Freedom Holding Corp. (FRHC), through its subsidiaries, engages in a range of activities, including securities brokerage, securities dealing for customers and for its own account, market-making activities, investment research, investment counseling, investment banking services, retail and commercial banking, insurance products, payment services, and information processing services.
The company also owns several ancillary businesses, which complement its core financial services businesses, inclu...
Freedom Holding Corp. (FRHC), through its subsidiaries, engages in a range of activities, including securities brokerage, securities dealing for customers and for its own account, market-making activities, investment research, investment counseling, investment banking services, retail and commercial banking, insurance products, payment services, and information processing services.
The company also owns several ancillary businesses, which complement its core financial services businesses, including telecommunications and media businesses in Kazakhstan that are in a developmental stage.
The company has a presence in Armenia, Austria, Azerbaijan, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Kazakhstan, Kyrgyzstan, the Netherlands, Poland, Spain, the United Arab Emirates, the United Kingdom, the United States, Turkey, and Uzbekistan. Its subsidiaries in the United States include a broker-dealer that is registered with the SEC and the Financial Industry Regulatory Authority (‘FINRA’). As of March 31, 2024, the company had 161 offices (of which 46 offered brokerage services, 52 offered insurance services offices, 20 offered banking services, and 43 offered other financial and non-financial services) and 530,000 retail brokerage customer accounts.
Business Strategy
The key elements of the company’s strategy are to expand through acquisitions on an opportunistic basis; create a digital fintech ecosystem; continue to grow organically; adhere to conservative risk management principles; and aspire to excellence in governance, transparency, and regulatory compliance.
Products and Services
The company’s business is organized into four segments: Brokerage, Banking, Insurance, and Other.
Brokerage segment
Brokerage segment primarily focuses on retail brokerage and investment banking. As of March 31, 2024, in its Brokerage business segment, the company had 46 offices that provided brokerage and financial services, investment consulting, and education, including offices in Kazakhstan, Europe, Armenia, the United States, Uzbekistan, and Kyrgyzstan. Freedom KZ and Freedom Finance Global PLC (‘Freedom Global’) are professional participants on the KASE and the Astana International Exchange (‘AIX’). Foreign Enterprise LLC Freedom Finance (‘Freedom UZ’) is a professional participant on the Republican Stock Exchange of Tashkent (‘UZSE’) and the Uzbek Republican Currency Exchange (‘UZCE’). PrimeEx is a professional participant on the New York Stock Exchange (‘NYSE’).
Freedom EU oversees the company’s European region operations (including Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Poland, and Spain). In Cyprus, the company is licensed to receive, transmit, and execute customer orders, establish custodial accounts, engage in foreign currency exchange services, and margin lending, as well as trade its own investment portfolio. Through Freedom EU, the company provides transaction processing and intermediary services to its regional customers and to institutional customers. All trading of United States and European exchange-traded and over-the-counter (‘OTC’) securities by all Freedom group securities brokerage firms, excluding PrimeEx, are also routed to and executed through Freedom EU. Historically, FST Belize’s customers executed brokerage transactions indirectly through Freedom EU via several omnibus accounts held by FST Belize with Freedom EU. As of March 31, 2024, the company had terminated its omnibus brokerage arrangement with FST Belize.
The company entered the U.S. market in December 2020 with the acquisition of PrimeEx, a New York corporation that is a registered agency-only execution broker-dealer on the floor of the New York Stock Exchange (‘NYSE’). PrimeEx is a member of the NYSE, Nasdaq, FINRA, and the Securities Investor Protection Corp (‘SIPC’). PrimeEx conducts investment banking and equity capital markets business under the name Freedom Capital Markets (‘FCM’). FCM provides its corporate and institutional customers with a full array of investment banking, corporate finance, and capital markets advisory services.
