The Cyprus Securities and Exchange Commission (CySEC) said over the weekend it has approved new authorization rules for financial service providers which eliminate the period from the granting of a license until its activation. Entities will be licensed only after they meet all of the regulator’s requirements.
Prior to the change, CySEC licenses were granted non-activated and were activated once the brokers fulfill additional set of requirements. Until that moment, companies were not authorized to offer the services for which they had been licensed. The new scheme aims to improve the process of authorization and to avoid, as much as possible, legal and practical issues which often arise in such circumstances.
The new rules were approved by the CySEC Board on 14 November, 2016, and came into effect immediately. They concern Cyprus Investment Firms (CIFs), UCITS Managers and external AIF Managers. Entities that have already applied for authorization will be carried out under the previous activation process.
Under the new authorization process, prior to granting authorization the CySEC will respond to license applications with conditions that applicants need to meet in order to get authorized in Cyprus, but only if the entity had shown it completes the legal requirements for authorization prima facie. The regulator will inform the public only if and after it has granted a license.
License applicants will have a maximum12 months within which they need to fulfill the CySEC’s conditions. At the end of that period, the regulator will examine whether the entity has met its conditions and if it is not satisfied with the results it will reject the application.
During the 12-month period, applicants must not make any substantial changes to their business management. If any such changes are made, applicants must withdraw their application and re-apply anew. In such case, application fees will not be reimbursed. The following are considered significant changes:
- Change of shareholder(s)
- Change of over 1 person of the Firm’s Board
- Change of business model
- Any derogation as to the conditions of granting authorization that CySEC has set out
Once all required information concerning the additional conditions is submitted, the Cypriot regulator will carry out on-sight inspections at the applicant’s headquarters to see to what extend it complies with the authorization conditions. If all is correct, applicants will be granted a license. Only then, the CySEC will include the entity in its list of regulated CIFs published on its website.
Cyprus is among the main regulation destinations of choice for most forex (and binary option) brokers that seek to operate in the EU. A CIF licensees are free to expand within all countries in the European Economic Area (EEA) thanks to a EU directive.
The CySEC licenses, supervises, and regulates players on the local capital market. Its managing board consists of five members, each one of which serves a term of five years.