CySEC seeks to regulate Investment Fund Administrators
CySec has introduced a consultation paper for a proposed law to regulate the profession of Investment Fund Administrators (Proposed IFA Law) and also rules for providing such services in or from Cyprus.
The range of services provided by the administrators currently includes the calculation of the NAV, maintenance of the investor registry, processing of subscription and redemption, and other back-office services.
The fund managers themselves can work on this and this was how it was envisioned as well. But lately, the fund managers want to focus purely on their management services and have hence started outsourcing the administration services to other individuals or companies within and outside Cyprus as well.
The need for administration services is common to all funds. Also, it is a very important service that is entwined with consumer protection as well as involves the calculation of the NAV and also maintenance of the investor registry which proves the ownership. Currently, the manager is the regulated entity and he is the one who is ultimately responsible for the proper provision of these administration services. CySEC feels that the entire outsourcing chain needs to be properly regulated to ensure fund and consumer safety and smooth functioning of the market.
The administrators could be local but the fund managers themselves could work from outside the jurisdiction and so CySEC has proposed this law to regulate and govern the administrators.
These new laws and regulations will cover all the services provided by the administrators and would also take into account the fact that the same administrator could be working for multiple funds and hence the personal information and KYC of each client needs to be maintained properly and securely as well. The new rules will also set out the reporting obligations of the administrators as well.
It would also consider the fact that the risk involved with their job is purely operational in nature and would not involve the actual dealing of funds as far as the administrators are concerned.
CySEC believes that this initiative would help to reduce the operational risk and help with better compliance and regulation. It would also help with reducing the customer risk and ensure their rights are kept paramount at all times. CySEC has called for any comments to be submitted by the interested parties to its email id at [email protected] and has said that the window to submit comments would be open till July 5, 2021.