An Indian-founded team proposes an offshore company that contracts with retail clients, receives margin and offers leveraged FX and index CFDs. Its founders and most product staff would remain in India. This composite case considers whether the team should seek permission in Mauritius, seek permission in Seychelles, or postpone the decision. The comparison assumes identical cash-settled products and an illustrative UK retail launch, with paid English-language acquisition. It treats individual and Indian-company funding as alternative proposed structures. No client outcome, regulatory approval or banking arrangement is assumed.
Executive Summary
- Mauritius and Seychelles: choose neither for an application now. First establish lawful investor funding, destination-country access and the operator's actual functions. Incorporation would commit the team to a structure before those conditions are satisfied.
- Mauritius: the investment-dealer route merits a category discussion for principal OTC dealing. A Global Business structure requires genuine management and control in Mauritius; retaining the effective dealing decisions in India would defeat that proposed structure. (Financial Services Act 2007, s. 71; FSC, SEC-2.1B Licensing Criteria, items 7 and 15.)
- Seychelles: outsourcing is a decisive design constraint. The amended conduct rules restrict external delegation of core functions to approved affiliated entities. A third-party software or liquidity contract requires examination of the function actually transferred. (Securities (Conduct of Business) (Amendment) Regulations 2024, SI 119/2024, inserted regs. 36–37.)
- United Kingdom: neither island's permission independently clears UK financial promotions or the UK regulated-activity perimeter. Overseas-person exclusions require a fact-specific analysis; UK residence alone does not establish that every offshore transaction needs UK authorisation. (FCA Handbook, PERG 8.2.1G, 8.8.1G and 2.9.15G–2.9.17G.)
- India: ordinary resident-individual overseas direct investment cannot fund an operating financial-services company under the general Schedule III route. An eligible Indian company presents a different analysis, with profitability and other conditions. Nationality does not determine FEMA residence. (Foreign Exchange Management Act 1999, s. 2(v); Overseas Investment Rules 2022, Sch. III, para. 1(2)(i); RBI Overseas Investment Master Direction, para. 21(7).)
The product and customer map
The proposed comparison uses major non-INR currency pairs and non-Indian equity-index CFDs. Clients would receive cash settlement rather than currency or shares. The operator would be their contractual counterparty, even where it hedges every exposure with a liquidity provider. Advice, discretionary management, copy trading and crypto products are excluded from this assumed launch.
These distinctions determine the application materials. A broker that owes the client's CFD settlement remains a contractual counterparty despite an offsetting hedge. An agency model would require different client and execution contracts. Selling software without entering client trades would be another business. Those alternatives should not be compared as though they required the same permission.
The UK is a deliberately demanding initial test. The commercial assumption is that the team wants one English-language retail acquisition programme. No market-size or conversion claim supports that choice. The same UK clients, advertisements, product specifications and execution model apply to each island. Moving the operator between Mauritius and Seychelles would leave the UK legal questions intact.
Mauritius investment-dealer categorisation
Mauritius is a candidate for a principal-dealing application, rather than a jurisdiction to select from a generic forex label. Section 29 of the Securities Act 2005 requires a body corporate and regulates intermediary execution, principal trading for public resale and underwriting. Section 2 supplies the securities and derivatives definitions; section 30 addresses investment advice. The application must explain how the proposed contracts fall within those provisions. (Securities Act 2005, ss. 2, 29–30.)
For this proposal, “forex license Mauritius” refers to evaluating the FSC investment-dealer route. The FSC's Full Service Dealer excluding Underwriting criteria describe intermediary execution, principal resale, ancillary advice and portfolio management. That description is not an approval of this team's particular OTC contract. The submission should identify the requested activities individually. (FSC, SEC-2.1B Licensing Criteria, item 7.)
The separately named Investment Dealer (Derivatives) category should not be selected merely because CFDs are derivatives. The 2019 amendment permits intermediary derivative execution and market-making, but defines a market maker by admission to an FSC-licensed securities exchange for futures. An OTC principal cannot assume that its commercial “market maker” label satisfies that definition. (Securities (Licensing) (Amendment) Rules 2019, GN 246/2019, r. 3(a)–(b).)
