Investment Companies in Cyprus

INVESTMENT COMPANIES IN CYPRUS

To provide any of the following services, the Cypriot firm is required to operate in terms of Law 144 (I) similar to CIF. This law is mentioned among other laws on investment operations and services, as well as regulated markets 2007-2012 (kind of consolidated, as it is possible to add it or change other, replacing it, laws) and is controlled by the Cyprus Commission on the Currency and Securities Market (“CySEC”).

Investment services include:

  • Acceptance and sending of orders concerning one/several financial instruments;
  • Execution of orders on behalf of clients;
  • Transactions on own accounts;
  • Portfolio management;
  • Investment Consulting;
  • Guarantees on financial instruments and their placement on the basis of firm obligations;
  • The arrangement of financial instruments is not based on firm obligations;
  • Operational functioning of a multi-faceted trading platform.

In addition, subsequent additional services may be selected for use in achieving the company’s objectives, but without prejudice to the following aspects of mandatory equity.

ADDITIONAL SERVICES

They include:

  • Safety and control of financial instruments in favor of clients and on their behalf, including storage of valuables in the banking institution, as well as the whole range of services related thereto;
  • Transfer of loans or credits to investors in order to be able to carry out transactions within one/several financial instruments if the outstanding credit firm accepts participation in this transaction;
  • Consultations on commitments made regarding the structure of capital, production strategies and related issues, on the basis of acquisition or merger of the obligations accepted;
  • Services of the currency market related to investment services;
  • Analysis of capital investments and financial analysis, as well as other recommendatory forms related to financial instruments operations;
  • Services on accepted obligations;
  • Investment activities and services, as well as a number of additional services, which are the basis for financial instruments reflected in paragraphs 5-7 and 10 below, if there is a link between additional services and capital investments.

Financial instruments include:

  • Securities in circulation;
  • Instruments in the money market;
  • Securities on accepted obligations within the framework of statutory funds;
  • Futures, options, exchanges between securities, forward type contracts in respect of interest rates and other derivative instruments relating to currency, securities, betting on them and other, as well as other financial instruments, indicators and indices, as per physical calculations or in financial equivalent;
  • Futures, options, exchanges between securities, forward-type contracts for interest rates and other derivative instruments relating to commodity-type resources held for cash or capable of committing such the choice of this one of the parties;
  • Futures, options, exchange between securities and other derivative instruments relating to commodity-type resources, made by physical calculation if the trade is carried out within the regulated market or a multifaceted trading platforms (MTF);
  • Futures, options, exchanges between securities, forward type contracts in respect of interest rates and other derivative instruments relating to commodity-type resources, which are made at the expense of physical calculation, unless otherwise stated in clause 6 above and provided that they are not suitable for commercial purposes with the properties of other derivatives of financial instruments, if repayment and payment is performed through licensed centres for depository and distribution operations or they are deposited from a regular additional group;
  • Derivative financial instruments for credit risk transfer;
  • Settlement contracts of financial nature;
  • Futures, options, exchanges between securities, forward type contracts for interest rates and other derivative instruments relating to climatic properties, quotas, freight rates and other similar parameters from the official economic statistics, conducted by cash calculation or suitable for conducting in this manner on the basis of the choice of one of the parties, as well as other derivative instruments related to assets, rights, obligations, indicators and indices, do not reflected in this list, but possessing the properties of other financial instruments, if they are traded within the regulated or MTF market, with repayment and payment through licensed centres of depository distribution transactions, or falling under the parameters of additional regular deposits.

The CySEC Commission, when issuing a permit, takes into account such factors as follow:

  1. Adequacy at the organizational level and administrative structuring of the candidate;
  2. Productivity of internal audit mechanisms, similar to regularity;
  3. Division between the client’s assets and the candidate with the division of client assets among themselves;
  4. Adequacy and efficiency of the procedure and mechanism for preventing and resolving conflicts of interest;
  5. Staff of the candidate in full capacity.
    It is necessary to familiarize with the underwritten requirements requiring satisfaction to obtain from CySEC a working license as an investment company CIF.