Securities Brokerage Services: The company provides a comprehensive range of securities brokerage services to individuals, businesses, and financial institutions. Customers can establish accounts and conduct securities trading with transaction-based pricing both through online tools and at retail locations. The company markets its brokerage services through a number of channels, including telemarketing, training seminars, and investment conferences, print and online advertising, using social media, mobile apps, and search engine optimization activities. It offers full-service retail brokerage services covering a broad array of investment alternatives, including exchange-traded and over-the-counter corporate equity and debt securities, money market instruments, derivatives, government bonds, and mutual funds. A substantial portion of the company’s revenue is derived from commissions from customers through accounts with transaction-based pricing. Brokerage commissions are charged on investment products in accordance with a schedule that aligns with local practices. The company provides its brokerage customers with access to the U.S. stock markets, and a significant amount of its brokerage business relates to trading in U.S.-exchange listed and OTC securities by its brokerage customers.
A majority of the trades the company executes for its brokerage customers are done on an ‘over-the-counter’ basis with counterparties outside the United States, including institutional market maker customers who hold accounts with it or, previously, with its FST Belize affiliate, from whom it earns commissions. The company uses the services of third-party U.S.-registered securities broker-dealer and clearing firms to execute substantially all of its trades that are executed directly in the U.S. market.
The company maintains omnibus brokerage accounts for certain institutional brokerage clients, in which transactions of the underlying clients of such institutional clients are combined in a single account with it.
Margin lending. The company grants margin loans to its brokerage customers, collateralized by securities and cash in the customer's account, for application to a portion of the purchase price of securities, and it receives income from interest charged on such margin loans.
Investment Banking: The company’s investment banking business consists of investment banking professionals in Kazakhstan, Uzbekistan, and the United States who provide strategic advisory services and capital markets products. Its investment banking team focuses on multiple sectors, including consumer and business services, energy, financial institutions, real estate, technology, media, and communications. In Kazakhstan and Uzbekistan, commercial banks are currently focusing their financing activities on large or state-owned enterprises, and commercial lending sources impose loan structures and debt covenants that preclude many companies from obtaining such lending. This has created growing interest in and demand for the company’s investment banking services in those countries. In the United States, the company’s investment banking activities include, among others, underwriting of debt and equity offerings on both a ‘best efforts’ and a firm commitment basis. In the equity capital markets area, it provides capital-raising solutions for corporate customers through initial public offerings and follow-on offerings, including listings of companies on stock exchanges. The company focuses on companies in growth industries and participates as market makers in its underwritten securities offerings after the initial placements of shares. In the debt capital markets area, it offers a range of debt capital markets solutions for emerging growth and small market companies. The company focuses on structuring and distributing private and public debt for various purposes, including buyouts, acquisitions, growth capital financings, and recapitalizations. In addition, it participates in bond financings for both sovereign and corporate issuers in the emerging markets.
In its Brokerage segment, the company also conducts proprietary securities trading activities.
As of March 31, 2024, the company had approximately 530,000 total brokerage customer accounts, of which more than 58%, 56%, and 58% had positive cash or asset account balances. As of March 31, 2024, it had approximately 96,000 active accounts. The company defines ‘active accounts’ as those from which at least one transaction occurred in the quarter prior to the date of calculation. The increases in the number of brokerage customer accounts during the fiscal years ended March 31, 2024, 2023, and 2022 were due to both organic growth and the migration to its brokerage companies of certain former customers of its former Russian brokerage subsidiary and of FST Belize.
Banking segment
The Banking segment encompasses lending, deposit services, payment card services, money transfers, and correspondent accounts, supporting both individual and corporate clients with innovative digital financial solutions. In its Banking segment, the company offers a range of retail and commercial banking products and services in Kazakhstan. Freedom Bank KZ has positioned itself in asset growth in Kazakhstan’s banking sector and is ranked among the top eight banks in the country based on total assets as of April 1, 2024, according to the National Bank of Kazakhstan (the ‘NBK’).
Freedom Bank KZ was established in 2021 following the acquisition of Kassa Nova from ForteBank and has since expanded its operations to cater to over 903,500 clients in 2024 from 546,000 in 2023. Freedom Bank KZ has shown a notable increase in its financial standing, largely due to a significant growth rate in assets, deposits, and its securities and loan portfolio.
