More on CIFs
Last Updated on Wednesday, 23 September 2009 17:16
The Investment Services and Activities and Regulated Markets Law of 2007 Law 144(I)/2007 regulates the provision of investment and ancillary services, as well as the performance of investment activities on a professional basis Cyprus.
Excluded from the provisions of this law among others are
. members of the European System of Central Banks and other national bodies performing similar functions
. insurance undertakings
. the undertakings for collective investment in transferable securities (UCITS)
. entities providing investment services exclusively for their parent undertakings, or for their subsidiaries or for other subsidiaries within the group
. entities that provide investment services which consist exclusively of the administration of employee-participation schemes
. persons dealing on own account in financial instruments
. persons providing investment advice in the course of providing another professional activity not governed by this Law, provided that the provision of such advice is not
. specifically remunerated
Who can provide investment and ancillary services
Only registered persons through the Cyprus Securities & Exchange Commission are allowed to provide investment services and/or to perform investment activities, on a professional basis, including
. Cyprus Investment Firms (CIFs) authorised under the Law, as well as market operators
. Member state Investment Firms (IFs), as provided for in subsection (1) of section 77 and subsection (1) of section 80
. Third country IFs, as provided for in subsection (1) of section 78
. banks, as provided for in section 118
. cooperative credit institutions, as provided for in section 122
Types of Financial Instruments, Investment Services and Activities covered by the law
Investment Services and investment Activities are defined in Part I of the Third Appendix, to the law and financial instruments are listed in Part II of the Third Appendix (Sub-sec 2(1)) as follows:-
Part I - Third Appendix Investment Services and Activities
1. Reception and transmission of orders in relation to one or more financial instruments
2. Execution of orders on behalf of clients
3. Dealing on own account
4. Portfolio management
5. Investment advice
6. Underwriting of financial instruments and /or placing of financial instruments on a firm commitment basis.
7. Placing of financial instruments without a firm commitment basis
8. Operation of Multilateral Trading Facility (MTF)
Part II - Ancillary Services
1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management
2. Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction
3. Advice to undertakings on capital structure, industrial strategy and related maters and advice and services relating to mergers and the purchase of undertakings
4. Foreign exchange services where these are connected to the provision of investment services
5. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments
6. Services related to underwriting
7. Investment services and activities as well as ancillary services of the type included in Parts I and II related to the underlying of the derivatives included under para 5, 6, 7 and 10 or Part III where these are connected to the provision of investment or ancillary services.
Part III - Financial Instruments
1. Transferable securities
2. Money-market instruments
3. Units in collective investment undertakings
4. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivative instruments, financial indices or financial measures which may be settled physically or on cash.
5. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event)
6. Options, futures, swaps and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or MTF.
7. Options, futures, swaps, forwards and any other derivative contracts relating to commodities that can be physically settled not otherwise mentioned in para 6 of part III and not being for commercial purposes, which have the characteristics or other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognized clearing houses or are subject to regular margin calls.
8. Derivative instruments for the transfer of credit risk
9. Financial contracts for differences
10. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contract relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Part, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognized clearing houses or are subject to regular margin calls.
Registrations
Registrations for CIFs are affected through CySEC. The application for registration needs to be accompanied by the following
. CySEC application form144-03-01 including all details and documentation requested on the form plus
. Organisational structure showing clear separations of duties and responsibilities
. Employee CV’s and professional competencies
. Information on shareholders and ultimate beneficiaries
. Capital requirements
. Business plan
. Operations manual
The registration usually takes 4-6 months for approval from CySEC.
Legal Compliance
Legal compliance for CIFs under the law include requirements for
. Internal organisation
. compliance and risk management, including business continuity policy
. conflicts of interest
. complaints handling
. record keeping, accounting policies and procedures
. safeguarding of client assets and deposits
. outsourcing
. Clients
. Identification of client
. Know your clients
. categorisation of clients for investor protection given
. suitability and appropriateness of investment advice given
. dealing with execution-only clients
. communication and reporting
. client agreements
. Market exchange
. Order management
. Best execution of client orders
. Pre and post trade transparency
. Transaction reporting
Disclosures & Reporting Requirements
Cyprus Investment Firms have comprehensive reporting requirements including
. Pre and post trade transparency reporting to clients (by the following day)
. Transaction reporting to CySEC (by the next day)
. Large Cash transactions to CySEC (monthly)
. Capital Adequacy reporting (monthly)
. the names of its shareholders possessing qualifying holdings during the previous calendar year, as well as the sizes of such direct or indirect held holdings to CySEC by 31 January
. Risk Disclosure requirements on the face of its financial statements
. Compliance, risk management and internal audit reports to the senior management (or Board of Directors) at least once annually.
. Minutes of meetings of the Board of Directors, plus the reports the minutes referred to, which compliance, risk and internal audit issues have been discussed, report to CySEC within 20 days of such a meeting.
. Financial reports
