The European Securities and Markets Authority (ESMA ) and National Competent Authorities (NCAs) recently completed an analysis of cross-border investment services in 2022. The study revealed a growing trend towards cross-border financial services, illuminating the benefits and challenges these services bring to consumers, firms, and regulators.

The study showed that Cyprus is currently the main hub for firms offering services to retail investors across the Old Continent. Companies licensed by the Cypriot Securities and Exchange Commission (CySEC) under ESMA regulations can reach clients from many other jurisdictions within the European Union (EU) and the European Economic Area (EEA).

ESMA Overviews Cross-Border Investment Services in 2022

ESMA and NCAs collected data across 29 jurisdictions, providing a comprehensive view of the market for retail investors receiving investment services from institutions outside their home country. Around 380 firms delivered services to retail clients on a cross-border basis, with 59% being investment firms and the remaining 41% being credit institutions.

In 2022, about 7.6 million clients in the EU were the beneficiaries of investment services from firms located in other member states. Cyprus emerged as the primary provider of cross-border investment services, housing 23% of all firms involved in such operations. Following Cyprus, Luxembourg and Germany accounted for 16% and 13% of all firms, respectively.

Firms in Cyprus, Germany, and Sweden served significantly more than 75% of EU retail clients receiving cross-border investment services. These firms reached out to millions of cross-border retail clients, with the remaining quarter of retail clients served by firms in other jurisdictions.

As for complaints, about 5,700 complaints related to cross-border investment services were recorded in 2022. The primary discontent areas revolved around contract terms, fees, charges and customer services.

ESMA has expressed its commitment to continue the data collection exercise annually, with plans to publish a report on the findings in 2024. According to the regulator, this will aid in maintaining transparency and ensuring the necessary regulations are in place to support the growing cross-border investment services sector.

The pan-European regulator also mentioned Cyprus and Germany in its report from last week. As suggested, local financial oversight commissions have made progress in improving their supervisory frameworks and conducting investigations.

CySEC’s Growing Importance as a Global Player

Finance Magnates conducted an exclusive interview this year with Dr George Theocharides, who has served as the Chairman of CySEC since 2021. The discussion covered the growing importance of Cyprus and CySEC as global players in the FX/CFD and financial regulatory market.

As Dr Theocharides noted, CySEC currently regulates 840 entities, 32 of which have joined those bodies since October 2021. The regulator is currently hiring 42 new people to bolster its supervision departments. Finance Magnates reported last week that CySEC is seeking an investigation expert, among others, who would be responsible for detecting potential violations of regulations by investment companies registered in the country.

“There was substantial growth in the investment firm sector in Cyprus after 2013. We have reached a stable level of around 240 CIFs. The latest data was 247, at the end of 2022 it was 248, at the end of 2021 it was 243,” Dr Theocharides commented.

Furthermore, the Cypriot collective investment fund sector has seen healthy growth, with over 330 entities and an increase of 200% in managed assets since 2016. Currently, this sector manages nearly 10 billion euros, demonstrating significant growth potential and positioning Cyprus as a potential regional fund hub.