FiveComply’s Regulatory Analysis for Seychelles Securities Dealers
The first half of 2026 has been a significant period for Securities Dealers operating in Seychelles. A combination of legislative changes, new regulatory requirements, supervisory communications and implementation deadlines has altered both the substance of Securities Dealers’ obligations and the standard against which compliance is likely to be assessed.
Individually, each development addresses a particular regulatory concern. The resident director requirement strengthens local governance. The appointment of a Local Complaints Liaison Officer enhances local oversight and supports the coordination and escalation of complaints within the firm’s established framework. The increase in minimum paid-up share capital reflects a heightened prudential expectation that licensed entities maintain an appropriate capital base commensurate with the nature, scale and risks of their regulated activities. Negative balance protection and appropriateness assessments strengthen safeguards for retail clients. At the same time, the new Code of Corporate Governance places greater emphasis on Board accountability, risk oversight, internal controls, audit arrangements and transparent decision-making.
The FSA has also continued to reinforce expectations concerning new-product risk assessments, Financial Intelligence Unit registration, FATF monitoring and ongoing AML/CFT compliance.
When these developments are considered collectively, a broader regulatory direction begins to emerge.
At FiveComply, our assessment is that the Financial Services Authority is moving beyond a supervisory model focused primarily on whether a firm has formally addressed each regulatory requirement. Increasingly, the focus appears to be on whether the firm can demonstrate that its governance arrangements, internal controls and compliance processes operate effectively in practice.
For Securities Dealers, the relevant question is therefore no longer simply:
‘’Have we implemented the latest regulatory requirements?’’
The more important question is:
‘’Can we demonstrate that our governance, risk management and control environment work effectively, consistently and in accordance with the firm’s actual business model?’’
This article examines the principal regulatory themes emerging from H1 2026 and provides FiveComply’s assessment of the potential gaps Securities Dealers should now consider.
The Regulatory Direction Appears to Be Shifting from Form to Effectiveness
Financial services regulation often develops in stages. The first stage establishes the legal and licensing framework. Firms are required to appoint key persons, significantly enhance manuals, maintain capital and comply with prescribed reporting obligations.
The next stage focuses on implementation. Regulators begin examining whether the required appointments have been made, whether policies have been adopted and whether regulatory submissions are being completed correctly and on time.
As a regulatory framework matures, supervision increasingly moves towards effectiveness. At this stage, the regulator is no longer satisfied merely because a policy exists or an individual has been appointed. The focus shifts towards whether the firm can demonstrate that the policy is followed, that the appointed person performs a meaningful function and that the Board understands and oversees the risks arising from the business.
In our experience supporting regulated financial services firms across different jurisdictions, this transition is one of the most important stages in the development of a supervisory framework. It creates a clear distinction between firms that are compliant on paper and firms whose governance and control arrangements are genuinely embedded into their operations.
The regulatory developments introduced during H1 2026 suggest that this distinction is becoming increasingly relevant for Securities Dealers in Seychelles.
Corporate Governance Is Becoming a Core Supervisory Benchmark
The introduction of the FSA’s Code of Corporate Governance represents one of the most important developments affecting regulated entities.
The Code applies to licensees under the Securities Act, subject to specified exclusions, and introduces nine broad principles covering Board responsibilities, independence, Board composition, corporate culture, remuneration, risk oversight, corporate reporting, internal and external audit, and conflicts of interest. It operates on an “apply or explain an alternative” basis and has the force of law.
The importance of the Code lies not only in the individual requirements it introduces, but also in the supervisory philosophy it reflects.
Historically, a Securities Dealer may have demonstrated governance by maintaining the required number of directors, conducting Board meetings and obtaining resolutions for material decisions. The new framework expects considerably more. The Board is expected to understand the licensed entity’s strategy, oversee management, assess risk, challenge decisions, monitor internal controls and take responsibility for the effectiveness of the compliance function.
