What is a New Zealand FSP? – Why Many Traders Mistakenly Think It’s a Forex Broker License

In the intricate realm of currency trading, the notion of regulation is paramount. Currency market players, whether seasoned or novice, naturally gravitate towards brokers that present themselves as “licensed” and regulated, seeking security and transparency. One term that has repeatedly caused confusion—and, unfortunately, misled many—is the New Zealand FSP. But what exactly is a FSP for this region, and why do so many figure out it’s equivalent to receiving a forex broker license?

Today, we’ll demystify the concept of the FSP registration, unpack its historical context, and explain why it should not be mistaken for a genuine license.

The Rise of FSPs: How It All Began

To understand the misconception, we need to go back to the early 2010s. Around 2010, New Zealand underwent significant reforms in its financial sector. These reforms, while well-intentioned, inadvertently opened the door for a surge of non-supervised FX dealers searching for a status place to commence their organisations.

The overhaul introduced the FSPR, which allowed organisations providing monetary  offerings to submit as an FSP. It was straightforward, inexpensive, and, importantly, did not initially require stringent licensing, particularly for those offering derivative products such as forex and CFDs. Proficient corporate solution providers quickly spotted a prospect: they began marketing under FSP submission as a de facto FX certification.

For brokers who wanted the appearance of legitimacy without the burden of regulatory oversight, this was the perfect solution. Once successfully registered as an FSP, these brokers could legally place their registration at the bottom margin number of their websites, proudly claiming to be “supervised” in this region. For dealers unfamiliar with the nuances of New Zealand’s financial regulations, this registration number appeared to be proof of licensing, causing many to incorrectly assume they were dealing with fully licensed, tightly supervised FX intermediaries.

In reality, all that this submission entailed at the time was incorporation and listing on a public registry—far from the rigorous certification workflow enforced by competent monetary governing bodies worldwide.

Why New Zealand Became the Preferred Choice

New Zealand’s global reputation as a stable, transparent, and well-regarded jurisdiction made the FSP status even more attractive. Investors and traders from Europe, Asia, and beyond saw “New Zealand” and naturally trusted the association. In parallel,lack of public awareness of the differences between an FSP registration and an actual regulatory license fueled the illusion.

This is not an isolated phenomenon either. A similar trend continues today in other directions, where traders submit as IBCs and falsely advertise themselves as supervisory units. The strategy plays on the same human psychology: jurisdictional credibility paired with legal registration that lacks meaningful oversight.

FMA’s Response: Redefining the Playing Field

However, this unsupervised window didn’t last forever. Over time, the cracks begin to show.

By 2017, the regional supervisory organs had started to receive a wave of complaints from investors. Most complaints stemmed from traders who believed they were working with regulated forex brokers—only to find out, usually after encountering withdrawal issues or malpractice, that their intermediaries had no regulatory obligations in the region beyond a basic FSP certification.

These intermediaries typically operated without any on-site presence in the region and were owned by individuals or corporations far removed from the country. Consequently, when investors sought help, the FMA faced significant challenges. Without a clear legislative base for overseeing these traders, and with many disputes involving cross-border nationals, the FMA’s ability to intervene was limited.

Recognizing the systemic risk and the damage to New Zealand’s financial reputation, the FMA acted decisively. In late 2017, it broadened the definition of a key term—“derivative.”

Prior to this change, offering FX and CFD assets did not demand a certification in this region. This loophole permits such traders to function under the radar with nothing more than an FSP certification. However, by redefining monetary tools grounded on underlying assets to explicitly include FX and CFDs, the FMA effectively closed the gap.

The result? Any intermediaries desiring to function in this region and propose these offerings now had to apply for and be granted a Derivatives Issuer License. This certification workflow encompasses harsh checks, comprising in-depth evaluation, evidence of no-site presence, capital adequacy, and obedience protocols. In other words, simply receiving an FSP certification is no longer enough.

The Lingering Misconceptions

Despite these regulatory changes, confusion still exists—especially among traders unfamiliar with New Zealand’s regulatory overhaul. Many brokers continue to market themselves as “licensed” based on historical FSP registrations or use vague language to suggest that they hold a valid certification of FX intermediaries when, in fact, they do not.

This is a critical point: an FSP certification, on its own, is not a FX broker certification.

Yet, commercial solution providers still offer FSP-registered companies to prospective buyers, often positioning them as turnkey solutions for launching a forex brokerage. Unsuspecting investors may view these offers as legitimate, unaware that without a Derivatives Issuer License, the organisation cannot lawfully function or solicit customers for this kind of activities.

In practical terms, an unlicensed New Zealand FSP is little more than a shell company—a far cry from the highly regulated intermediaries certified in directions like the UK’s FCA, Cyprus’ CySEC, or Australia’s ASIC.

Proceeding with Caution

For traders and investors, this brings us to a crucial takeaway: exercise extreme caution when dealing with any dealer claiming to hold a New Zealand FSP. Always verify whether the broker has gone through the extra step of securing a Derivatives Issuer License from the FMA. Simply having FSP credentials listed at the page footer is not sufficient protection.

Similarly, if you’re an entrepreneur searching to receive FX certification, be wary of service issuers proposing this type of certification as a fast-track licensing solution. Without the appropriate certification, these entities cannot legally operate, rendering their business—and your investment—virtually worthless.

Our Professional Recommendation

We specialize in guiding clients through the ordinary convoluted workflow of receiving proper certification. Whether you’re interested in launching a licensed brokerage in this region or have been approached to get an existing FSP-registered entity, our team is here to assist.

We offer comprehensive assessments of any FSP acquisition offers and ensure that you’re fully informed about what you’re actually purchasing. In an industry where regulatory compliance can make or break a business, it’s essential to proceed with complete clarity and specialist consultation.

Summary

A New Zealand FSP is not a substitute for a forex broker license. Understanding the distinction—and verifying the presence of the necessary licenses—is vital for dealers, financiers, and entrepreneurs alike. Always double-check, ask the right questions, and consult experts before making any commitments.