Freedom Bank KZ is a pioneer in digital banking services in Kazakhstan, having granted 7,747 digital mortgage loans and 14,202 digital car loans to individuals, alongside a substantial amount of lending to small and medium-sized enterprises. Freedom Bank KZ also actively participates in the Kazakhstan national housing program, holding a prominent position in the mortgage market. Additionally, Freedom Bank KZ has implemented Visa B2B Connect to facilitate secure and fast international payments for Kazakhstan businesses, marking its foray into enhancing digital banking services in Central Asia.
In its Banking segment, the company also conducts proprietary securities trading activities.
The company has 20 office locations in Kazakhstan that provide banking services to its customers.
In Kazakhstan, the Kazakhstan Deposit Insurance Fund (‘KDIC’) administers the deposit insurance system. The KDIC insures deposits in the case of liquidation of a bank-member of the KDIC fund. Deposits are insured up to 20 million Kazakhstan tenge per customer.
Payment Cards: The company is a key participant in the international payment systems Visa and MasterCard in the regions in which it operates. It issues both single and multi-currency cards, which allow purchases to be made in multiple different currencies with the use of a single card. The company provides internet banking and mobile applications for Android/iOS for companies and individuals. In addition, it offers customers several investment and structured banking products (insured deposits with option features and currency risk hedging products as permitted by local laws). The following is a description of the company’s principal payment cards:
Invest Card: The Invest card allows its customers the ability to manage their investment accounts both online and in branches of the bank and is the only card of its kind available in the Kazakhstan market. Freedom Bank KZ partners with the relevant broker. The broker has the ability to issue a card in a few minutes through Freedom Bank KZ's remote channels. The Invest card offers features unique to the Kazakhstan market, including: integration with the customer's brokerage accounts to allow for convenient instant money transfers to and from the customer's brokerage account; no fee interbank and peer-to-peer transfers and replenishment of the card in any currency; daily interest payments in U.S. dollars on the outstanding balance on a savings account; and the ability to remotely open bank accounts by means of biometric identification and remote execution of account opening documents. At the customer's election, the Invest card can be a digital card or a plastic card. During fiscal 2024, approximately 24,141 new Invest cards were issued to customers.
Deposit Card: The deposit card combines the features of deposit and debit cards. The card is tied to a deposit account, and when debit transactions are made, the money is debited from the deposit account. Clients have the opportunity to save simultaneously in seven currencies. During fiscal 2024, 182,583 new deposit cards were issued.
Freepay: Freepay is a card with a credit limit, which can be used by customers for personal expenses, including making purchases in installments or on credit. For installment or credit purchases, the client does not have to obtain a card in advance, but instead, the card is issued automatically when a purchase is made through the company’s partner network. During fiscal 2024, 139,549 new Freepay cards were issued.
Freedom Card: The Freedom card is a multi-currency payment card for any purchases around the world. Clients can hold money under the card in seven different currencies. During fiscal 2024, 36,907 new Freedom cards were issued.
Araldy Saqta: Araldy Saqta is a deposit card with an increased cashback of up to 10%, and the cashback amount is transferred to the International Fund for the Salvation of the Aral Sea in Kazakhstan.
Digital Mortgages: In July 2021, Freedom Bank KZ launched a highly digitized mortgage product, which allows for the obtaining of a mortgage loan through an online process. The bank's internal process interacts with many government services, which significantly speeds up the process of obtaining a mortgage. The client submits an application in his or her personal account, passes the scoring and online assessment of the selected property, and signs all the necessary documents using an electronic digital signature. The pledge is registered using blockchain technology, and the decision to issue a loan is made through an automatic system. The company’s digital mortgage product has enabled Freedom Bank KZ to become a mortgage lender in the Kazakhstan market, with a market share of 19.4% as of March 31, 2024. In the 2022 calendar year, Freedom Bank KZ was in issuing mortgage loans under the Kazakhstan state program for financing of mortgage loans ‘7-20-25’. During fiscal 2024, it issued 7,747 digital mortgage loans.