The Code also addresses Board committees, succession planning, director competence, conflicts of interest, internal audit, external audit, remuneration, business continuity and the quality of corporate reporting. In addition, licensees are required to complete an annual Corporate Governance Disclosure Form and submit it by 31 December each year.
In practical terms, governance is becoming a matter of evidence.
A Securities Dealer may have a Board Charter and documented terms of reference, but those documents will have limited value if the Board does not receive meaningful management information, challenge management decisions or regularly consider compliance and risk matters.
Similarly, a firm may hold the required number of Board meetings, but the minutes should demonstrate more than the formal approval of resolutions. They should provide evidence that directors received sufficient information, considered the relevant risks, raised questions and reached an informed decision.
This is where many governance gaps arise. Board minutes are often drafted as a record of outcomes rather than a record of oversight. They may confirm that a policy was approved without documenting the key issues considered, the questions raised or the basis on which the Board concluded that the policy was appropriate.
Another common gap concerns delegation. Securities Dealers frequently rely on outsourced compliance providers, group functions, external advisers or senior management. Such arrangements can be appropriate and efficient, but they do not remove the Board’s ultimate responsibility.
The Code specifically reinforces that delegation does not absolve the Board from responsibility for the sound governance of the company.
The regulatory gap is therefore not necessarily the absence of a policy or procedure. It may be the absence of evidence showing that the Board owns, understands and oversees the relevant matter.
In our view, Securities Dealers should now assess whether their governance framework reflects the reality of their operations. A generic Board Charter or governance manual will not be sufficient where the firm’s actual reporting lines, outsourcing model, target markets and decision-making processes are materially different.
A credible framework should explain who is responsible, what information is provided, how matters are escalated, how decisions are recorded and how the Board satisfies itself that delegated functions are operating effectively.
The FSA Appears to Be Placing Greater Weight on Local Substance
The regulatory reforms introduced during the first half of 2026, including the Resident Director requirement, the appointment of a Local Complaints Liaison Officer and the increase in minimum paid-up share capital, should not be viewed as isolated compliance obligations. In our view, these developments collectively indicate a broader regulatory emphasis on strengthening the operational substance and governance of licensed entities in Seychelles.
Rather than focusing solely on whether the prescribed appointments have been made or the applicable capital thresholds have been met, the broader regulatory objective appears to be ensuring that Securities Dealers maintain governance structures and prudential foundations that are proportionate to the nature, scale and complexity of their regulated activities. Collectively, these measures reinforce the expectation that licensed entities demonstrate a meaningful presence within the jurisdiction and maintain governance arrangements capable of supporting effective regulatory oversight.
The Resident Director requirement is a clear example of this direction. While the appointment itself satisfies a regulatory requirement, its broader significance lies in strengthening the governance framework of the licensed entity through local Board representation and facilitating effective oversight of the firm’s activities. However, the appointment should not be regarded as an end in itself. A Resident Director should be appropriately integrated into the firm’s governance framework by receiving timely management information, participating in Board deliberations and being provided with the information necessary to discharge the responsibilities of the role effectively.
Similarly, the introduction of a Local Complaints Liaison Officer should not be interpreted as transferring responsibility for complaints handling or regulatory compliance. Rather, the role supports the firm’s existing complaints-handling framework by providing a local point of coordination and facilitating effective communication and engagement where required. Ultimate responsibility for complaints handling, as with all regulatory obligations, remains with the licensed entity and its Board of Directors.
The increase in minimum paid-up share capital should also be considered within this broader context. In our view, this measure reflects a strengthened prudential expectation that licensed entities maintain an appropriate capital base commensurate with the nature, scale and risks of their regulated activities. While the minimum capital requirement remains a licensing condition, it also reinforces the importance of maintaining an appropriate level of financial standing to support the firm’s regulated activities and its ongoing compliance with the prudential framework.
