CySEC CIF Application: All steps until activation

In previous articles dedicated to the regulatory framework for Investment Firms in Cyprus (CIF), we discussed the investment and ancillary services, the main areas of regulatory compliance, and provided details on their capital requirements, fees payable to CySEC, and the initial contributions to the Investor Compensation Fund (ICF).

We continue with this article, which details the next steps once you (and your team, consultants) have
– identified the investment and ancillary services that suit your business model,
– understood what running a CIF of this type would require financially and operationally,
– and, you are about to start the application process.

Before starting the application process

1. Start with the Board of Directors

Finding the CIF’s Board of Directors (BoD), if it is not chosen yet, is the first step towards applying to CySEC. Irrespective of the investment and ancillary services, the minimum requirement is for:

• Two Executive Directors – they also satisfy the four-eyes principle,
• Two independent Non-Executive Directors (NEDs).

The applicant CIF needs to have the majority of its directors residing in Cyprus. Many times, CySEC will request the ultimate beneficial owners (UBOs) to be also members of the BoD, either as executive directors or non-executive directors.

The executive directors are expected to be employed on a full-time basis once the CIF authorization is granted.

2. Incorporating a Cyprus Company

The Cyprus Company to be incorporated needs, a specific and appropriate to its scope, Memorandum and Articles document. The shareholders, the directors and the secretary of the company are needed at this stage of the process. The procedure:

1. application for approval of the Company’s name to the Registrar of Companies,
2. the registration of the Company,
3. receipt of the Incorporation documents of the Company;
   1. Memorandum and Articles of Association
   2.  Certificate of Incorporation
   3.  Certificate of Shareholders
   4.  Certificate of Directors and Secretary
   5.  Certificate of Registered Office

Preparation and submission of the CIF Application

The CIF Application Form provides information about

• the Company which will become authorized to offer and perform investment and ancillary services as an Investment Firm,
• the shareholders and the directors of the Company.

The application form needs to be completed and be accompanied by the following:

1. Incorporation documents of the Company (mentioned above),
2. Certification of the existence of funds to raise the initial capital required,
3. Source of funds details – It is required to present evidence that the required capital exists for the share capital plus funds to support the operation of the Company. Further, it is required to justify the source of these funds,
4. Organization chart of the Company (and of the group, if applicable),
5. Completed questionnaires in relation to the BoD, the shareholders,
6. Personal information and documents of the directors and the UBO. In particular:
   1. Personal questionnaire fully completed and signed. This document gathers information on past experience, contact details, holdings in any legal entities, academic and other qualifications and names and details of two persons which can provide references.
   2. Updated CVs,
   3. True copies of academic degrees and professional qualifications,
   4. Notarized/Apostilled copy of passports,
   5. Original certificate of non-bankruptcy from the competent authorities of the country in which the they have resided for the last five years (officially translated in English).
   6. Original certificate of clean criminal records from the competent authorities of the country in which they have resided for the last five years (officially translated in English),
7. If the direct shareholder is a legal entity, then corporate documents, information and audited account will need to be provided,
8. Policies, procedures and appointments of the applicant CIF, including;
   1. Internal Operations Manual,
   2. Best Execution Policy,
   3. Product Governance Policy,
   4. Money Laundering and terrorist financing Manual,
   5. Conflicts of Interest Policy,
   6. Annual consolidated financial accounts for the last three years, if applicable,
   7. Business plan,
   8. Business Continuity plan,
   9. Certification of the representative, external auditors and legal advisors of the Applicant CIF.

Time frames to keep in mind till and after the application is submitted

1. Incorporation of Cyprus Company, between five to ten working days,
2. Preparation of the application, approximately one month from the day all documentation is provided,
3. Pre-licensing approval by CySEC, will take approximately three to five months for the fulfillment of the conditions and we support you with the provision of consulting and guidance on all regulatory requirements for ensuring the granting of the final Authorisation.
4. Deposit the minimum capital required*, three to four weeks prior to the granting of the CIF Authorisation,
5. Lastly, CySEC needs to be invited for an activation inspection. The regulator will examine the rented office according to the needs of each control function, the hired personnel, the established systems and procedures and so on. Unless, CySEC has a comment that needs to be addressed following the inspection, the license will be taken to the Board of CySEC for the final license approval.

* The minimum initial capital needs to be deposited in a bank based in the European Economic Area and blocked until the CIF pre-license is granted.

Overall, the CIF authorization by CySEC takes on average of eight months considering that there are no exceptional circumstances surrounding the application. It is possible to utilize the fast track scheme of CySEC based on which there is an additional fee of EUR 25.000 paid to CySEC which can reduce the processing time of the application by CySEC.

Organizational Structure

It is not required to appoint or employ any other personnel before or during the CIF application process, other than the BoD. Beyond the board, the following functions are required to be in place within three months after the pre-license approval is granted:

1. Compliance Officer and Anti-Money Laundering (AML) Compliance Officer: this position must be filled by a person residing in Cyprus and work on a full-time and exclusive basis for the Company.
   • If the CIF’s business activities will not be in offering CFD/Forex trading, then the position of Compliance Officer can be outsourced, but not that of the Anti-Money Laundering (AML) Compliance Officer. Otherwise, both positions need to be filled internally.
2. Risk Manager: There are possible options for this position:
   1. Hire a separate full-time employee to undertake these duties,
   2. One of the directors to undertake these duties as well,
      • If the CIF’s business activities will not be in offering CFD/Forex trading, then this position can be outsourced.
3. Investment Services personnel: One person dedicated to each investment service the license has been granted for needs to reside in Cyprus on be hired on a full-time basis. Indicatively:
   1. Head of Dealing on Own Account: This employee is required if the Company is applying for the investment service of Dealing on Own Account. This position must be filled by a person residing in Cyprus and work on a full-time and exclusive basis for the Company.
   2. Head of Brokerage Department: If the investment service of Reception and Transmission of Orders and/or Execution of Orders is to be offered and performed, this position must be filled by a person residing in Cyprus based.
4. Head of Accounting Department (safekeeping) and Head of Back office and Back office: these positions need to be filled.
5. Head of Information Technology (IT): This department can be outsourced to an external service provider.
6. Internal Auditor and External Auditor: Engagements for these functions must be in place.

All above comments and insights are to be examined by CySEC at their discretion, while we as SALVUS remain committed to add value by diligently monitoring our clients’ CIF applications throughout the application process and after its authorization. We work to warrant that all the relevant items, capital, personnel and structure are optimized to the full extent.

SALVUS and our chosen associates can provide the full range of services required to support Cyprus Investment Firms, before, during and after the granting of the CIF authorization. As we deal in Operations, Compliance and Risk Management, our services beyond the CIF License application, include Activation support, ongoing Compliance Officer support, and Internal Audit Services among others.
We remain at your disposal should you have any question on the all the above. Please email us at info@savlusfunds.com.

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.