Tornaritis Law Practice Areas
Financial Services Regulatory
Tornaritis Law Practice Areas
Banking & Finance
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What is Forex and the Cyprus Investment Firms
Forex (Foreign Exchange) is the market in which currencies are traded. It is the most liquid market in the world, with traded values that can be trillions of euros per day. The forex market is open 24 hours a day, five days a week, except for holidays and it includes all of the currencies in the world. Currencies are traded among the major financial centers of New York, London, Tokyo, Frankfurt, Hong Kong, Singapore, Paris, Sydney and Zurich.
The Cyprus Investment Firms Law 144(I)/2007 provides the legal framework for the provision of investment services, registration, regulation of undertakings and supervision of Cyprus Investment Firms. This Law implements the provisions of the Markets in Financial Instruments Directive into the domestic law. Financial Services in Cyprus are regulated by the Cyprus Securities and Exchange Commission (CySEC). All companies wishing to provide FX trading/investing services need to apply for licensing as a Cyprus Investment Firm and comply with the minimum capital requirements set out by Law 144 (I)/2007.
Key Benefits of Obtaining a CIF license
- Passporting: The license granted by CySEC to operate as a Cyprus Investment Firm, provides the opportunity to the company to offer cross-border investment services or establish a branch in another EEA jurisdiction without the need to obtain additional licenses
- Tax Regime: Cyprus has an attractive tax regime for companies providing investment services and a wide network of double tax treaties in place with more than 60 countries worldwide
- Low set-up and operational costs: The company’s set-up costs and the cost of providing services in Cyprus can be generally lower than some other EU countries (office space, staff, professional services etc.)
- Reception and transmission of orders on behalf of clients
- Execution of orders on behalf of clients
- Dealing on own account
- Portfolio Management
- Investment Advice
- Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
- Placing of financial instruments without a firm commitment basis
- Operation of Multilateral Trading Facility
- Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management
- Granting of credits or loans to and investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction
- Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings
- Foreign exchange services where these are connected with the provision of investment services
- Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments
- Services related to underwriting
Minimum Capital Requirements
A Cyprus Investment Firm that provides one or more of the following investment services and holds clients’ money or/and client’s financial instruments, must have an initial capital of at least €125.000:
- The reception and transmission of orders in relation to financial instruments;
- The execution of orders on behalf of clients;
- Portfolio Management;
- Provision of Investment Advice;
A Cyprus Investment Firm that provides the investment services stated in subsection (a) or/and (d) above, and does not hold clients’ money or/and clients’ financial instruments, and which for that reason may not at any time place themselves in debt with their clients, may have an initial capital of:
- At least €50.000; or
- At least €40.000 and professional indemnity insurance covering all member states or some other comparable guarantee against liability arising from professional negligence, that it enters into with an insurance undertaking, representing an amount of at least €1.000.000, per claim, and in aggregate at least €1.500.000 per year for all claims.
A Cyprus Investment Firm that provides one or more of the following investment services or/and performs the following investment activities shall have an initial capital of at least €730.000:
- Dealing an own account;
- Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
- Placing of financial instruments without a firm commitment basis;
- Operation of Multilateral Trading Facility
A Cyprus Foreign Exchange company must have at least one Executive Director. The Executive Director must pass the requirements (investment/financial background, clean criminal record and a respected reputation). The Executive Director must also be a resident of Cyprus in order for CySEC to correspond and liaise with him especially in as regards reporting as well as for clarifications and spot checks. In addition, the company must have a General Manager, who is non-executive. There is no requirement for the non-executive General Manager to be a resident of Cyprus. However, he must visit Cyprus on a regular basis to oversee the functions of the company. General Manager’s main role is to oversee the Executive Director and the Board of Directors in general.
Reporting and Compliance Requirements
Cyprus Investment Companies have to continuously report to CySEC and also to comply with the Anti Money Laundering requirements and have a Know Your Client procedure in place.
General Conditions to grant a license
- The Memorandum of the Company must have specific clauses regarding the nature of this business
- The applicant company must fulfil the minimum capital requirements as set out above
- At least one director who is resident in Cyprus to act as Executive Director and who passes the requirements
- The company has a physical office space in Cyprus
- Set up an internal control mechanism, namely CySEC will want to be satisfied that the company has in place internal rules and procedures to oversee potential problem areas, contingency plans, server protection, client protection etc.
- The shareholders pass a requirements test, especially a background check whereby CySEC is satisfied that they have a clean criminal record as well as experience in the business
- Company’s structure and organization designed to minimize the risk of conflict of interest between the client and the company or between the clients
- All corporate documents of the company (incorporation certificate of directors/secretary, shareholders, Memorandum and Articles etc.) together with the Cyprus investments firm’s application form (Form 144-03-01).
- Together with the above document bundle, a three year business plan, internal procedures manual, anti-money laundering and know your client procedures must be filed with the application.
- The application and all supporting documents is filed with CySEC.
- CySEC must reply favorably or not in a period up to six months from the date of submitting all the application documents. In case of unreasonable delay, the applicant can bring administrative action against CySEC at the Supreme Court of Cyprus.
Estimated Registration Time (For the whole process)
The application process usually takes about 6-8 months to be completed:
- 1-2 Months should be given for preparation and submission of documents to the CySEC
- CySEC will then review the application and grant license within 6 months
CySEC Application Fees
There is a fee charged by CySEC of €3.000 plus €1.000 per investment service of activity of Part I, Annex III of the Law 144(I)/2007, except for the operation of a Multilateral Trading Facility (MTF) the additional amount of which is €10.000, as well as €500 per ancillary service of Part II, Annex III of the Law 144(I)/2007.
What is the cost for the Registration?
The cost is around 15,000 euro. The fees above do not Include the out of pocket expenses as Company register capital and other taxes which must be paid with the applications.
How can Tornaritis Law help?
Should you require any additional information, clarification or have any comments, please do not hesitate to contact this office and we shall be more than happy to be of assistance.
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