessary to ensure the financial system’s safety and soundness, including the licensing system, especially for businesses with nature related to financial services.  As the industry evolves with technology advancements, there is the introduction of new financial licenses; however, the central core licenses are as follow:

1. Securities Brokerage Licence

Licenses for brokerage activities allow to bring ultimate clients to the stock markets of different countries for conducting transactions.

2. Forex Licence

Forex licenses provide the commencement of trading services to offer brokerage service to customers. No licence is required for individuals investing resources and money that do not belong to other people or agencies.

Additionally, the licence increases the level of loyalty and confidence of clients, indicating the integrity of the company’s funds and conscientious policy.

3. Licence for Electronic Money Institution

Payment systems have high incomes from the turnover of funds by providing services for handling transactions of the client. Such licence will convince your clients of the reliability of your resource.

4. Investment Management Licence

It is necessary for more efficient interaction with other companies, of which you are going to invest in the client’s finance. The licence for such financial services allows working with many private and public funds, exchanges, and organisations.

5. Banking Licence

Each microcredit company or established financial institution stand up for its clients. The licence for providing such financial services enlarges the number of potential counterparties in the service sectors of accepting deposits and credit provision to clients, private banking aimed at serving clients that are very important and increasing the chances of advancement at the international level.

6. Small Payment Institution Licence (SPI Licence)

Issued in the territory of the UK and Ireland, the SPI licence is for those companies which annual turnover of funds does not exceed 3 million euros. A list of other requirements but not limited to include:

  • Company’s organisational and legal form should either be Partnership or Limited Liability Company (LLC)
  • The head office of the company should be located in the territory of the UK, and branch management should be carried out through representative office registered in the UK
  • Before obtaining SPI license, it is necessary to provide comprehensive information about the founder, shareholders, and investors
  • The company’s management team should have an excellent reputation and without any criminal records

These licenses are intangible assets that legally entitle a business to operate and elevate them, putting them on global maps. In various jurisdictions, the functions and usage of financial licenses differ slightly. Taking the two renowned financial hubs in Asia – Singapore and Hong Kong, the licenses to apply to vary based on the business nature and the authorities that oversee the licensing regime.

In Hong Kong, any person operating a money service should be licensed with the financial licence – Money Service Operators (MSO), granted by the Hong Kong Customs and Excise Department (C&ED). Money services refer to money changing, and remittance services and the two services hold the following definition:

  • Money changing service

Exchanging of currencies operating in Hong Kong as a business, but not include those service that is incidental to the central business.

  • Remittance service

A service of one or more of the following that is operated in Hong Kong as a business:

  • sending, or arranging for the sending of, money to a place outside Hong Kong;
  • receiving, or arranging for the receipt of, money from a place outside Hong Kong;
  • arranging for the receipt of money in a place outside Hong Kong.

MSO applicants can include a Hong Kong limited company, Hong Kong unlimited company or an overseas company. The licence has a validity period of 2 years. Hence the licensee will have to apply for the renewal of licence before expiration to continue its money service operation. Other specific financial services, such as brokerage services will require a brokerage licence with different requirements and assessments.

In Singapore, the financial licences are categorised into five services: banking, Capital Markets, Financial Advisory, insurance, and Payment. In the situation of money changing and remittance services, new entrants that intend to operate would require a Payment Service Provider Licence that includes money changing and remittance operating purposes. 

Within the payment service provider licence, there are three classifications. Money changing, Standard Payment Institution and Major Payment Institution. The categories determine the licence cost, depending on the type of activity that the business conducts. For instance, application charges for cross-border money transfer service differ between Standard Payment Institution and Major Payment Institution.

Applicants of payment service provider licence include the following:

  1. Individual applicants, partners or directors of a company applying for this license should have relevant working or business experience on a full-time basis for a minimum of a year.
  2. Other requirements are:
  • Individuals
    For sole proprietors, the applicant must be a Singapore citizen
  • Partnership or Limited Liability Partnership
    Majority of partners should be Singapore citizens. If there are only two partners, only one needs to be a Singapore citizen
  • Singapore-owned Company
    More than 50% of the equity shareholdings should be beneficially owned and effectively controlled by Singapore citizens.

Majority of the board of directors of the company should be Singapore citizens. If there are only two directors, only one of the directors needs to be a Singapore citizen.

  • Foreign-owned Company

In the case of a Singapore-incorporated, wholly-owned subsidiary of a foreign bank, or a foreign company primarily engaged in money-changing, the parent company must:

  • Be of significant size
  • Be ranked among the top banks in the country for a foreign bank where it is incorporated
  • Possess a good track record and reputation, i.e., meet the “fit and proper” test.
  • Be adequately regulated and supervised by its home supervisory authority for Anti-money Laundering (AML) and Combating the Financing of Terrorism (CFT)

The validity of the licence holds until the following situation occurs:
1. The licence is revoked by MAS

  1. The licensee surrenders its licence
  2. The licence lapses in accordance with section 11(1) of the PS Act and regulation 10 of the Payment Services Regulations

In order to ensure high standards within the financial services industry and protection for consumers, the regulators have set up stringent governance structures; thus, obtaining a financial service licence can be a gruelling task. With a rigorous and time-consuming application process, it is usually advisable for individuals or companies venturing into financial services to obtain advice from third-party professional.

How Desfran can help

Desfran is backed with professionals more than a decade of experience in comprehensive business solutions ranging from company incorporation to business matching and more. As an integrated business company, our specialists are equipped to optimise key business processes that connect an organisation with its trading partners – customers, suppliers, logistics companies, and financial institutions.

Contact Desfran for a free consultation now.

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