Digital Car Loans: In June 2022, Freedom Bank KZ launched a unique digital product that allows an auto loan to be obtained through an entirely online process. The platform has made the auto buying process more transparent and streamlined and has created safeguards to limit the risk of financial fraud or identity theft. Like a digital mortgage, a digital auto loan allows a new or used car to be purchased in as little as one day and without physically visiting the bank, and all documents are signed using biometrics. In addition, customers do not need to purchase additional auto insurance, which is included in the registration process and is provided by Freedom Insurance. As of March 31, 2024, more than 305 car dealerships cooperated with Freedom Bank KZ in offering digital auto loans. Some of them allow cars to be purchased in installments. During fiscal 2024, 14,202 digital auto loans were issued. As of March 31, 2024, Freedom Bank's share in the total Kazakhstan's digital auto loans market amounted to 9.3%, according to the First Credit Bureau of the Republic of Kazakhstan.
Digital Business Loans: Freedom Bank KZ seeks to provide a high level of service to legal entities and to provide support for entrepreneurial activities in the market. At the beginning of the 2024 calendar year, it launched the digital business loan, which allows small businesses to obtain a loan in as little as one day and without physical delivery of documents. All documents are signed using biometrics, without the need for an electronic digital signature, and the loan proceeds are transferred to a corporate card, which is automatically opened in the name of the client during the loan process. Freedom Bank KZ is a member of the Damu Fund, a Kazakhstan state program, which provides entrepreneurs with the opportunity to receive a loan to develop their business at a reduced rate, and such loans can be applied for online with the company’s digital business loan. During fiscal 2024, 20,153 digital business loans were issued. As of March 31, 2024, Freedom Bank's share in the total Kazakhstan's digital business loans market amounted to 21.3%, according to the First Credit Bureau of the Republic of Kazakhstan.
Freedom Box: Freedom Box is a package of payment acquiring services for individual entrepreneurs, whereby the entrepreneurs do not need to bring documents to the company’s bank in order to obtain the package of services. The package includes an installment plan for clients purchasing the acquiring services, a free POS terminal, an overdraft facility, and an entrepreneur's card. After the client applies and is approved for Freedom Box, it can start using Freedom Box online, and the card and POS terminal will subsequently be delivered. During fiscal 2024, 3,804 clients subscribed to the Freedom Box service package.
Insurance segment
The Insurance segment offers life and general insurance services. On May 17, 2022, the company acquired two insurance companies in Kazakhstan, a life insurance company, Freedom Life, and a direct insurance carrier, excluding life, health, and medical, Freedom Insurance. Prior to the company acquiring these companies, each was wholly owned by its controlling shareholder, chairman, and chief executive officer, Timur Turlov.
Freedom Life: Freedom Life was established in 2014. Since 2018, the company has been operating under the Freedom Finance brand. Freedom Life provides a range of health and life insurance products to individuals and businesses, including life insurance, health insurance, annuity insurance, accident insurance, obligatory worker emergency insurance, travel insurance, and reinsurance. Freedom Life has an S&P Global Rating of ‘BB’ on the international scale and a long-term rating on the national scale of ‘kzA+’ with a ‘Negative’ outlook. As of March 31, 2024, Freedom Life had 387,103 clients and 616,301 active contracts. During the fiscal year ended March 31, 2024, Freedom Life experienced a 121% increase in gross insurance premiums written. As of March 31, 2024, Freedom Life's market share in the Kazakhstan life insurance market was 12% based on gross written premiums for life insurance, and it held an approximately 56% market share in the Kazakhstan voluntary life-related accident insurance market, in each case according to the NBK.
Freedom Insurance. Freedom Insurance operates in the ‘general insurance’ industry and is in online insurance in Kazakhstan and offers various general insurance products in property (including automobile), casualty, civil liability, personal insurance, and reinsurance. Freedom Insurance has been assigned ‘B+’ rating by S&P Global Ratings and ‘kzBBB’ national scale rating: Outlook - ‘Stable.’ Freedom Insurance distributes its products and services through different channels, such as the internet, payment terminals, and a call center. By utilizing its digital solutions, Freedom Insurance's customers can purchase Freedom Insurance products within five minutes and have a personal account for managing policies. As of March 31, 2024, Freedom Insurance had 146,466 clients and 190,872 active contracts. On August 27, 2022, the company acquired 100% of JSC Insurance Company ‘London-Almaty’ (‘London-Almaty’), a Kazakhstan insurance company, and on December 19, 2022, this company was merged into Freedom Insurance.