A proposed execution-only service should exclude recommendations and discretionary authority from its contracts and staff permissions. Adding managed accounts later would reopen the activity analysis. Receiving margin also requires a separate examination of the custody and client-money provisions; a dealer label does not settle ownership of every balance. (Securities Act 2005, ss. 30, 52 and 54.)
Mauritius operating substance and client assets
For a Mauritius corporation with the relevant non-citizen control and principally overseas business, section 71 requires a Global Business Licence alongside the activity permission. The operator must conduct its core income-generating activities in or from Mauritius as required under the Income Tax Act, be managed and controlled there, and use a management company. The FSC's statutory considerations include at least two resident directors exercising independent judgment, a principal local bank account, local accounting records and audits, and board meetings involving at least two directors from Mauritius. (Financial Services Act 2007, s. 71(1)–(3).)
The founders may retain an Indian development team under the proposed structure, but they must distinguish coding from dealer control. The board should identify who approves counterparties, sets exposure limits, controls withdrawals and resolves execution disputes. If Indian founders reserve those decisions while resident directors only sign minutes, the proposed allocation would conflict with the Mauritius management-and-control requirement. The company should document actual decision rights before selecting directors. (Financial Services Act 2007, s. 71(3).)
FSC application guidance calls for a two-person dealing team, compliance and money-laundering officers, an approved auditor, insurance details and segregation arrangements. It states MUR 1,000,000 minimum unimpaired capital. Global Business applicants undertake to meet that amount before operations, trading or liabilities. The domestic-company requirement for two full-time officers should not be transplanted automatically to this proposal. (SEC-2.1B Licensing Criteria, items 19–24, 31 and 39–40.)
The banking mandate needs attention before account applications. The FSC's June 2026 regime requires Global Business account signatories to include an approved management-company officer. It took effect on 19 June 2026. The September extension grants existing companies six months from that effective date; a new applicant should not budget for legacy relief. (FSC, Communiqué, 8 June 2026, Management Companies Guidelines, para. 9.2; Circular Letter, 10 September 2026.)
Client-money treatment must follow the actual margin agreement. Section 54 protects specified credit balances, restricts unauthorised use and addresses insolvency, but expressly distinguishes balances representing pledged or otherwise secured securities. It should not be presented as a blanket guarantee covering every collateral arrangement. Section 52 permits custody only within the applicable authorisation and conditions. The operator should identify cash ownership, permitted use, collateral transfers and withdrawal rights account by account. (Securities Act 2005, ss. 52 and 54.)
A third-party stack does not remove the need to explain execution responsibility. The FSC criteria request platform, third-party execution and liquidity-provider agreements, pricing information and OTC risk controls. The proposed contract matrix should identify who prices, executes, confirms, monitors and settles each trade. (SEC-2.1B Licensing Criteria, items 11–15.)
The operator also needs a functioning supervisory relationship after launch. The FSC can require information and issue directions, including remedial action or cessation where the statutory conditions apply. Outsourced records must remain accessible to the operator and regulator. A structure that cannot produce its dealing records is unsuitable for the proposed application. (Financial Services Act 2007, ss. 71(4), 73A and 75.)
Seychelles retail dealing and outsourcing
The relevant permission behind “forex license Seychelles” is the FSA securities-dealer route. The amended dealer-conduct provisions expressly address leveraged CFDs and rolling-spot forex as restricted speculative investments. A “CFD broker license” description must identify the actual dealer permission and permitted services. (Securities (Conduct of Business) (Amendment) Regulations 2024, SI 119/2024, r. 2, definitions; Securities (Forms and Fees) (Amendment of Second Schedule) Regulations 2024, SI 120/2024.)
Minimum issued and paid-up capital for a Seychelles securities dealer is USD 100,000. That minimum must be maintained at all times in an account with a bank licensed under the Financial Institutions Act 2004 or in a jurisdiction recognised and approved by the Securities Authority. The transition for persons licensed before the amendment commenced does not apply to a new applicant. (Securities (Financial Statements) Regulations 2008, reg. 20(1)(a)–(2), as amended by SI 117/2024, rr. 2–3.)
