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Legislation/Regulatory Updates

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Provision of Warnings in Spain – C248

By Xenia Neophytou | November 3, 2017
Following Circular C210 CySEC issues Circular C248 – Requirements of the Spanish Securities and Exchange Commission (‘the CNMV’) regarding the provision of warnings on complex financial instruments to retail clients resided in Spain, expanding on the requirements for mentioned warnings when providing services to clients within the territory of Spain. In summary a CIF must:
  • include a risk warnings mentioned in the Circular on the homepage of their website and not relegate any warning to other part of their website with less direct access
  • use warnings in the same language in all related texts and secondary documents when the website adopts Spanish
  • must have a warning on the “cost of closing the position” on their general website showing the mechanism used to calculate said cost
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Regulation on Virtual Currencies – C244

By Xenia Neophytou | October 13, 2017

As in accordance with CySEC Circular 244 – Trading in virtual currencies and/or trading on contracts for differences relating to virtual currencies, CySEC sets preliminary regulatory requirements regarding the trading of virtual currencies or related contracts of differences in anticipation of the official position of European authorities. It should be noted that there is no specific EU regulatory framework governing the trading on virtual currencies and/or trading on CFDs relating to virtual currencies. In summary, a CIF must:

  • inform their clients that there is no specific EU regulatory framework governing the trading in such products
  • that virtual currencies carry a significant risk, are highly volatile and are not appropriate for inexperience clients
  • disclose all related information including bid/ask calculation
  • use only licensed/regulated feed providers (e.g. virtual currency exchanges, liquidity providers)
  • maintain sufficient controls, measures and procedures to identify related risk
  • maintain proper and sufficient record keeping procedures and controls
  • set maximum leverage limit 1:5 for retail clients
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Remuneration Guidelines – C240

By Xenia Neophytou | October 4, 2017

With Circular C240 – Guidelines on sound remuneration policies issued by the European Bank Authority, CySEC draws the attention of Cypriot Investment Firms to Guidelines on sound remuneration policies – EBA/GL/2015/22. CIFs must comply with the regulatory requirements and design sound remuneration policies and that do not raise conflict of interest between CIF’s clients and CIF’s personnel and/or associates.

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New Marketing Condition in Latvia – C239

By Xenia Neophytou | October 4, 2017

In accordance with Circular 239 – Financial and Capital Market Commission of Latvia (the “FCMC”) – Law on the Financial Instruments Market regarding the natural and legal persons that are allowed to provide/ perform investment services/ activities in the Republic of Latvia, CySEC informs Cypriot Investment Firms to adjust their business models to include new specifications when soliciting clients within the territory of Latvia. In summary, a foreign investment firm must engage clients through an approved by FCMC, branch or tied agent and all marketing material provided must clear, fair, not misleading, identifiable as such.

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New Passporting Guidelines – C233

By Xenia Neophytou | August 22, 2017

With the issue of CySEC Circular 233 – MiFID II Main changes in relation to passporting issues and new notification forms, CySEC draws the attention of Cypriot Investment Firms to the new conditions required under MiFID II for the cross-border provision of their products and services to member states. Under MiFID II Investment Firms are required to submit one passport notification for each member state in which they intend to provide cross-border services, thus firms must assess their existing passporting licenses and consider their amendment if necessary. CySEC has prepared new notification forms for this purpose which will be mandatory as of 3rd January 2018.

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Redefining threshold criteria of ‘significant CIF’ – Circular C228

By Xenia Neophytou | July 26, 2017

CySEC has issued Circular 228 – Redefining threshold criteria of ‘significant CIF’, setting the new criteria for what is consider to be a “significant CIF” under the law. If a CIF meets one or more criteria from the below following the results of its audited financial statements then it will be consider as a “significant CIF” by CySEC:

  • Total assets more than 43 mil. EUR
  • Annual fees /commission income/ net trading income more than 50 mil. EUR
  • Clients’ money more than 35 mil. EUR
  • Clients’ assets more than 750 mil. EUR

It should be noted that a CIF may waive the “significant CIF” status by sending a formal request to CySEC justifying the request and pending approval. It should also be noted that CySEC reserves the right to impose “significant CIF” status to a CIF not fulfilling the above criteria if deemed appropriate.

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New Capital Requirements for Financial Assets situated in Estonia – C222

By Xenia Neophytou | July 7, 2017

As in accordance with Circular 222 – Decision of the Cyprus Macroprudential Authority (Central Bank of Cyprus) concerning Recommendation ESRB/2016/4 of the European Systemic Risk Board with regard to the adoption, via reciprocity, of a macroprudential measure adopted by Estonia, CySEC informs Cypriot Investments Firms of Central Bank of Cyprus decision to impose 1% (one percent) systemic risk buffer rate on all exposures located in Estonia. All CIFs with financial assets situated in Estonia must now include in their calculation of capital requirement the aforementioned decision of the CBC.

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The Risk Factors Guidelines for AML processing – C219

By Xenia Neophytou | July 5, 2017

As in accordance with Circular 219 – ESAs Guidelines on anti-money laundering and countering the financing of
terrorism – ‘The Risk Factors Guidelines’Use of Affiliates
, when CIFs process clients for anti-money laundering, and counter terrorist financing, they must classify then using a risk-based approach in their assessment and categorize them accordingly. From 26 June the new requirements come to effect. In summary, a CIF must adjust their policies and procedures to:

  • obtain sufficient information regarding origin of funds and ultimate beneficiary owners
  • maintain the information updated on frequent basis
  • use the information obtained to categorize client based on risk for AM/TF
  • monitor and perform due-diligence on clients based on their risk classification
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New Marketing Condition in Poland – C221

By Xenia Neophytou | July 5, 2017

In accordance with Circular 221 – New rules set by the Polish Financial Supervision Authority (the ‘KNF’) regarding persons that are allowed to provide activities in the territory of Poland, CySEC informs Cypriot Investment Firms to adjust their business models to include new specifications when soliciting clients within the territory of Poland, CySEC informs Cypriot Investment Firms to adjust their business models to include new specifications when soliciting clients within the territory of Poland. In summary, a foreign firm must engage clients directly or through a known agent and provide clear and sufficient information about firms products and services with proper disclosures.

 

 

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Provisions for selecting Affiliates – C217

By Xenia Neophytou | June 27, 2017

As in accordance with Circular 217 – Use of Affiliates, when CIFs use affiliates to promote its services and products must ensure that the selected affiliate acts in compliance with the laws and regulations imposed by CySEC and the jurisdiction the affiliate operates in. Responsibility of marketing remains always with the CIF therefor the CIF must take such actions and measures to control its affiliates. In summary, a CIF must:

  • have sufficient controls, measures and supervision over its affiliates
  • ensure marketing material promoted by affiliates is compliant with article 36 of the Investment Services and Activities and Regulated Markets Law of 2007
  • use/develop tools that allow sufficient monitoring of its affiliates
  • make public, at least through its website of all affiliates which the CIF is in cooperation with as well as affiliates that the cooperation has been terminated, especially when termination is due to breach of contract or the distribution of unauthorized marketing material
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