Cyprus CySEC License

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An Investment Firm licensed in Cyprus, can be for the provision of investment services from Cyprus in all EU markets by simply pass porting its license, while it can also offer investment services to third countries. Such services can be offered on a cross-border basis or by establishing a physical presence in the jurisdiction into which the services will be provided.

The regulatory body competent to regulate and license the provision of investment services under the Law is the Cyprus Securities and Exchange Commission (CySEC).

Investment Services Subject To Authorisation By CYSEC

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.

Ancillary (Non-Core) Services Subject To Authorisation By CySEC

Ancillary (non-core) Services subject to authorization by CySEC consist of the following services (it should be noted that no license can be granted for the provision of non-core services alone):

1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management;
2. Grant 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. Provide advice to undertakings or capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings;
4. Provide 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. Safe custody services.

The CySEC

CySEC is the regulatory body competent to regulate and license the provision of investment services under the Law. CySEC is administrated by a five-member Board which is composed of the Chairman, the Vice-Chairman that provides their services at complete and exclusive employment. In addition, the Board is composed of three other members. In the Board's meetings a representative of the Governor of the Central Bank is represented, who has the right to register subjects in the agenda, to participate in the discussions and to express opinions but deprived the right of vote.

The Cyprus Investment Firm

Cyprus Investment Firms (“CIF”) are companies established in Cyprus and licensed by CySEC to provide one or more investment services to third parties or/and perform one or more investment activities pursuant to the law.

Legal Requirements

Shareholding

There must be a clear shareholding structure. Shareholders of a CIF must be fit to be shareholders of a CIF and must be approved by CySEC. CySEC requests for natural persons, in addition to the standard qualifications included in a CV, a statement of assets and liabilities as well as to attend a personal interview. For legal entities or groups all relevant information and financial statements for at least 3 years must be submitted to CySEC.

Management

The Board of Directors structure requirement must also be fulfilled properly in order to obtain the license.

Namely, the Board of Directors being the main body responsible for the CIF must be constituted of at least: 2 Executive directors (the one of which, being the main person managing the CIF and answerable to CySEC, must be a Cyprus resident) and 2 independent non-executive directors. Inevitably, to come under the favourable corporate tax regime of Cyprus, the majority of shareholders should be Cypriots.

Initial Share Capital

A CIF that provides one or more of the following investment services and holds clients’ money or/and clients’ financial instruments must have an initial capital of at least €200.000:

1. Reception and transmission of orders in relation to one or more financial instruments;
2. Execution of orders on behalf of clients;
3. Portfolio management;
4. Provision of investment advice.

A CIF that provides one or more of the following investment services or/and performs the following investment services shall have an initial capital of at €1.000.000:

1. Dealing on own account;
2. Underwriting of Financial Instruments and/or placing of Financial Instruments on a firm commitment basis;
3. Placing of Financial Instruments without a firm commitment basis;
4. Operation of Multilateral Trading Facility.

A CIF that provides the service for the reception and transmission of orders in relation to one or more financial instruments and/or provision for investment advice and does not hold client’s money or/and clients’ financial instruments, and which for that reason may not at any time place themselves in debt with their clients may have an initial capital of at least €80.000 while the amount may vary in the case where a professional indemnity insurance shall be provided.

The proposed CIF’s share capital must be placed in a blocked bank account and a confirmation from the bank must accompany the CIF application.

Documentation

A sample organizational chart must be submitted to CySEC during the application process, including the Board of Directors structure, the Risk Management Committee, the Internal Audit and the Investment Committee.

It is important to decide by the beginning as to the functions which will be outsourced as well as to the members of the staff by taking all reasonable steps as to avoid the possibility of a conflict of interest. Every CIF must have at least an Order Execution Policy, a Client Categorization Policy and a Risk Management Policy.

A CIF should have all the standard documentation of a Cyprus company obtained by the Registrar of Companies. Moreover, the Memorandum of Association contains specific wording that restricts the operations of the company to that of a CIF, prior to the commencement of operations.

Operational Requirements

There are various requirements to be complied with during the CIF’s operations. Such requirements are, inter alia, the following:

The CIF must have a physical presence by keeping agreements and documents within Cyprus;

The CIF must create and maintain a business plan covering at least 3 operational scenarios (expected, optimistic, pessimistic) concerning each of the first 3 years of its operations;

The operations manual which must be submitted along with the licensing application to CySEC and which should reflect the operations of the Company and any other relevant detail;

Client documentation;

Operational Costs

Website domain

UCITS

The UCITS Law 225(I) of 2002 provides the legal framework for the registration, regulation and marketing of local and foreign funds established in Cyprus. Under the said Law, UCITS is considered to be any organization whose sole aim is to collectively invest publicly collected capital, in transferable securities via stock markets, banking deposits and any other investments and whose operation is based on the principle risk of diversification and whose units can be liquidated by the unit holder on request using the assets of the organization.

Under the legislative framework of Cyprus, the following are not considered to be UCITS under the law:

UCITS which are not open ended

UCITS that do not market to the public in Cyprus or other EU Member States

UCITS that based on their fund rules or constitutional documents only make their units available to the public in other countries except Cyprus.

UCITS for which due to their investment and borrowing policy the rules of the law 225(I) 2002 are not suitable.