Seychelles presents a distinct outsourcing constraint. Regulation 36 requires written notification and the binding agreement at least 14 days before engaging an external provider's services for outsourced support functions. Regulation 37 prohibits external outsourcing of core functions except to an affiliated entity with FSA approval at least 30 days before outsourcing. The operator must classify the work, rather than classify the vendor by its marketing description. (SI 119/2024, inserted regs. 36–37.)
An unrelated vendor that merely supplies software raises a different question from one that operates the dealing function. A technology function may itself be core where its failure or inadequacy, arising from weakness or failure in the licensee's performance, materially and adversely affects proper and efficient operations. A liquidity provider may act as a hedge counterparty without taking over the operator's client obligations. Conversely, assigning material execution decisions and daily dealer operations to an unrelated provider would engage the core-function restriction. The team should test the proposed service specifications, system permissions and escalation rights against that distinction before signing a white-label contract. (SI 119/2024, r. 2, definition of “core function”, and inserted reg. 37.)
The 2024 statutory amendment requires one of the directors to be a resident person employed full-time. The conduct amendments require a resident employee for complaints. Separate duties cover client classification, appropriateness assessment and seven-year records. They limit retail liability on restricted speculative investments to funds in the trading account. These requirements affect staffing, onboarding and the platform's account controls. (Securities (Amendment) Act 2024, Act 18/2024, s. 8; SI 119/2024, amended reg. 24, reg. 25(4), inserted reg. 35.)
The text of SI 118/2024 also prescribes a warning about losses exceeding deposits. The operator should not convert that warning into a contractual right to recover retail losses beyond the account limit. Its lawyers must read the warning and account-liability provisions together when settling advertisements and client terms. The amendments' 18-month adjustment periods concern existing licensees; they do not excuse a new applicant's design. (Securities (Advertisement) (Amendment) Regulations 2024, SI 118/2024, rr. 2–3; SI 119/2024, reg. 35(10) and r. 3.)
Home permission and the UK retail test
Destination-country permission is a separate application workstream in each jurisdiction. Mauritius requires an undertaking to obtain necessary destination approvals. Seychelles regulation 34 requires country identification and a board declaration, with written evidence of lawful solicitation and onboarding required at application or after licensing. A geographic exclusion policy must therefore match the actual customer-acquisition plan. (SEC-2.1B Licensing Criteria, item 16; SI 119/2024, inserted reg. 34.)
For the assumed UK campaign, the FCA explains that section 21 of the Financial Services and Markets Act 2000 restricts unauthorised business communications inviting or inducing investment activity. Approval by a person permitted to approve the promotion, or an applicable exemption, may provide a route. An offshore communication can fall within the restriction when capable of having an effect in the UK. A Mauritius or Seychelles licence does not supply that approval. (FCA Handbook, PERG 8.2.1G and 8.8.1G.)
FCA guidance includes approving financial promotions within marketing. Where COBS 22.5 applies, a firm approving the proposed retail CFD promotion must satisfy its applicable marketing requirements, including the prescribed risk-warning requirements. (FCA Handbook, COBS 22.5.1R, 22.5.4G and 22.5.6R–22.5.8R.)
The activity analysis is distinct from the advertising analysis. FCA guidance recognises overseas-person exclusions and requires attention to where the regulated activity occurs. A legitimate approach may include an unsolicited approach or one resulting from a lawful promotion. Therefore, the analysis cannot assume that UK retail residence always requires a locally authorised contracting entity. Nor can a broker turn an unlawful paid campaign into a legitimate approach through a “reverse solicitation” checkbox. (FCA Handbook, PERG 2.9.15G–2.9.17G.)
The strongest alternative to postponement is a properly structured UK route. That might involve a UK-authorised operator, or a cross-border model satisfying the relevant territorial, exclusion and promotion conditions. Those are different contractual businesses. A permission held by an affiliate would not automatically authorise this offshore operator's activities. The customer agreement must name the entity whose permissions and exclusions support the actual service.
