Establishment of Temporary Permission Regime (‘TPR’)
UK MiFID II firms became non-EU financial institutions no longer benefiting from the so-called “MiFID II” passport post-Brexit. Due to this, Cyprus Securities and Exchange Commission (‘CySEC’), established a TPR. Please find more information in our previous article regarding TPR here.
Notification to TPR Entities in relation to the expiration of TPR and next steps
On April 21, 2021, CySEC addressed a letter to the TPR entities. The letter mentioned amongst others the following:
- Notifying them that on 1 January 2022, the TPR will expire. In the absence of an equivalence decision by the European Commission in relation to the UK relevant regulatory framework and subsequent registration with the European Securities and Markets Authority (“ESMA”), pursuant to Articles 47 and 46 of MiFIR respectively, TPR Entities will no longer be able to provide any investment services and/or perform any investment activities, with or without any ancillary services, on a solicited basis in Cyprus (including not to per se professional clients and to eligible counterparties), without the prior establishment of a physical presence in the Republic or in another EEA Member State; and
- Encourage them to formulate a contingency plan for either:
- Phasing out their operations in an orderly fashion, or
- Establishing an appropriate physical presence in Cyprus or in another EEA Member State that best suits their business.
Several groups of TPR entities sought to continue their solicited activities in Cyprus.
Policy Approach and the rationale behind it.
The evaluation of an application for the establishment of a physical presence in the Republic is an elaborated and lengthy process. Due to this, CySEC has decided to amend its policy approach on the TPR to avoid disruption of the existing business of the TPR Entities and to facilitate the migration of such business to Physical Establishments.
In an attempt to ensure a smooth transition towards Physical Establishment CySEC has decided to further amend the Directive DI87-04. The amendment introduces a grandfathering clause in relation to TPR Entities. This clause applies up until the completion of the evaluation of the applications in question.
In case of a successful assessment of such application, a period of additional six months is granted for:
- the smooth and compliant onboarding of clients to the Physical Establishments and/or
- for such establishment becoming fully operational, as applicable.
CySEC will issue a list of the TPR entities that will be eligible to continue operating after 31 December 2021.
The rest of the TPR entities must cease their actively solicited operations in the Republic by 1 January 2022. CySEC expects that the proactive engagement with such entities has ensured that a contingency plan is in place for smoothly phasing out their solicited operations in Cyprus.
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- Obtaining authorization for your Cyprus Investment Firm
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