In the company's Insurance segment, it also conducts proprietary securities trading activities.
Other segment
The Other segment includes payment processing services, online ticket sales, and new business areas, including telecommunications and media services. As of March 31, 2024, in the company's Other segment, it had 43 offices, providing a range of services, including payment processing, entertainment ticketing sales, online air and railway ticket purchase aggregation, and online retail trade and e-commerce services. In addition, the company has recently established subsidiaries in Kazakhstan with a view to launching a telecommunications business and a media business, respectively, each of which is in the developmental stage. In the company's Other segment, it also conducts proprietary securities trading activities, which are mainly conducted by FRHC.
Digital Fintech Ecosystem and Product Expansion
Operating under the ‘Freedom’ brand, the company's comprehensive suite of digital products and services enables its customers to engage in electronic trading and to monitor their accounts. In addition to trading capabilities, the company has expanded its digital solutions to include mortgages, auto loans, and insurance products. Through its online platform, customers can conveniently apply for and manage mortgages, track auto loans, and access a range of insurance options. The company prioritizes delivering a seamless and integrated digital experience across all its products, ensuring user-friendly interfaces, robust security measures, and efficient workflows.
The company has recently expanded its digital product portfolio with the acquisition of Ticketon Events LLP (‘Ticketon’), an online ticket sales company in Kazakhstan, actively working to create an e-commerce infrastructure in the field of culture and sports. Ticketon's service focuses on promoting the cultural life of Kazakhstan and introducing modern promotion technologies. Ticketon offers convenient ways to buy tickets, expands sales channels for organizers and venues, and provides effective ticket promotion and distribution services. This acquisition further strengthens the company's digital offerings and enhances its ability to serve customers in the entertainment industry.
One of the company's key digital products is the Paybox payment platform, which it acquired as part of its acquisition of Freedom Technologies LLP and its subsidiaries in February 2023. The Paybox platform is a dynamic payment system services project. By connecting to the Paybox platform digital payment aggregator, customers can accept payments from buyers using a wide range of payment methods, including bank cards, online banking, electronic money, and more. Paybox also develops customized solutions for banks, catering to their specific needs and expanding the company's network of partners. According to Global Data, for the calendar year 2022, Freedom Technologies' share of electronic payments in the Kazakhstan market was 30%. This acquisition allowed the company's bank to become the largest acquiring bank in Kazakhstan, enhances its product offering, and expands its geographic footprint.
The company seeks to establish a new independent telecommunications operator in Kazakhstan to provide a diverse range of telecommunications and telecommunications-related services to customers, which may include, among others, high-quality internet connectivity, mobile virtual network operator (MVNO) services, WiFi access, over-the-top (OTT) streaming, internet protocol television (IPTV), traffic transit for operators, and cloud solutions, subject to obtaining applicable licenses or entering into partnerships where required. An experienced core management team has been appointed to Freedom Telecom, and a broader team of specialists with experience in creating successful technology projects in Kazakhstan is being assembled.
In alignment with the company's digital fintech ecosystem strategy, during fiscal 2024, it established Freedom Media LLP (‘Freedom Media’) as a subsidiary of Freedom Telecom. The company intends for Freedom Media to become a national media platform in Kazakhstan offering media content to customers. The establishment of Freedom Media marks a significant milestone in the company's endeavor to diversify its product and service offering and to offer tailored streaming services to the Kazakhstan and Central Asia market. This platform is expected to provide unlimited access to a diverse collection of TV shows, movies, documentaries, and exclusive content across multiple genres.
The company is committed to further expanding its digital fintech ecosystem going forward by integrating its online and mobile brokerage services, banking offerings, insurance products, payment processing systems, and online commercial ticketing services. The company's strategic objective is to provide customers with a comprehensive and user-centric digital experience, offering them convenient access to a wide array of financial products and services through a single platform. By leveraging cutting-edge technology and fostering continuous innovation, the company strives to enhance its digital offerings and meet the evolving needs of its diverse customer base.