From our experience advising regulated financial institutions, one of the most common implementation gaps is treating each of these requirements as an individual compliance exercise. Firms update their organisational chart, appoint the required individuals and submit the necessary notifications, yet the broader governance framework often remains unchanged. Reporting lines, Board procedures, governance documentation and internal escalation mechanisms are not always reviewed to reflect the new regulatory landscape.
In our assessment, this is where Securities Dealers should focus their attention. The regulatory developments introduced during H1 2026 suggest that the Authority is increasingly interested not only in whether the prescribed requirements have been implemented, but whether they have been meaningfully embedded into the firm’s governance and operating model. Demonstrating that appointments, governance arrangements and prudential safeguards operate cohesively within the organisation is likely to be considerably more persuasive than evidencing compliance with each requirement in isolation.
Capital Is Becoming a Governance Issue, Not Merely a Licensing Requirement
The increase in minimum paid-up share capital strengthens the prudential framework applicable to Securities Dealers.
Capital requirements are sometimes treated as a one-off licensing or finance exercise. The firm receives shareholder funding, obtains the necessary evidence and submits confirmation to the regulator. However, this approach overlooks the broader governance objective.
Capital is intended to support the firm’s ability to continue operating, absorb losses and meet its obligations. It should therefore be considered within the firm’s risk-management and strategic planning processes.
The Board’s consideration should extend beyond the initial capital contribution to ensuring that the licensed entity continues to maintain an appropriate capital position in accordance with the applicable regulatory requirements and remains capable of meeting its prudential obligations on an ongoing basis.
This becomes particularly important where a Securities Dealer is expanding into new markets, introducing new products, increasing marketing expenditure or relying on shareholder support to maintain operations.
A potential gap arises where capital compliance is tested only at a specific reporting date. The firm may be able to demonstrate that it met the threshold when the capital increase was completed but may not have an ongoing process for monitoring the adequacy and availability of those funds.
In our view, the enhanced capital requirements point towards a more forward-looking approach to prudential supervision. Firms should expect that capital may increasingly be considered alongside the business plan, financial projections, risk assessment and operational resilience arrangements.
The strongest governance approach would therefore involve regular Board oversight of the firm’s prudential position, supported by periodic reporting on compliance with the applicable regulatory capital requirements and consideration of any strategic or operational developments that may have implications for the firm’s ongoing prudential standing.
This is a good example of how technical compliance and governance effectiveness differ. Technical compliance confirms that the required capital was paid. Effective governance demonstrates that the Board understands the firm’s financial position and monitors it on an ongoing basis.
Retail Client Protection Is Becoming Embedded Across the Client Lifecycle
Negative balance protection and appropriateness assessments both strengthen the safeguards applicable to retail clients, although they operate at different stages of the client relationship.
An appropriateness assessment seeks to determine whether a client has the knowledge and experience required to understand the risks associated with the relevant financial products. Negative balance protection seeks to prevent the client from losing more than the funds available in the trading account.
Neither requirement should be treated as a standalone document or system setting.
An effective appropriateness framework should be aligned with the firm’s client classification, target market, onboarding process, product offering and record-keeping arrangements. The questionnaire should be sufficiently relevant to the products offered, and the firm should have a clear methodology for assessing the client’s responses.
The firm should also be able to demonstrate what happens where a client appears to have insufficient knowledge or experience. A warning that is not recorded, retained or linked to the client’s profile may be difficult to evidence during a regulatory review.
The treatment of existing clients requires equally careful consideration. A firm may conclude that a client’s trading history provides evidence of knowledge and experience, but that approach should be supported by a documented methodology and applied consistently.
Negative balance protection must also be reflected across the firm’s control environment. It should be included in client agreements and disclosures, but it should also operate correctly at system level.
The protection may appear straightforward during ordinary market conditions, but the more difficult questions arise during gaps, extreme volatility, system interruptions, multiple positions, corporate actions or delayed execution. Firms should therefore consider whether the system has been tested against realistic scenarios and whether the legal wording accurately reflects the operational outcome.
