Regulation Of Investment Firms And Investment Activities In Cyprus

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Cyprus is a major financial and business centre in the EU and internationally. As a result, there is a requirement for an effective and efficient regulatory framework. In Cyprus, the Cyprus Security Exchange Commission (CySEC) is an independent legal entity that regulates and supervise any business activity carried out in Cyprus and the operation of investment firms on the island. Furthermore, CySEC is responsible for granting licenses to investment firms. The objectives of CySEC is to supervise the investment activities on the island, protect investors and contribute to the development of a safe and reliable security market.

Regulatory framework:

CySEC operates according to the provisions of Investment Services and Activities and Regulated Markets Law (144(I)/2007). Precisely, the Law 144 (I)/2007 regulates:

  • The provision of investment and ancillary services in the Republic of Cyprus.
  • The performance of investment activities on a professional basis in the Republic of Cyprus.
  • The operation of regulated markets.

The Law (I)/2007 is harmonised with European Union regulations and Directives, and it applies to:

  • Local and foreign firms that provide investment and ancillary services to persons who stay/reside/ are domiciled in the Republic of Cyprus, or where the relevant transaction is held in Cyprus.
  • Persons that stay/ reside/are domiciled in the Republic of Cyprus and act on behalf of a third party based outside of Cyprus in offering investment and ancillary services, either as an employee or in another capacity.

CySEC’s duties:

CySEC is responsible for examining applications and granting licenses to firms under its supervisions. Moreover, CySEC may suspend and revoke licenses in case the firms do not satisfy the necessary conditions. It should be mentioned, that CySEC is responsible for supervising and regulating investment firms and agencies so that to ensure that they comply with the relevant laws. In case the firms do not comply with the law, then CySEC may impose administrative and disciplinary sanctions, and even withdraw their licenses.

In addition, CySEC may demand information from any person or firm so that to permit experts and auditors to proceed with the necessary investigations. Hence, persons and firms are obliged to provide the necessary information to CySEC.

I would like to point out that CySEC is responsible for the supervisions of the following entities:

  • Cyprus Investment Firms
  • Cyprus branches of Investment Firms of other EU member-states
  • Tied Agents of Cyprus Investment Firms
  • Undertakings for Collective Investment in Transferable Securities
  • UCITS (Undertakings for Collective Investment in Transferable Securities) Management Companies
  • UCITS Agents
  • Cyprus branches of UCITS Management Companies of other EU member-states
  • Administrative Services Companies – Trustee and Fiduciary Service Providers
  • Variable Capital Investment Companies
  • Alternative Investment Fund Managers
  • Regulated Markets
  • Central Counterparty Clearing House (CCPs) of over-the-counter (OTC) derivatives
  • Trade depositories of over-the-counter (OTC) derivatives

General information about the operation of investment firms:

Investment firms are corporate entities that provide invest services on a professional basis inside or outside the Republic of Cyprus. Furthermore, they should operate within the limits of their license and they cannot operate without prior authorisation from CySEC. The Law 144 (I)/2007 outlines specific provisions concerning capital requirements and the establishment of branches. A firm must provide all the necessary information to satisfy CySEC in order to get authorisation. I would like to mention that all investment firms’ authorisations are registered, kept and updated in a register that is accessible to the public.

Investor Compensation Fund:

According to article 59, the Investor Compensation Fund aims at ensuring the protection of clients and investors. Furthermore, the Investor Compensation Fund secures the claims of clients against investment firms. That is to say, the provisions of the law protects investors and clients adequately in case an investment firm does not operate sufficiently. Nevertheless, in case you have a claim against an investment firm you will need a professional legal support so that to file a case to the Court.

 

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