In April 2024, Freedom Finance Bank launched its mobile application, SuperApp, marking a significant milestone in the Kazakhstan financial technology sector. This innovative app consolidates all essential financial services into one platform, offering clients a seamless and convenient way to manage their finances without the need for multiple apps and services. With SuperApp, clients can easily check their account balances, review transaction histories, make transfers and payments, open and manage deposits, and obtain and repay loans. The app also provides real-time portfolio monitoring, along with access to analytical reports and recommendations, empowering users to make well-informed investment decisions. SuperApp's payment services enable users to pay utility bills, mobile phone charges, internet fees, and other expenses effortlessly. The app supports setting up recurring payments and auto-payments, making the payment process quick and easy. SuperApp not only enhances the user experience but also aligns with the company's strategic goals. Customer satisfaction is improved through easy access to all banking and investment services in a single app, coupled with an intuitive interface and personalized recommendations.
Information Technology
The company has implemented a Technology Development and Ecosystem Growth strategy centered on building a robust technological infrastructure, fostering innovation, and enhancing user experiences. This strategy is designed to leverage technology as a key driver of success within the group. The company is continuously adapting to the rapidly evolving digital landscape and aligning its technological capabilities with the changing needs of its customers and stakeholders.
Tradernet Platform
Tradernet is the company's flagship online trading platform designed for a wide range of investors, offering a comprehensive and user-friendly trading experience. The platform allows users to trade a diverse array of financial instruments, including stocks, options, and ETFs from major global exchanges, such as KASE, AIX, NYSE, Nasdaq, ATHEX, the London Stock Exchange, the Chicago Mercantile Exchange, the Hong Kong Stock Exchange, and Deutsche Börse.
Accessibility and User Interface: Accessible via both web and mobile platforms, Tradernet ensures that users can monitor and manage their investments in real-time from any location with internet connectivity. The platform's interface is designed to be intuitive and customizable, offering tools for technical analysis, portfolio management, and market monitoring. These features cater to both beginner traders, who benefit from the platform's simplicity, and advanced traders, who appreciate its sophisticated analytical tools.
Data Platform and Operational Efficiency: Tradernet features an advanced order routing system that ensures trades are executed at the best possible prices by directing orders to the most favorable markets. At the heart of Tradernet is a robust data platform that provides real-time market data and analytics. This platform supports various trading activities by offering comprehensive data on securities, enabling users to make informed decisions. The back-end infrastructure of Tradernet is designed to handle high volumes of transactions securely and efficiently, ensuring the platform's reliability and performance even during peak trading times. Tradernet back-office solutions automate many administrative processes, reducing the need for manual intervention and minimizing errors. The back-office system handles transaction processing, compliance checks, and real-time account monitoring, ensuring smooth and efficient operations. The integration of Tradernet's back-office system with the trading platform allows for the efficient management of trading accounts and commissions, ensuring accurate reporting and payment processing. Compliance and risk management are integral parts of Tradernet's back-office solutions. The system includes advanced compliance features to ensure all trading activities adhere to relevant regulations, which is crucial for maintaining the platform's integrity. Additionally, risk management tools help monitor client positions, margins, and overall exposure, providing timely alerts and advice to manage risks effectively.
Education and Support: Tradernet places a strong emphasis on education and support, providing extensive resources, such as tutorials, webinars, and market analysis reports. This ensures that users can make informed trading decisions. The platform also offers robust customer support to assist users with any issues they encounter.
Competition
The brokerage and financial service firms which the company regards as its principal competitors include: Halyk Finance, BCC Invest, and First Heartland Securities in Kazakhstan; and eToro and Interactive Brokers in Europe.
Intellectual Property
As of March 31, 2024, the company owned approximately 15 registered trademarks in Cyprus, 13 in Kazakhstan, seven in the United Kingdom, seven in Germany, two in Azerbaijan, and one in Uzbekistan.