In our experience, client-protection gaps often arise because the legal documentation, trading systems, CRM and internal procedures are reviewed separately. The client agreement may promise one outcome while the operational system is configured differently. The appropriateness questionnaire may exist, but its result may not influence onboarding or subsequent monitoring.
The broader regulatory direction suggests that the FSA is likely to place increasing emphasis on the complete client journey. The assessment is not merely whether the firm has adopted a questionnaire or included a contractual clause. It is whether the relevant safeguard is consistently implemented from onboarding and trading through to monitoring, complaints handling and account closure.
Risk Management Is Expected to Begin Before the Business Decision
Circular No. 1 of 2026 reminds reporting entities of their obligation to assess money laundering and terrorist financing risks before introducing a new product, business practice or new or developing technology.
The assessment should consider the customer profile, geographic exposure, products, services, delivery channels, transactions, third-party due diligence and technological developments. The outcome must be documented, and where no new product or technology has been introduced, that position should also be stated in the firm’s risk assessment report.
The significance of this circular extends beyond AML/CFT.
It reflects a wider expectation that risk management should influence business decisions before implementation. Compliance should not be asked to review a product after commercial arrangements have been finalised, systems have been developed and the launch date has been announced.
The risk function should be involved early enough to identify concerns, propose mitigating measures and influence the final structure.
This is particularly relevant to Securities Dealers introducing new CFD products, copy-trading services, PAMM or MAM arrangements, automated onboarding, artificial intelligence, outbound dialling systems, new payment channels, new liquidity providers or expansion into higher-risk jurisdictions.
A new-product review should not focus on AML/CFT risk alone. The assessment should also consider licensing scope, target market, client classification, conduct risk, conflicts of interest, disclosures, systems, outsourcing, operational capacity and the impact on the firm’s overall risk profile.
A common gap is the fragmentation of the approval process. Legal may review the contract. Compliance may review the disclosures. Technology may test the system. Operations may establish the workflow. Yet there may be no single document bringing together the overall risk assessment, controls, residual risk and final approval.
In such circumstances, each department may have performed its task, but the firm may be unable to demonstrate that the product was assessed from an enterprise-wide perspective.
At FiveComply, we believe this is one of the clearest indications of the FSA’s evolving supervisory direction. Risk management is expected to become preventive rather than reactive. Firms should be able to demonstrate that risk considerations were part of the original decision, not added after the commercial decision had already been made.
AML/CFT Compliance Is Being Reinforced as a Continuous Governance Responsibility
The FSA’s 2026 AML/CFT communications reinforce that compliance obligations must be actively maintained rather than addressed only during annual reporting periods.
Circular No. 3 of 2026 reminds reporting entities of their obligation to register with the FIU and notify changes to the particulars of Compliance Officers and Alternative Compliance Officers within 30 days. It also highlights the requirement to register the relevant officers on the GoAML platform and the potential consequences of failing to comply.
This may appear to be an administrative obligation, but it has wider governance implications.
Firms often notify the FSA of the appointment or resignation of a Compliance Officer but fail to consider whether a separate FIU notification is required. The regulatory event is treated as a single process even though it may trigger different obligations involving different authorities, deadlines and systems.
This creates a common implementation gap. The appointment may be approved by the FSA, while the GoAML profile, internal reporting procedures and contact information remain outdated.
The FSA’s FATF circulars reinforce the same expectation of ongoing attention. Reporting entities are required to remain current with high-risk and increased-monitoring jurisdictions and apply enhanced due diligence and enhanced ongoing monitoring on a risk-sensitive basis.
The June 2026 FATF developments were subsequently addressed in Circular No. 4 of 2026, which continued to emphasise the need for firms to remain updated and apply the appropriate risk-based measures.
The relevant gap is not simply whether the country-risk list has been updated. The more important question is whether the update has affected the firm’s actual risk management.
