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November, 16 2018
November, 15 2018
CySEC | An Overview of the Cyprus Securities and Exchange Commission
The Cyprus Securities and Exchange Commission better known as CySEC, is the financial regulatory body of Cyprus.
It was established in accordance with section 5 of the Securities and Exchange Commission (Establishment and Responsibilities) Law of 2001, as a public legal entity. The operation of the CySEC is governed by the Laws regulating the Structure, Responsibilities, Powers, Organization of the Cyprus Securities and Exchange Commission and Other Related Matters (Law 73(I)/2009).
The CySEC is administered by a five-member Board, consisting of Chairwoman and Vice-Chairman, who provide their services on a full and exclusive employment basis, and three additional non-executive members.
All CySEC`s Board members are appointed by the Council of Ministers, following a proposal of the Minister of Finance. The service for all the members is renewable every five years.
CySEC is the independent public supervisory Authority, responsible for the supervision of the investment services market, transactions in transferable securities carried out in the Republic of Cyprus and the collective investment and asset management sector. It also supervises the firms, offering administrative services, hence it has various roles and contains the following departments:
- Strategy & international relations
- AML-CFT Anti Money Laundering – Counter Financing Terrorism
- Market surveillance & investigations
- Administration & personnel
- Information technology & operations
- Risk and statistics department
- Internal audit
Vision and mission
The vision of the CySEC is to establish the Cyprus securities market as one of the safest, most reliable and attractive destinations for investment, hence a significant number of overseas retail forex brokers and binary options brokers, have obtained registration from CySEC.
The mission of the CySEC is to exercise effective supervision, to ensure investor protection and the healthy development of the securities market.
The CySEC is the independent public supervisory Authority responsible for the supervision of the investment services market, transactions in transferable securities carried out in the Republic of Cyprus and the collective investment and asset management sector. It also supervises the firms offering administrative services, which do not fall under the supervision of the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Cyprus Bar Association. As an EU Member State, CySEC’s financial regulations and operations comply with the European MiFID financial harmonization requirements.
The main duties and responsibilities of the CySEC are set out in Article 25, Part IV of Law 73(I)/2009 and may be summarized as follows:
- To examine applications and grant operating licenses to entities under its supervision, as well as to suspend and revoke the said licenses;
- To supervise and regulate the operation of the Cyprus Stock Exchange(CSE) and of other organised markets in the Republic, and the transactions carried out in these markets;
- To supervise and regulate the agencies under its supervision, in order to ensure their compliance with the laws governing their operation;
- To carry out all necessary investigations in view of the exercise of its duties under the law as well as on behalf of other foreign competent Authorities;
- To request and collect information, which is necessary or conducive to the exercise of its duties under the law and to demand by written request, the provision of information from any natural or legal person or organisation, deemed to be in a position to provide the required information;
- To impose the administrative and disciplinary sanctions provided by the law;
- To require the termination of practices, which are contrary to the securities market laws;
- To apply to a competent court for the issue of an order for detention, or charge or freezing or prevention of alienation or transaction, involving assets;
- To issue regulatory Directives and Decisions;
- To cooperate and exchange data and information with other public Authorities in the Republic, competent foreign supervisory Authorities and other organisations.
The CySEC is responsible for the supervision of operations and ensuring the compliance with the relevant legislation of the following entities:
- Cyprus Investment Firms (CIFs)
- Cyprus branches of Investment Firms (IFs) of other EU Member States
- Tied Agents of CIFs
- Undertakings for Collective Investment in Transferable Securities (UCITS)
- 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 (VCIC)
- Alternative Investment Fund Managers (AIFMs)
- Regulated Markets (RM)
- Central Counterparty Clearing House (CCPs) of over-the-counter (OTC) derivatives
- Trade depositories of over-the-counter (OTC) derivatives
- Alternative Investment Funds (AIFs)
In addition to the above responsibilities, the CySEC has also been entrusted with powers and duties under the following laws:
- The Public Offer and Prospectus Law of 2005
- The Insider Dealing and Market Manipulation (Market Abuse) Law of 2005
- The Public Takeover Bids Law of 2007
- The Transparency Requirements (Transferable Securities Admitted to Trading on a Regulated Market) Law of 2007
Authorization and licensing
The provision of investment services and/or the performance of investment activities as a regular occupation or business is a subject to prior authorisation by CySEC in accordance with Chapter I of Law 87(I)/2017 – For the Provision of Investment Services, the Exercise of Investment Activities, the Operation of the Regulated Markets.
