CySEC Adjusts Rules on Investment Services Provision in Third Countries

On Tuesday, the Cyprus Securities and Exchange Commission (CySEC) announced an adjustment to its policy on the provision of investment and ancillary services and or activities in third countries by Cyprus Investment Firms (CIFs). Third countries are countries that do not belong to the European Union or the European Economic Areas.

The adjustments are contained in a new circular issued by the Cypriot financial markets regulator following its Board meeting held last Thursday.

Finance Magnates compared the new circular with the old one which was issued on February 8, 2018, and found that the major difference is that CySEC now requires CIFs to submit a relevant certificate from a competent authority of a third country when the third country does not require authorization for them to provide the services stated in the provision. As stated in the old circular, the financial watchdog required a legal opinion issued by a qualified lawyer or a legal firm of the relevant jurisdiction in this type of situation.

Also, as stated in the old circular, CIFs in their letters of intent are required to include a list of third countries where they intend to provide the stated services, noting for each country whether it has obtained the relevant authorization from a competent authority or a legal opinion that no authorization is required. However, the new circular does not mention the need for a legal opinion for this particular step.

In addition, the new circular enjoins CIFs that are already operating in third countries to ensure that they continue to comply with the Legislative Framework applicable in such countries.

Retained Rules

A study of both circulars shows that most rules were retained. CIFs that want to provide investment and ancillary services and/or activities in third countries are still required to notify CySEC of such moves via a letter of intent.

Before providing and performing the aforementioned services and activities in third countries, the firms are still tasked with acquiring the necessary authorization from the respective legal authorities of the third countries. Again, CIFs are still required to provide CySEC with a certified copy of the authorization for the provision of the mentioned services as issued by the competent authority of the third country.

Furthermore, CySEC noted that the process of acquiring required authorization from third countries still remains the exclusive duty of CIFs. Additionally, these investment firms are still required to file information about their third-country operations on CySEC’s portal. Moreover, they are still expected to notify the market supervisor in writing when the third countries that they operate in change.

“All existing and newly established CIFs must declare [post] on their websites the names [information] of all the third countries in which they provide/perform services/activities,” both circulars state.