Where a jurisdiction’s status changes, the firm may need to reconsider client risk ratings, enhanced due diligence requirements, transaction-monitoring rules, target-market decisions, payment relationships and Board-approved risk appetite.
A policy update that does not result in an operational response does not demonstrate effective compliance.
In our view, the recurring AML/CFT communications point towards a clear supervisory expectation: compliance should operate as a continuous governance function. It should identify external developments, assess their relevance, initiate internal action and report material implications to senior management and the Board.
Compliance Is Evolving from a Control Function into a Governance Function
One of the strongest themes emerging from H1 2026 is the increasing connection between compliance and governance.
Traditionally, the compliance function may have been viewed primarily as the department responsible for maintaining manuals, submitting reports and advising on regulatory questions.
That model is no longer sufficient for a complex Securities Dealer.
Compliance should provide the Board with meaningful insight into the firm’s regulatory exposure, emerging risks, implementation weaknesses and the potential impact of business decisions.
The distinction is important. An operational compliance report may confirm the number of files reviewed, reports submitted or policies updated. A governance-focused compliance report goes further. It explains why a matter is significant, what risk it creates, whether the issue is recurring, what action management has taken and whether the Board needs to intervene.
The Code of Corporate Governance reinforces the Board’s responsibility for the compliance function and requires directors to approve and review the compliance policy and manual annually or as required.
This means that compliance should have sufficient access, authority and independence to escalate concerns directly to the Board. Where the function is outsourced, the Board should still receive appropriate reporting and retain responsibility for assessing effectiveness.
A frequent gap is that compliance is present but not influential. The function produces reports, yet material business decisions are made without its involvement. Findings are raised, but implementation is not tracked. Policies are updated, but system or operational changes do not follow.
In our assessment, firms should expect future supervision to examine not only whether the compliance function exists, but whether it influences governance and decision-making.
The Central Regulatory Question Is Becoming Whether the Board Can Evidence Oversight
Many of the H1 2026 developments ultimately lead back to the Board.
The Board is responsible for the governance framework. It oversees capital, risk, client safeguards, compliance, audit, conflicts of interest and business continuity. It appoints or oversees key function holders and remains accountable even where responsibilities are delegated.
This does not mean that directors must perform management functions. It means that they should receive sufficient information, understand the firm’s risks and exercise informed oversight.
A Board that receives a large volume of operational data is not necessarily an effective Board. The quality of information matters more than quantity.
Board reporting should identify material issues, trends, breaches, overdue actions and decisions requiring approval. It should allow directors to understand the implications and challenge management where necessary.
The Board minutes should then record the substance of that oversight.
This is likely to become increasingly important because effective governance cannot be demonstrated through policies alone. It is evidenced through the firm’s decision-making history.
Where a regulator reviews a material event, it may examine when the Board became aware of the issue, what information it received, what questions were raised, what decision was made and whether the action was followed through.
From a gap-analysis perspective, Securities Dealers should therefore consider whether their governance records would allow an independent reviewer to understand how the Board discharged its responsibilities.
FiveComply’s Regulatory Gap Analysis: Where Firms May Be Most Exposed
Based on our experience advising financial services firms, the most significant regulatory gaps are rarely caused by the complete absence of documentation. They usually arise from inconsistency.
The governance manual may describe one reporting structure while the organisation operates another. The Board may approve a policy but receive no reporting on its effectiveness. A resident director may be appointed but excluded from material decisions. The appropriateness process may be documented but disconnected from the CRM. A FATF list may be updated without reassessing affected clients. A product may be legally reviewed but launched without a consolidated risk assessment.
These gaps are difficult to identify through a document-only review because each individual item may appear compliant when viewed separately.
An effective regulatory gap analysis should therefore assess the connections between governance, policy, systems, people and evidence.
For example, reviewing the complaints framework should involve more than confirming that a Complaints Handling Policy exists. It should consider whether the Local Complaints Liaison Officer is reflected in the policy, whether complaints are recorded consistently, whether root causes are analysed, whether trends are reported to the Board and whether changes are implemented where recurring issues are identified.
