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Cyprus is an important business and financial center in the EU and internationally. As a result, an effective and efficient regulatory framework is required. In Cyprus, the Cyprus Securities Exchange Commission (CySEC) is an independent legal entity that regulates and supervises any business activity carried out in Cyprus and the operation of investment companies on the island. Also, CySEC is responsible for licensing investment firms. CySEC’s objectives are to monitor investment activities on the island, protect investors and contribute to the development of a safe and reliable security market.

Regulatory framework:

CySEC operates in accordance with the provisions of the Law on Investment Services and Activities and Regulated Markets (144(I)/2007). Precisely, Law 144 (I)/2007 regulates:

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

Law (I)/2007 is harmonized with the regulations and Directives of the European Union, and applies to:

  • Local and foreign companies providing investment and ancillary services to persons staying/residing/domiciled in the Republic of Cyprus, or where the relevant transaction takes place in Cyprus.
  • Persons staying/residing/domiciled in the Republic of Cyprus and acting on behalf of a third party based outside Cyprus to provide investment and ancillary services, whether as employees or in another capacity.

CySEC Duties:

CySEC is responsible for examining applications and granting licenses to companies under its supervision. Furthermore, CySEC can suspend and revoke licenses in case companies do not meet the necessary conditions. It is worth mentioning that CySEC is responsible for supervising and regulating investment companies and agencies to ensure that they comply with the relevant laws. In case companies do not comply with the law, CySEC can impose administrative and disciplinary sanctions, and even withdraw their licenses.

Additionally, CySEC may demand information from any person or firm to allow experts and auditors to proceed with necessary investigations. Therefore, individuals and companies 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
  • Branches in Cyprus of investment firms from other EU member states
  • Tied Agents of Cyprus Investment Firms
  • Undertakings for Collective Investment in Securities
  • UCITS Management Companies (Undertakings for Collective Investment in Securities)
  • UCITS Agents
  • Cyprus branches of UCITS management companies from other EU member states
  • Administrative Services Companies – Fiduciary and Fiduciary Service Providers
  • Variable Capital Investment Companies
  • Alternative Investment Fund Managers
  • Regulated Markets
  • Central Counterparty Clearinghouse (CCP) for over-the-counter (OTC) derivatives
  • Over-the-counter (OTC) derivatives commercial deposits

General information on the operation of investment companies:

Investment Firms are corporate entities that provide investment services on a professional basis within or outside the Republic of Cyprus. Furthermore, they must operate within the limits of their license and cannot operate without prior authorization from CySEC. Law 144 (I)/2007 establishes specific provisions regarding capital requirements and the establishment of branches. A company must provide all information necessary to satisfy CySEC in order to obtain authorization. I would like to mention that all investment firm authorizations are recorded, maintained and updated in a registry that is accessible to the public.

Investor Compensation Fund:

According to article 59, the Investor Compensation Fund aims to guarantee the protection of clients and investors. In addition, the Investor Compensation Fund guarantees clients’ claims against investment firms. That is, the provisions of the law adequately protect investors and clients in the event that an investment firm does not operate sufficiently. However, in case you have a claim against an investment company, you will need professional legal support to bring a case to court.

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