Regulation
The company operates under various securities, banking, and insurance licenses and must maintain its licenses in order to conduct its operations. As of March 31, 2024, the company, through its subsidiaries, held: brokerage licenses in Kazakhstan issued by the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (the ‘ARDFM’) and the Astana Financial Services Authority (the ‘AFSA’), in Cyprus issued by the Cyprus Securities and Exchange Commission (‘CySEC’), in the United States issued by FINRA, in Armenia issued by the Central Bank of Armenia, and in Uzbekistan issued by the Ministry of Finance of the Republic of Uzbekistan; a foreign currency operations license in Kazakhstan issued by the ARDFM; a banking license in Kazakhstan issued by the ARDFM; insurance licenses (general and life) in Kazakhstan issued by the ARDFM; and payment services licenses in Kazakhstan, Uzbekistan, and Kyrgyzstan.
The company is subject to often overlapping schemes of regulation that govern all aspects of its relationships with its customers, including but not limited to customer identification, clearance, and monitoring to identify and prevent money laundering and funding of terrorism, U.S. Department of Treasury's Office of Foreign Assets Control (‘OFAC’) and other non-U.S. sanctions violations, to follow FATF recommendations; and tax reporting obligations under QI, FATCA, and CRS regulations.
Freedom KZ holds the following licenses: No. 3.2.238/15 dated October 2, 2018 (initially issued on March 21, 2007) for performance of activity on the securities market; and Banking license No. 4.3.12 dated February 4, 2020 (initially issued on April 4, 2019) for performance of exchange operations with foreign currency, except for exchange operations with foreign cash.
The company's Freedom Global subsidiary is a member of the AIFC and has License No. AFSA-A-LA-2020-0019 issued by the AFSA on May 20, 2020.
Freedom Bank KZ holds License No. 1.2.108/43/250 dated February 1, 2023, for performing banking and other operations.
Freedom Insurance holds unlimited license No. 2.1.16 dated November 24, 2022, for performing general insurance (reinsurance) activities. Freedom Life holds unlimited license No. 2.2.14 dated December 28, 2022, for performing life insurance (reinsurance activities).
Freedom Pay LLP is registered with the NBK to provide the following payment services, among others: electronic money disposal, acceptance and transmission of payments made with electronic money, and payment processing services.
Freedom EU is a Cypriot Investment Firm (‘CIF’) registered with the Registrar of Companies of Cyprus under number HE 324220 and regulated by CySEC under license number 275/15 and is under obligation to cooperate with the Cyprus Unit for Combating Money Laundering (MOKAS).
Freedom EU complies with the requirements and/or obligations implemented by the following laws and regulations under the applicable legal framework:
Directive 2014/65/EU of the European Parliament and of the Council of May 15, 2014, on Markets in Financial Instruments and amending Directive 2002/92/EC and Directive 2011/61/EU.
Cyprus Investment Services and Activities and Regulated Markets Law of 2017 (The Law 87(I)/2017) regarding the provision of investment services, the exercise of investment activities, and the operation of regulated markets (the ‘Investment Services and Activities and Regulated Markets Law 2017’).
Directive of 2020 of CySEC for the Prevention and Suppression of Money Laundering and Terrorist Financing.
ESMA Final Report (ESMA35-42-1227) on the European Commission mandate on certain aspects relating to retail investor protection as of April 29, 2022.
Freedom EU follows the European Securities and Markets Authority (ESMA), European Union Directive 2014/65/EU (the Markets in Financial Instruments Directive or ‘MiFID II’), European Commission, European Central Bank, Central Bank of Cyprus, and CySEC circulars requirements to ensure its compliance with the foregoing regulatory acts.
The Law of the Republic of Cyprus L. 87(I)/2017 regarding the provision of investment services, the exercise of investment activities, and the operation of regulated markets (as amended) (the ‘Cyprus Securities Market Law’) is the main law regulating broker-dealer, portfolio management activities in Cyprus. The Cyprus Securities Market Law is a local implementation of MiFID II in Cyprus. It establishes a framework for MiFID II investment services, such as broker-dealer, investment advice, portfolio management activities, dealing on own account, CIF registration and licensing requirements, and the regulation of such activities by CySEC. Freedom EU holds licenses in Cyprus and the EU for conducting investment services.
