Full Service Dealer Licence
Including Underwriting
Overview
A Full Service Dealer including Underwriting licence, issued by the Financial Services Commission (FSC) of Mauritius, is a comprehensive permit allowing investment dealers to perform a wide array of activities in the securities market. This licence empowers holders to act as intermediaries in securities transactions, trade securities as principals, underwrite securities, offer investment advice, and manage client portfolios.
Key Functions and Activities
Intermediary in Securities Transactions: Investment dealers are authorised to facilitate securities transactions on behalf of their clients, providing a crucial link between buyers and sellers in the market.
Principal Trading: Licensees can trade securities on their own account with the aim of reselling them to the public, thus playing a direct role in market liquidity and pricing.
Underwriting Securities: This function allows investment dealers to underwrite securities, meaning they can guarantee the sale of a certain number of shares, reducing the risk for issuers and ensuring successful capital raising efforts.
Investment Advice: Licensed dealers can provide investment advice ancillary to their core activities, offering clients expert guidance based on market analysis and trends.
Portfolio Management: Managing client portfolios is another critical activity, where dealers handle the investment decisions and asset allocations on behalf of their clients, ensuring optimised returns based on clients’ investment goals and risk tolerance.
Regulatory and Compliance Framework
The legal framework for these activities is set out in the Securities Act 2005 and the Securities (Licensing) Rules 2007. These laws establish a robust regulatory envirnment designed to ensure transaprency, fairness, and investor protection in the financial market.
Financial Requirements
Applicants for this licence must demonstrate significant financial stability, maintaining a minimum unimpaired stated capital of MUR 10 million or its equivalent in foreign currency. Additionally, they must secure a professional indemnity insurance that aligns with the scale and risk profile of their business operations.
Application and Compliance Criteria
Conflict of Interest Prevention: Applicants must establish procedures to prevent conflicts of interest and ensure the segregation of different business activities to mitigate the risk of insider trading.
Trading Platform Details: Detailed information about any trading platform to be used must be submitted, ensuring regulatory oversight of the technological infrastructure supporting trading activities.
Fitness and Propriety Standards: Promoters, shareholders, directors, beneficial owners, and key staff must meet stringent fit and proper standards, ensuring that only qualified and reputable individuals are involved in the business.
Anti-Money Laundering (AML) Measures: A robust AML framework is mandatory, including the appointment of a Money Laundering Reporting Officer (MLRO), Deputy MLRO and compliance officer.
The underwriting capability is crucial as it allows the licence holder to underwrite securities offerings, which involves guaranteeing the sale of securities by purchasing any unsold shares in a public offering. This reduces the risk for issuers and helps ensure the success of capital raising efforts.
Excluding Underwriting
This licence permits the holder to engage in most of the same activities as the full-service dealer including underwriting. However, the licence holder cannot underwrite or distribute securities on behalf of an issuer or holder of securities. This restriction limits the dealer’s involvement in initial public offerings (IPOs) and other underwriting activities, which are crucial for raising capital for companies and for stabilising and supporting new issues in the market.
The holder of a Full Service Dealer – Excluding Underwriting requires a lower minimum unimpaired stated capital as opposed to the holder of an underwriting licence. This reflects clearly the reduced scope of activities and the associated risks.
In summary, the primary difference between the two licences lies in the underwriting capability. A Full Service Dealer including Underwriting can participate in underwriting securities, a vital function for facilitating public offerings, while a Full Service Dealer excluding underwriting cannot. This distinction impacts the strategic roles these dealers can play in the securities market and their involvement in capital raising activities.
