CySEC introduces amendments to Cyprus Investment Firm license applications

Maria Nikolova

The new form of the applications requires submission of additional information by companies – for instance, a more detailed business plan.

The Cyprus Securities and Exchange Commission (CySEC) has published on its website an announcement about the amended form for applying for a Cyprus Investment Firm (CIF) license.

The announcement is formal, enlisting the number of amendments to the application in tune with new requirements towards CIFs.

What is new?

  • The form now includes a Part B, concerning the operations of a Multilateral Trading Facility. This means that the applicant should report on the proposed instruments to be traded on the platform, the proposed market participants (like market-makers), to provide information on the trading process and finalization of the transactions, etc. To facilitate the understanding of this section of the application, CySEC has published a dedicated Checklist.
  • Additions to the contents of the business plan of the CIF authorization applicant. This means that the applicants should submit a detailed description of their business plan, including (inter alia) the list of markets in which the applicant intends to operate – in the European Union and third countries, and how it will operate there (via branches, tied agents, introducing brokers). This appendix should also offer information on the applicant’s marketing strategy that will be used to attract clients, as well as description of what customers this company will target, etc.
  • A new Appendix has been added – the applicant should provide information on a draft Internal Capital Adequacy Assessment Process (“ICAAP”) approved by the Board of Directors or by the persons signing the Memorandum and Articles of Association of the applicant.
  • When providing information on the organizational structure, the applicant should consider that if they will market and sell CFDs and other speculative products, two Executive Directors must be residents of the Republic of Cyprus.
  • Addition of a clarification that the applicants, which will market and sell CFDs and other speculative products, may not outsource the compliance function.

Also, the Checklist for the Internal Procedures Manual that accompanies the Application for the granting of CIF authorization (Form 144-00-05) has been amended with the introduction of a new Part XI in relation to the Best Execution Policy, the CIF’s business continuity policy (Part ΙV, point 10.1) as well as the Leverage Policy (Part ΙΙΙ, point 5.1.1). The latter says: “If applicable please state the leverage policy of the applicant and the measures adopted by the CIF in order to prevent the potential conflict of interests arising between the commercial interests of the CIF offering leveraged products and the interests of a retail client.”

All applications that are submitted to CySEC from March 15, 2017 onwards should be using the updated Form.

Meanwhile, CIFs that are providing trading in binary options are facing new requirements, affecting trading methodology, reporting, as well as the nature of binary options that can be offered.

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