An FCA-regulated retail CFD route also changes the product economics. COBS 22.5 requires initial margin of at least 3.33% of exposure for major currency pairs and at least 5% for major stock indices, account-level close-out when net equity falls below 50% of required margin as soon as market conditions allow, negative-balance protection and restrictions on incentives. These rules should be applied within their stated scope, rather than treated as automatically binding on every foreign dealer. A plan dependent on materially greater leverage or deposit bonuses would require redesign for that route. (FCA Handbook, COBS 22.5.1R, 22.5.11R, 22.5.13R, 22.5.17R and 22.5.20R.)
Indian investor funding and residence
The funding analysis begins with FEMA residence, not an Indian passport. Section 2(v) combines a day-count test with purpose-based exceptions concerning employment, business and an uncertain period of stay. A company incorporated in India is separately within the resident-person definition. Founder relocation, investor identity and the source of funds must therefore be established before choosing an overseas investment route. A genuinely non-resident investor would require a different analysis from the assumed resident subscriber. (Foreign Exchange Management Act 1999, s. 2(v).)
Assume first that a founder is a resident individual subscribing ordinary cash capital into the new dealer. Schedule III's general ODI permission is limited to an operating foreign entity not engaged in financial services. It does not authorise that proposed subscription. Limited inheritance, employee-equity and other specified exceptions require their own facts; the RBI also retains a discretionary permission route. These provisions cannot be converted into general founder-funding permission. (Overseas Investment Rules 2022, r. 9(2)(ii); Sch. III, para. 1(2) and provisos.)
An Indian-company investor requires a different test. RBI directions permit qualifying non-financial Indian entities to invest in foreign financial-services businesses other than banking or insurance, subject to preceding three-year net profitability. An Indian financial-services investor must also satisfy the applicable domestic registration and regulatory-approval conditions. Interposing a newly formed Indian company does not manufacture the required earnings history. (RBI Overseas Investment Master Direction, para. 21(7).)
Each Indian-resident investment must satisfy the requirement for bona fide business permissible under Indian and host-country law. For a startup recognised under host law, Indian-company ODI must use internal accruals of that entity or Indian group or associate companies. For such a startup, resident-individual ODI must use the individual's own funds. Merely describing a new company as a startup does not establish that trigger. These conditions prevent an offshore dealer licence from serving as the entire Indian investment opinion. (Overseas Investment Rules 2022, rr. 9(1) and 19(2).)
Adding INR-linked contracts would create another restriction. RBI directions include Indian-market stock indices within INR-linked financial products; Indian-resident ODI into an entity offering those products requires specific RBI approval. The assumed non-INR FX and non-Indian indices avoid that additional product trigger, without resolving the other investment conditions. (Overseas Investment Rules 2022, r. 19(1)(c); RBI Overseas Investment Master Direction, para. 20(1).)
The transaction sequence matters even at incorporation. Subscription to unlisted foreign equity is ODI; a small shareholding does not necessarily avoid that classification. RBI directions require Form FC for the initial ODI, while explaining that a UIN is not RBI approval. The UIN must be obtained before outward remittance or acquisition of equity capital, whichever is earlier. Applications requiring RBI approval proceed through the authorised dealer and the applicable regional-office process. (Overseas Investment Regulations 2022, reg. 9(2); RBI Overseas Investment Master Direction, paras. 1(vi), 3(3) and 16(3); A.P. (DIR Series) Circular No. 02, 1 April 2026.)
Indian staff, customers and payments
Keeping developers in India should not be treated as equivalent to conducting every dealer function there. The proposed Indian service agreement should separate software maintenance from order handling, personalised advice, price discretion and client-money control. The operator should assess each actual Indian activity rather than assume that offshore incorporation removes Indian territorial rules. FEMA section 3 remains relevant to foreign-exchange dealings and payments involving non-residents. (Foreign Exchange Management Act 1999, ss. 1(3) and 3.)