Moreover, under the said Law, local UCITS may take the following legal forms:

Mutual Funds

Variable Capital Investment companies

A. Process

The process is quite straight forward and fast provided you can provide us with all the necessary quickly enough. Specifically we will need to apply to CySEC for granting an authorization to provide investment services. In order to prepare and file the application we will need the following information:

1. An application form will be filled
2. Questionnaires will have to be filled by the beneficial shareholders and the management of the company
3. We will have to obtain from either governmental authorities or other reliable source of the country of residence of the persons referred to paragraph 1 above for clean criminal record and non-bankruptcy.
4. We will present some information as to the background of the shareholders and the source of funds that will be deposited as initial capital.
5. We will prepare a business plan for the first 3-5 years of operations of the company
6. We will prepare an Internal Procedures Manual detailing all procedures that will be followed by the company when operating
7. Preparation of the Money Laundering Manual and Know Your Client procedures and policies.

The above is the basic procedure and documentation that will be initially prepared and filed. A company will also have to be formed with share capital depending of the services that the company will offer. Please provide us with details of the activities of the company in order to provide you with the initial capital requirement.

The services that can be offered by CIF’s are listed in Appendix 1. Application fees are calculated as a fixed charge of Euro 3.000 plus € 2.000 per investment activity applied for and €1.000 for each ancillary service as per Appendix 1.

Our Services

As part of our service, amongst others, we shall:

1. Promote your application to the Central Bank of Cyprus.
2. Prepare an operations plan as per the requirements of the CBC, which will include the proposed services.
3. Prepare the business plan, in accordance with CBC requirements which will include projections for the first three years.
4. Prepare necessary justifications to be submitted to the CBC, as applicable, to suit your case and quid in providing all the necessary documentation and certificates.
5. Assist your client in justifying (i.e. by drafting procedures) that the obligations of article 10 of the relevant Law are met.
6. Prepare a custom-built Operations Manual, in the most efficient manner, and based on your client’s specific needs which will describe the internal control mechanisms and corporate governance.
7. Prepare the Anti-Money Laundering Manual and the Know Your Client (KYC) policies, in the most efficient manner and based on your needs.
8. Describe the participation of the proposed payment institution to national or international payment systems, with your input and special guidance on this.
9. Presentation of the shareholder structure as per the requirements of the CBC.
10. Preparation of Memorandum and Articles of Association.
11. Undertake to be responding, to CBC’s queries, and suggestions relating to the application.
12. Locate qualified executive and non-executive directors (if needed).
13. Locate qualified executive personnel (if needed).

The preparation of documentation takes usually 1- 1 1/2 months to complete (always depending on your prompt response to our queries.)The approval may take something from 4-6 months to complete but always subject to the number of applications in hand by CySEC.

It is understood that the speed and timing of application process will depend on information to be submitted by you to us and provided there are no obstacles outside our control to delay or bar the process. For the preparation of the above tasks we will need your input and assistance.

Ongoing Registration And Licensing Obligations

Besides all services related to the start-up of the Company, there are ongoing obligations that flow from having a CySEC license;

Depending on the nature of the financial service, these requirements may include (a) written client agreements, (b) pre-investment disclosure documents and (c) anti-money laundering & know-your-client obligations.

There may also be Cypriot tax implications. We will provide the appropriate advice on these matters as it applies to your business.

Registration Package

CySEC licensed company formation in Cyprus

Registration as a Cypriot CIS

Establishment of a Physical Office in Cyprus, Limassol with all Regulator’s required services, provided on a monthly basis

Recruitment of Company’s Office Manager in Cyprus

Assisting opening Company Business Bank Account

Introduction to Banking Software Provider

Appendix 1

I. Investment Services (Part Ι of the Third Appendix of the Law 144(Ι)/2007)

I(1) Reception and transmission of orders in relation to one or more financial instruments

I(2) Execution of orders on behalf of clients

I(3) Dealing on own account

I(4) Portfolio management

I(5) Investment advice

I(6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis

I(7) Placing of financial instruments without a firm commitment basis

I(8) Operation of Multilateral Trading Facility

ΙΙ. Ancillary Services (Part IΙ of the Third Appendix of the Law 144(Ι)/2007)

ΙΙ(1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management

ΙΙ(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

ΙΙ(3) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings

ΙΙ(4) Foreign exchange services where these are connected to the provision of investment services

ΙΙ(5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments

ΙΙ(6) Services related to underwriting

ΙΙ(7) Investment services and activities as well as ancillary services of the type included under points I and II above related to the underlying of the derivatives included under point III (5), (6), (7) and (10) where these are connected to the provision of investment or ancillary services.

ΙΙΙ. Financial instruments (Part III of the Third Appendix of the Law 144(Ι)/2007)

ΙΙΙ(1) Transferable securities

ΙΙΙ(2) Money-market instruments

ΙΙΙ(3) Units in collective investment undertakings

ΙΙΙ(4) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash

ΙΙΙ(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).

ΙΙΙ(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 or/and an MTF

ΙΙΙ(7) Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in point 6 of Part III and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls

ΙΙΙ(8) Derivative instruments for the transfer of credit risk

ΙΙΙ(9) Financial contracts for differences

ΙΙΙ(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 recognised clearing houses or are subject to regular margin calls.

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