New CySEC regulated brokers cross border activity guideline


The Cypriot financial markets regulator has issued New CySEC regulated brokers cross border activity guideline. What will this change for CIFs?

5 May, AtoZForex – The Cyprus Securities and Exchange Commission (CySEC) has issued a circular for the regulated brokers across the island. CySEC’s stance in regards to the regulatory norms is gradually changing, reflecting its intentions to establish transparent and fair practices in the Cyprus Forex market.

New CySEC regulated brokers cross border activity guideline

This time, the regulator has sent the circular to the financial firms with regulation across the Cyprus. The circular has outlined the CySEC regulated brokers cross-border activity guideline. Specifically, the regulator has stated some basic rules that every regulated broker needs to follow. Moreover, the CySEC has stated the deadline for brokers to obey the new guideline – 31st May 2017.

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According to the official circular, accepting clients from abroad will now oblige the broker to have a broader set of features. Moreover, the regulator will need to approve the onboarding process of clients in order to guarantee the safety of operations in other jurisdiction.

By issuing this new circular, the Cypriot watchdog has improved the flexibility in the legal regulatory rules. Moreover, the new CySEC regulated brokers cross-border activity guideline provided the regulator with the ability to limit the CIF’s access to investment activities abroad.

What exactly the new CySEC circular states?

The official announcement of CySEC regulated brokers cross border activity guideline states:

“The Cyprus Investment Firms (‘the CIFs’) must assess their existing third-country-passports and consult with their legal consultants by taking the appropriate legal advice, and/or letters/ official documents from the competent authority of the host third-country, affirming either the carrying out of legitimate investment services and activities (holding a relevant authorisation), or the exception of holding such authorization, in that territory.”

Speaking differently, as soon as the regulatory uniformity has been established, the CIF is subject to a verification process. During the process, the firm will not be required to submit any evidence for the documents about their regulatory status. However, the firms could be subject to examination, if CySEC believes that it is necessary.

What does it all mean?

Following on the circular, CySEC proceeds with explaining the exact steps of the verification process. The watchdog outlined the following:

"CIFs must submit to CySEC, through CySEC’s web portal as a free text by the end of business on May 31, 2017, with the title: «C204 – Freedom to provide investment and ancillary services and/or perform investment activities in a third country», the following:

1. A confirmation letter signed by all board members with regard to the CIF’s compliance with paragraph 1.

2. A list of third countries that the CIF provides investment and ancillary services and/or performs investment activities, stating for each country whether a legal advice or letter/official document has been obtained."

After studying this circular, the following is clear: CIFs now have a choice. In case they already have a registration abroad, they can become a full investment firm. In this scenario, they can offer any investment service to the customers. However, they are being subject to both jurisdictions’ regulatory frameworks.

The other case implies leaning on the “appropriate legal advice, and/or letters/ official documents.”

Like this, the regulatory burden is eliminated for brokers that are operating in less stringent jurisdictions. Moreover, they can offer their services in these regions without being subject to regulation different to those of the CySEC.

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