Once authorization is granted, the CySEC registers all Cyprus Investment Firms (CIFs) in a register, which is publicly accessible and contains information on the services and/or activities, for which the CIF is authorized. The Commission updates the register and notifies every authorization to the European Securities and Market Authorities (ESMA).
The CIF authorisation is valid for the entire European Union and allows a CIF to provide the services or perform the activities, for which it has been authorized throughout the European Union, either through the right of establishment, including through a branch, or through the freedom to provide services.
Furthermore, the CySEC will grant a license only if all capital requirements are in accordance with Regulation (EU) No. 575/2013, having regard to the nature of the investment service or investment activity, are met.
A CIF, which does not deal in any financial instruments for its own account or underwrites, issues of financial instruments on a firm commitment basis, but which holds client money or securities, and which offers one or more of the following services, shall have initial capital of €125 000:
- the reception and transmission of investors’ orders for financial instruments;
- the execution of investors’ orders for financial instruments;
- the management of individual portfolios of investments in financial instruments;
- Investment Advice
A CIF, which intends to offer all of the below services, shall be required at all times to maintain initial capital of not less than €730 000:
- Reception and Transmission of Orders
- Execution of Orders on Clients` Behalf
- Portfolio Management
- Investment Advice
- Underwriting and placing of financial instruments on a firm commitment basis
- Dealing on Own Account
- Operation of Multilateral Trading Facility (MTF)
- Operation of Organized Trading Facility (OTF)
Certifications and training
All individuals who are employed by a CIFs, must possess sufficient knowledge, skills and experience to perform their duties.
In accordance with Article 92 of Law 87(I)/2017 a CIF`s employee involved in the provision of investment services or the carrying out of investment activities, must be certified and registered in the public register of certified persons, after passing the relevant exams (basic and advanced). They must also fulfil the requirements of R.A.D 22 of 2017 – Directive regarding the certification of persons and certification registers, which specify the minimum academic and professional qualifications, which they should hold. According to the Directive the CySEC prepares and makes public on its website a table of all Successful Candidates.
Persons registered in the Public Register are obligated to renew their registration and therefore attend continuous professional training (CPT) and seminars, on topics that fall within the relevant legislation, which applies to them and which relates directly to the
duties, which they will undertake as part of their certification.
To this end CySEC organize seminars and training for Continued Professional Training (CPT), which are addressed primarily to the persons registered in the public register (certified persons), in order to maintain their certifications and registration in the Public Register.
The CySEC actively participates in the European and International affairs, through the:
- Conclusion of bilateral and multilateral agreements in the form of memoranda of understanding (MOU) with Competent Foreign Supervisory Authorities,
- Participation in committees and groups of the European Securities and Market Authority (ESMA),
- Participation in the European Systemic Risk Board (ESRB)
- Participation in the International Organization of Securities Commissions (IOSCO)
- Participation in national working groups, which participate in the working groups of the Council of the European Union.
The international cooperation is an essential to the CySEC’s work, in view of the increasing globalization component of financial markets, together with the increasing number and complexity of the supervised entities with cross-border activities.
The CySEC, recognizing the positive contribution of Corporate Social Responsibility (CSR) to society, has adopted as part of its long-term strategy, various actions for contributing to society and implements several initiatives related to social responsibility.
The role, duties and responsibilities given to CySEC are of great importance to the whole Cypriot economy and thus CySEC is very strict, precise and pay high attention to detail. Companies which are under its supervision often find it hard to keep up with the pace of the fast-changing regulations and the stringent demands of the regulator.
Nevertheless, the ultimate responsibility of CySEC is to safeguard the interests of the investors, hence the primary commitment is to them.
AUTHOR: Krassi Bozhilova, Senior Associate | Regulatory Compliance, AML @ AGP LAW