How To Register an Investment Company

Firstly you should know that if you have a program accepting funds from third parties without being legally registered as a company then you are in an illegal and dangerous situation.

Most of HYIPs are in this situation and some of them tell you to be registered as an IBC, LLC… but you should know if this registration is legal or not in these circumstances.

In most jurisdictions you need a financial license to accept funds from third parties. Many HYIPs only register an IBC and think that it’s enough. I know that you have read warnings like this one (in this example in Belize):

It is notified for general information that neither XXXXXXXXX is licensed by the International Financial Services Commission or any other competent authority in Belize to provide insurance, reinsurance, stock brokerage, or any other international financial services.

All persons concerned are asked to take note and exercise extreme caution.

GIAN C. GANDHI
DIRECTOR GENERAL
International Financial Services Commission

Every jurisdiction has his own rules and as I said above you need a financial license to be legally registered, and it’s very difficult to get this license from that Government.

Well, there are other options. There are jurisdictions where a financial license doesn’t exist but in some of them the price to register your company is extremely expensive, these companies are for example an OFC in New Zealand or a Swedish Credit Union in Sweden. Some cheaper jurisdictions to establish a registered investment company are Seychelles and Uruguay.

In Uruguay

There was a type of company named SAFI (“Sociedad Anónima Financiera de Inversión”, in English language: Financial Investment Corporations, also called Holdings). I say “was” because you can not register a new SAFI yet, the laws have changed and Uruguay only let the current registered SAFI,s to be operative until 2010. In that year current SAFI,s have to change the statutes to a S.A. company (Corporation). But you can register now this Corporation. The taxes to pay annually are very cheap.

In Seychelles

You can also find other type of company called CSL (Companies Special Licenses) to register your investment company, but not if they are about banking or insurance, only investment companies. The problem is that the audits are very expensive (from $2000 annually) and the taxes are 1,5% annually. In this type of company the register of Director is opened though the register of shareholders is closed: no bearer shares for this type of companies. They are used mostly for avoidance of double taxation under DTAs between Seychelles and other country where the trade of investment is undergoing.

I recommend you when you register your investment company to look for a good and reliable business dedicated to these registrations inside that jurisdiction/country. You will find them so much cheaper that all those online companies offering the same services. These last online companies are only intermediaries of the real ones and they are working to gain a good commission from you. And I also recommend you to send some emails to that country asking all your doubts or questions. Sometimes they tell you which companies are legal to offer these services to register your company in the country. Be careful because there are a lot of companies offering these services online that are only scams.

If you are going to accept USA citizens you must also be registered with the SEC, you can find more information in this website: http://www.sec.gov/

Some other people create an investment Club: a group of people who pool their money to make investments. They usually don’t have to be registered in the SEC if the purpose is about education in a private manner. But every Club is different and they could be offering or selling “securities” (members invest and expect to make a profit from others). If all members decide what investments to make then it’s not necessary to be registered with the SEC, if they are passive members then it may be issuing securities and so it must be registered only if these conditions apply:

1. The club invests in securities,
2. The club issues membership interests that are securities, and
3. The club is not able to rely on an exclusion from the definition of investment company.

For example, a “private investment company” may not need to register with the SEC. To qualify, an investment club:

• Must not make, nor propose to make, a public offering of its securities, and
• Must not have more than 100 members.

You can find more information in the SEC website about investment Clubs.

So, sometimes the best option is to be registered with the SEC or not accepting USA citizens/residents.

You must also be careful about international laws with money laundering. You must request the documentation of all your investors, a valid phone and a contract signed between the investors and your company. You must prove the source of funds if any authority request it. Be careful with this important point. And of course you must save this information in a safe place, not in your computer. The best option is to encrypt all this information in 2 pen drives, never online or in your computer.

Some other people use to register a company in Panama, looking for privacy and anonymity with a Foundation and an IBC. With these two companies together the privacy can be 100% but it doesn’t mean that you are legally registered. You need a financial license there, and you can find a cheap financial license by $50 but if I am right this license is very limited and it’s not valid to accept funds from third parties. You need another type of financial license that it’s more expensive and very difficult to get from this Government.

Some companies that register your company even offer the service of “Nominees”. This means that the real owner of the company will not appear and it’s hidden. The unique names that will appear are the owners of the company that registered the IBC, with the address and the telephone of their office, not the real owner. Then the real owner sign a POA (Power of Attorney) with this company and that’s all: privacy and anonymity. Sometimes they also offer a Bank account included in the package. I don’t recommend you this option if you want to be legally registered. This method is used by many HYIPs to hide the identity and sooner or later they can find problems like the funds frozen by authorities. In Panama these companies only reveal the identity if there are real proofs of money laundering, drugs, etc. There are laws about secrecy in Panama.

It would be different if you register your company in a legal jurisdiction with your own name and with your ID notarized (they request it to register your company). Then you can pay an office in this jurisdiction if it’s required by the type of company you registered (for example in a S.A. or a SAFI in Uruguay), and this office will work for you to follow the laws, the Accounting Book, fees and audits to/from the Government, etc.

But that’s not all. Now you need an online Bank account. Nowadays it’s very difficult to be accepted by an online Bank if you are not referred by other company. But if you send them your ID and the papers of the company notarized and translated to English language, and you show them that you are a reliable company you could be accepted. That’s my experience.

And don’t think that being offshore you are hidden. Nowadays the bank secrecy practically doesn’t exist. Pay your taxes and never hide yourself.

Reading this article you know why many programs only accept e-currencies and they are not registered (obviously most of them are ponzis, but even reliable programs can not follow this steps): you need some good extra money and a lot of time to finish with this legalization process. It could take some months. But in my opinion e-currencies are not a good option, look for example what happened with e-gold. Your broker can refuse the e-currencies that they were accepting before, these e-currencies can find real troubles, etc. Things are changing and now even many e-currencies request to identify yourself and this is very good because it will avoid many ponzis to scam people.

You know the story about e-gold, they didn’t request the documents or a proof of identity from the owner of the e-gold account before, and many ponzis found a paradise there. There are a lot of people thinking that a program paying more than 1 year can not be a ponzi, and that’s not true. While they are receiving funds to pay old members they will continue scamming. And when the program disappears you can not get your own funds, only if e-gold freeze some of these funds, but you will need a lawyer to get them and finally you only get a minimum part of your own funds.

My recommendation is to be accepted by a Bank with your real documentation once you legally register your company, you will never regret it and you will be more relaxed, although you must pay more commissions sending and receiving wire transfers. I am sure that you will rise the minimum amount to deposit once you are using only wire transfers.

Sorry if my English is not good. I hope that this information can be useful to you. If you are thinking to register your company I could help you with good information in Uruguay (a S.A. – Corporation) referring you to them.

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Jose is the owner of No Ponzi Blog, is a forex trader and runs an investment firm. To contact him, drop him an email
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