The company's U.S. subsidiary PrimeEx is registered as a securities broker-dealer with the SEC, is a member of various self-regulatory organizations (‘SROs’) and securities exchanges, including being a ‘Blue Line’ broker-dealer on the floor of the NYSE. In 2007, the National Association of Securities Dealers and the member regulation, enforcement, and arbitration functions of the NYSE consolidated to form FINRA, which serves as the primary SRO of PrimeEx, although the NYSE continues to have oversight over NYSE-related market activities.
In January 2022, PrimeEx received regulatory approval from FINRA to conduct investment banking and equity capital markets business. Such business is conducted under the name Freedom Capital Markets.
In the United States, the 1970 Foreign Corrupt Practices Act, or FCPA, requires that the company establishes and maintains an effective compliance program to ensure compliance with U.S. law. Failure to comply with the FCPA can result in substantial fines and other sanctions.
The 2010 Foreign Account Tax Compliance Act (‘FATCA’) was enacted in the U.S. to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions, such as certain of the company's non-U.S. subsidiaries, to report to the U.S. Internal Revenue Service (‘IRS’) information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
OFAC, in connection with its administration and enforcement of economic and trade sanctions, publishes lists of individuals and companies, known as ‘Specially Designated Nationals,’ or SDNs. Assets of SDNs are blocked, and U.S. companies are generally prohibited from dealing with them. OFAC also administers a number of comprehensive sanctions and embargoes that target certain countries, governments, and geographic regions. Under the company's global sanctions compliance policies and procedures, it and its U.S. subsidiaries, and, in certain circumstances, its non-U.S. subsidiaries may be prohibited from engaging in transactions involving any individual, entity, country, region, or government that is subject to such sanctions.
At its subsidiaries Freedom KZ and Freedom Global, Sum and Substance is integrated with the World-Check (Refinitiv) database. At its subsidiary Freedom Bank KZ, Refinitiv is integrated with the Colvir banking system. The Refinitiv database is used during the onboarding and ongoing processes, by checking clients. It contains information on individuals and legal entities from more than 715 lists submitted by international and national security agencies and law enforcement agencies. World-Check allows identification of hidden risks associated with individuals or companies that have been included in sanctions lists, involved in money laundering (AML), or the financing of terrorist activities, including the proliferation of weapons of mass destruction (CFT and/or WMD). The company's subsidiary Freedom Bank KZ also uses the Dow Jones database during the onboarding process by checking clients against sanctions lists.
Historically, the company's affiliate FST Belize engaged in a significant amount of trading with it through its omnibus account at Freedom EU. This trading was governed by a Cross-Border Correspondent Relationship Agreement between Freedom EU and FST Belize, wherein FST Belize agreed to follow sanctions laws and AML controls that are applicable to brokers in the United States and the European Union and granted the company access to its customer records for purposes of compliance monitoring.
Freedom EU is subject to the European Union Markets in Financial Instruments Directive (‘MiFID’) and/or related regulations and must, when holding funds belonging to customers, make adequate arrangements to safeguard the rights of customers and maintain their records and accounts in a way that ensures their accuracy. As a licensed Kazakhstan broker, Freedom KZ is obliged to maintain segregated accounting of its own and customers' assets. Freedom Global is subject to the AIFC business rules and is required to have systems and controls in place to ensure the proper safeguarding of customer assets, which includes conducting proper due diligence of the third parties.
The company is subject to laws and regulations in relation to the privacy of such information in the various jurisdictions where it conducts business or has customers. These include the laws of Kazakhstan, the EU, the UK, and the U.S., as well as the rules and regulations of their various state agencies and self-regulatory organizations. These laws include the data privacy and security frameworks in the European Union and the United Kingdom, each entitled the General Data Protection Regulations, Kazakhstan's Law on Personal Data and Its Protection, Information Technologies and Information Protection, as well as the laws of a number of states of the United States and SEC cybersecurity disclosure rules.
History
The company was incorporated in 1981. The company was formerly known as BMB Munai, Inc. and changed its name to Freedom Holding Corp. in 2017.
