CySEC ramps up scrutiny: €2.2 million in fines levied on CIFs in 2023

abdelaziz Fathi

Dr. George Theocharides, Chairman of the Cyprus Securities and Exchange Commission (CySEC) today detailed the commission’s supervisory efforts throughout 2023.

A key focus of 2023 was the audit of promotional materials from over 35 CIFs. Where misleading content was identified, CIFs were directed to amend their promotional materials to ensure accuracy and fairness towards investors. The Market Surveillance department probed 6 CIFs, completed 42, and continued another 48 investigations by year’s end. One case was referred to the Attorney General to assess potential criminal offenses.

CySEC’s rigorous supervisory audits resulted in administrative sanctions totaling nearly €2.2 million in 2023, with a single CIF facing sanctions of €1 million. Over the last three years, the watchdog has imposed €6 million in sanctions, predominantly on CIFs for legislative breaches.

Additionally, over 103 instances required corrective measures from supervised entities, with 35 entities instructed to adopt specific actions within a given timeframe to comply fully with laws and directives on money laundering and terrorist financing prevention. Nineteen CIFs faced revocation or suspension of their operating licenses, and two cases involved the revocation of licenses for Collective Investment Undertakings.

Despite financial challenges, the capital market in Cyprus continues to attract interest. In 2023, CySEC approved 82 entities, bringing the total number of supervised entities to 830 by February 2024, indicating a 12% growth over four years. Currently, 78 licensing applications are under review.

Anticipation for MiCA regulation

Dr. Theocharides highlighted the impending implementation of the Markets in Crypto-Assets Regulation (MiCA) by the end of 2024, which targets crypto-asset service providers. MiCA is expected to boost investor protection and market integrity, with CySEC among the European supervisory authorities preparing for its adoption.

Investors were also cautioned about the inherent risks of investing in crypto-assets, noting the odds for massive losses due to complexity and heightened online interest.

Throughout the year, CySEC’s Supervision and Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Departments conducted over 700 thematic inspections, both on-site and remotely, of entities under its purview. These inspections included systematic remote checks for compliance with prudential supervision framework limits and monitoring of prudential requirements for Cypriot Investment Firms (CIFs) impacted by sanctions related to the Russia-Ukraine conflict.

CySEC also reviewed information from supervised institutions regarding their business relations with individuals under EU Restrictive Measures against Russia and scrutinized transfer transactions of Russian securities/tokens deemed ‘Forced Transfers’ within Cyprus.

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