Similarly, reviewing negative balance protection should involve more than reviewing the client agreement. It should include system configuration, testing, exception handling, disclosures and complaints procedures.
This integrated approach is where regulatory experience becomes particularly important. Requirements rarely operate in isolation. They interact with the firm’s business model, target market, outsourcing arrangements, technology, governance structure and risk appetite.
A generic compliance checklist may identify whether a document exists. It will not necessarily determine whether the framework is coherent, proportionate or capable of withstanding regulatory scrutiny.
What Securities Dealers Should Prioritise During H2 2026
In our view, the priority for the second half of 2026 should not be the creation of further documents without first assessing the effectiveness of the existing framework.
Securities Dealers should begin by examining whether the changes implemented by 30 June have been fully embedded into their operations. This includes assessing whether local appointments are functioning effectively, whether capital monitoring has become an ongoing Board responsibility and whether retail-client safeguards operate consistently across documentation and systems.
Firms should also assess their readiness for the annual Corporate Governance Disclosure. The disclosure should not be approached as a form-completion exercise in December. The underlying governance arrangements should be reviewed early enough to identify weaknesses, implement changes and obtain appropriate Board approval.
The new-product approval process should also be reviewed. Compliance, risk, legal and operations should be involved before material changes are implemented, and the firm should maintain one consolidated record of the assessment and approval.
AML/CFT governance should be examined with particular attention to FIU registration, GoAML access, changes in key-person details, FATF updates and the operational consequences of changing geographic risks.
Finally, Boards should consider whether the information they receive is sufficient to demonstrate meaningful oversight. The quality of governance reporting and minutes will be central to evidencing that the firm does not merely comply formally, but manages regulatory risk effectively.
FiveComply’s Perspective
After years of advising regulated financial institutions, we have observed that the firms best prepared for regulatory scrutiny are not necessarily those with the greatest number of policies or the largest compliance departments.
They are the firms whose governance arrangements reflect their actual operations, whose Boards understand the material risks and whose control functions are involved before decisions are implemented.
They can demonstrate not only what the policy says, but how the control operates. They retain evidence of decisions, escalation and follow-up. They understand that proportionality does not mean reduced accountability and that outsourcing does not transfer responsibility away from the licensed entity.
Based on the regulatory developments observed during H1 2026, our view is that these characteristics are becoming increasingly important for Securities Dealers in Seychelles.
The FSA’s supervisory direction appears to be evolving beyond technical compliance and towards a more mature assessment of governance effectiveness, operational substance and proactive risk management.
This should not be viewed solely as an additional regulatory burden. Properly implemented governance and risk frameworks support better decisions, reduce operational weaknesses and improve the firm’s ability to respond to regulatory and market change.
The most important lesson from H1 2026 is therefore not that Securities Dealers are subject to more requirements.
It is that the standard of compliance appears to be changing.
The question is no longer only whether the requirement has been addressed.
It is whether the firm can demonstrate that the control works.
How FiveComply Can Assist
FiveComply supports Seychelles Securities Dealers in assessing the effectiveness of their regulatory frameworks and translating complex requirements into practical, proportionate and defensible arrangements.
Our regulatory gap analyses extend beyond confirming whether the required policies and appointments are in place. We assess whether governance arrangements, reporting lines, operational processes, systems and Board oversight work together and whether the firm can evidence that effectiveness under regulatory scrutiny.
Our support includes corporate governance reviews, Board-effectiveness assessments, governance and committee documentation, AML/CFT framework reviews, new-product risk assessments, appropriateness frameworks, negative balance protection implementation reviews, regulatory-notification matrices, client-protection assessments and ongoing implementation support.
For Securities Dealers, H1 2026 should be viewed not only as a period of regulatory change, but as an opportunity to strengthen the foundations of the business before those foundations are tested.