Residents may pay a foreign entity's obligations only through financial commitment permitted under the OI Rules and Regulations. RBI directions separately allow an authorised dealer to permit reasonable pre-incorporation remittances up to USD 100,000 per foreign entity. An individual's remittance counts towards the LRS limit. Those costs engage the OI Rules and Regulations if recognised as equity or debt financial commitment, but not if expensed without such recognition. Neither provision establishes this investor's eligibility to fund the dealer. (RBI Overseas Investment Master Direction, paras. 11(iii) and 27(6).)
Indian-resident customers should be excluded from this proposed offshore retail launch. RBI guidance restricts resident forex transactions to authorised persons and permitted purposes, with electronic execution through authorised platforms or recognised exchanges. RBI's LRS guidance prohibits overseas margin remittances and remittances for forex trading abroad. These restrictions cannot be solved by accepting a different payment currency. (RBI, Forex Transactions FAQ, questions 1–3; LRS FAQ, question 2.)
Advertising and collection channels must follow that exclusion. RBI's April 2024 circular identifies local agents, domestic payment gateways and accounts collecting margin for unauthorised forex platforms. It directs authorised dealers to act on such arrangements. The proposed controls should therefore reject Indian-resident onboarding, prohibit India-targeted affiliate campaigns and prevent Indian accounts from collecting customer margin. Nationality alone should not exclude an otherwise eligible non-resident customer in an approved destination. (RBI, A.P. (DIR Series) Circular No. 02, 24 April 2024; FEMA, s. 2(v).)
Fees and the implementation decision
Official dealer fees do not establish total launch cost. Mauritius's July 2026 schedule lists USD 1,000 processing and USD 3,400 annual fees for SEC-2.1B in its US-dollar columns. Seychelles's amended schedule lists USD 3,000 application and USD 6,000 annual securities-dealer fees. These amounts are not quotations for incorporation, Global Business administration, personnel, systems, insurance, banking or legal work. (Financial Services (Consolidated Licensing and Fees) (Amendment) Rules 2026, GN 119/2026, Schedule, SEC-2.1B; SI 120/2024, Second Schedule, Securities Dealer.)
The recommendation is to postpone incorporation and either licence application while completing a bounded design exercise. That recommendation does not require abandoning CFDs permanently. It follows because investor eligibility, lawful acquisition and responsibility for dealing must match the same proposed operator. Passing one test would not satisfy the others.
First, record each investor's legal residence, ownership percentage, funding source and investment route. Obtain the Indian permissibility analysis and authorised-dealer requirements before acquiring foreign equity or transferring capital. Ordinary resident-individual cash ODI would require a different lawful route or specific permission; changing the island alone would not cure that restriction. (Overseas Investment Rules 2022, r. 9 and Sch. III; Overseas Investment Regulations 2022, reg. 9(2).)
Next, freeze the client countries, retail classification, contract specifications, leverage and acquisition channels. For the illustrative UK launch, settle the promotion and regulated-activity analyses before paying for a home-state application. Keeping the UK while changing the contracting model may be possible; relying solely on an island licence is not an adequate UK legal basis. (FCA Handbook, PERG 8.2.1G, 8.8.1G and 2.9.15G–2.9.17G.)
Then allocate dealing decisions, technology tasks, complaints, customer due diligence and withdrawals to named entities and officers. Draw the payment path through client accounts, processors, the operator and liquidity provider. Test it against client-money ownership, Indian payment restrictions and the chosen island's substantive requirements before negotiating binding vendor commitments. (Securities Act 2005, ss. 52 and 54; SI 119/2024, regs. 36–37; FEMA, s. 3.)
Mauritius merits the first category discussion if the team can establish genuine Mauritius dealer control while retaining a defined Indian technical-support function. Seychelles becomes a candidate only with a service model compatible with its core-outsourcing restriction and a legally supported customer-country map. Neither should progress to an application where the business still depends on ordinary resident-individual funding, unsupported UK acquisition or an operating allocation inconsistent with the selected jurisdiction. Each change must be reflected in the contracts and permission request before money is committed. (Financial Services Act 2007, s. 71; SI 119/2024, regs. 34 and 37; Overseas Investment Rules 2022, Sch. III.)