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Introduction

A Cyprus Investment Firm (CIF) is licensed and supervised by the Cyprus Securities and Exchange Commission (CySEC) under Law 87(I)/2017 which provides for the provision of investment services, the exercise of investment activities and the operation of regulated markets and other related matters. This is the national transposition of Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments (MiFID II).

As per Part I of the Appendix ‘A’ of the legislation, investment services may include: receive and transmit orders in relation to one or more financial instruments, execution of orders on behalf of clients, dealing on own account, portfolio management, provide investment advice, underwrite of financial instruments and/or place of financial instruments on a firm commitment basis, disposal of financial instruments without an underwriting commitment, MTF and OTF operations.

CIFs can also provide a range of ancillary services that may include: safekeeping and administration of financial instruments, safe custody services, granting credits or loans to an investor for transaction purposes, advice on capital structure, industrial strategy and related matters, foreign exchange services, investments research and financial analysis, and services related to underwriting.

Authorization process

Following the incorporation of a company under the Companies Law, Cap. 113, a future CIF should apply to CySEC for license through a legal entity only. The documents to be included in the application package are, but not limited to, the following:

1. Incorporation Documents of the Company.
2. Amended Memorandum and Articles of Association to enable Investment Firm business.
3. Certification of the existence of funds required as initial capital.
4. Chart of group structure.
5. Questionnaires to be completed by the Directors and Senior Management.
6. Passport/ID card, non-bankruptcy certificate and clean criminal record for each Director and Senior Management.
7. Incorporation certificates, annual financial statements (consolidated statements, if applicable) for all legal entities having direct or indirect holding in the Company.
8. Chart of organizational structure of the company.
9. Internal operations manual.
10. Risk management and AML procedures manual.
11. Annual financial accounts of the company for the last 3 years.
12. Annual consolidated financial accounts for the last 3 years, if applicable.
13. Business plan.
14. Confirmation letters of the, external auditor and legal advisor of CIF.
15. Questionnaires to be completed by all direct and indirect shareholders, if their shareholding percentage exceeds 10% of the Company, along with the required supporting documentation as stated in the questionnaires.
16. Key Information documents about the products that the CIF shall deal with.

It should be noted that the license is valid throughout the European Union, and allows the CIF to provide services and carry out the activities for which it has been authorized throughout the EU, either through the establishment of a branch, or through free provision of services.

General operational requirements

1. Initial Capital requirements

The initial capital that a CIF is required to maintain in order to obtain and operate a CySEC authorization is the following:

At a minimum, CIFs should:

1. establish defined policies and procedures that ensure company’s compliance with legal obligations.
2. Organize and design procedures in such way that it prevents conflicts of interest.
3. establish clear risk policies, implemented and controlled by a separate risk management unit.
4. be member of the Investment Compensation Fund for Clients and must comply with its obligations.
5. always safeguard its clients’ ownership rights and must develop and define adequate procedures accordingly.
6. communicate clearly the risk disclosure, conflict of interest and other policies with the client
7. ensure that they are AML (adequate KYC procedures in place) and GDPR compliant (adequate data protection procedures in place)
8. Operating Structure

A CIF necessarily needs to establish, or partly outsource, the following departments and functions:

1. Senior management, comprising of 2 Senior Managers (CEO & COO/General Manager)
2. Dealing room for the reception and transmission of clients’ orders and execution of orders
3. Dealing on own account department (if applicable) for the execution of own account trading and the implementation of Company’s hedging policy.
4. Portfolio Management Department (if applicable)
5. Investment Advice Department (if applicable) for the provision of personal recommendations to clients
6. Back office for the opening of new accounts and maintenance and update of clients’ files
7. Finance & Accounting Department for the due keeping of the books and records of both the CIF and clients
8. Marketing and Customer Services Department
9. IT department for safeguarding the data, network, servers, and personal computers of the company
10. Risk manager for identifying, and assessing risks and design and implement risk strategies and procedures.
11. Compliance officer responsible for complying investment services and activities with CIFs legal obligations
12. Internal auditor for ensuring operations manual is up to date with the provisions of both internal processes/procedures and external legal obligations
13. Anti-money laundering compliance officer

Board of Directors

The Board of Directors must consist of at least two executive directors and two independent non-executive directors. All four board members should demonstrate CySEC they are fit and proper for the position prior to the licensing of the CIF. That is to say they have the necessary knowledge, experience and integrity to effectively manage the CIF.

The overall management of the CIF is performed by at least two persons of good reputation and experience (CEO and General Manager); following the four-eye principle.

Why a company in Cyprus

Cyprus has become a significant jurisdiction for investment services providers due to a combination of business environment and lifestyle. The most prominent reasons are considered the following:

How we can help

Athos Demetriou Associates in proud to be working alongside some of the most prominent CIFs worldwide. Our multidisciplinary team of expert lawyers, and consultants is able to assist you with the formation and incorporation of your IF, as well as provide key services to ensure the firm is operated safely. In particular, we can support you with the licensing application process, and the consequent communication and follow up with the regulator. Moreover, we can provide management, corporate, and compliance services, as well as legal support for a variety of maters.