CAPITAL AND REQUIREMENTS

The presentation of one or more of the investment services stated in paragraphs 1, 2, 4 and 5 above requires an initial capital of 200,000 Euros.

The provision of one or more of the investment services referred to in paragraphs 3, 6 to 8 requires the availability of initial capital of at least 1,000,000 Euros.

It is required a confirmation that the candidate has the required capital in the role of his original capital, and he himself takes the obligation to freeze it on the bank account for making payments on the funds of the EU member state in the presence required by the SEC Commission.

Organizational requirements. The investment company in Cyprus should:

  1. To form, launch and support decision-making processes, as well as structure of the organization, capable in clear and accessible form to define the direction of reporting with simultaneous distribution of duties and functions. Further, to form and use the required internal audit mechanisms, which must be present at all levels of CIF;
  2. To form and use the effective policy on management of processes and risks, capable to identify risks related to activity of CIF and its components, with staging of permissible CIF risk levels in appropriate for this place;
  3. To carry out and support productive actions of administrative and organizational character that will allow to exclude origin of conflict of interests at negative influence on interests of the client;
  4. To implement adequate measures for continuous and regular procedure of capital investment in conjunction with other services, using the required processes, methodologies and systems;
  5. To use the required procedures for client identification, document management and internal reporting;
  6. To create and use the option for regular productive compliance, acting in an independent mode. Requires the appointment of a responsible internal control officer responsible for internal monitoring and reporting at least once a year before the CIF;
  7. To form, start and use accounting procedures and principles that enables to submit reports to the CySEC Commission in a timely manner.
  • The CIF management is obliged to take from two or more persons with a high reputation and experience sufficient for a productive CIF management. In addition, the work should be undertaken only by persons with a good reputation and sufficient knowledge and skills to cope with all the obligations assigned. For example, the head of the portfolio control division, the head of the Investment advisory division, the head of the commitment department, the head of the unit for work with orders, as well as the chapter, which operates without any superior insurance, should have registration within the state register CySEC, which is carried out on the fact of successful passing of the exam. The term of holding – not less than once in 12 months, the Minister of Finance is responsible for the organization.

Functions that can be transferred according to the following:

  • Accounting;
  • IT;
  • Human resources management;
  • Internal monitoring and risk control (internal monitoring includes the post of the person for internal control and the person who opposes the process of illegal money laundering
  • Internal Audit.
    At the request of the candidate:
  • Audit Committee;
  • The Committee of Investment activity;
  • The Committee on Risk control;
  • Head office of CIF Company.

CIF headquarters is located on the territory of Cyprus. As regards the minimum range of CIF-based requirements, they include the following:

  1. The Board of Directors shall consist of two executive directors who may also act as general managers, with one of them having to be a Cypriot resident. There should be three non-executive directors, predominantly residents of Cyprus;
  2. The head of each of departments of investment services should work at full rate;
  3. The functions of contracting character stated above.
    Please note that the above list is a direct indicator of what is included in the category of minimum organizational requirements. However, our experience and practice also testifies to the feedback from CySEC, where the assessment of candidates is carried out individually in each specific situation with a certain dependence on the range of additional services provided by CIF and identification the level of employment of employees in accordance with the services they provide.

OTHER SUPPORTING DOCUMENTATION

  • Organizational diagrams that tell about departments and their management;
  • Internal regulations – established, embedded and executed in full compliance with the law and the directives on which it is based;
  • A business plan that includes a description of analytical pattern that examines the nature and option of working with investment and other additional services, with a focus on the subject of the application. Here there should be the markets in which the CIF operation is planned, the composition of the clientele and their advertised structure with a list of ways of their service and study, as well as the options of development, both the staff and its financial and technical opportunities;
  • Individual questionnaires;
  • A range of basic agreements aimed at CIF activities.

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