Regulatory Updates & CySEC CircularsSalvus Team
It is undeniable that securities and capital markets are evolving dynamically and becoming affected by economical, political and social developments. The supervision exercised in these sectors on a European level is nothing less than robust and comprehensive. This is the result of constant communication between European Supervisory Authorities (ESA), national competent authorities (NCA) and regulated entities. The ultimate objective is to protect European markets and market participants.
In this article, the SALVUS Regulatory Compliance team presents the role of ESA and discusses regulatory updates and specifics of important circulars, as follows:
1. European Supervisory Authorities
2. Regulatory Updates
3. Important Circulars for the year 2022
We regularly share bite-sized insights on LinkedIn such as those found in this article
1. European Supervisory Authorities
The 2008 global financial crisis revealed vulnerable areas of the European financial system. This has led to the reconstruction of the European financial supervision framework. The resulting framework as we know it today is comprised of:
- The European Systemic Risk Board (ESRB);
- responsible for monitoring macro-prudential risks.
- The European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA);
- together known as the ESA.
Each ESA constitutes the European supervisor of the relevant sector. They are tasked to prepare the delegated and implementing acts, as well as the guidelines that supplement framework acts adopted by the European Commission and Council. This procedure is also known as the Lamfalussy process, specifically followed for the financial services regulations.
Moreover, ESA are responsible for the uniform implementation of the acts across the European Union (EU) Member States. For that reason, they monitor the enforcement actions taken by NCA through extensive reporting obligations.
2. Regulatory Updates
Monitoring closely the securities and banking sectors both ESMA and EBA introduce new and amending regulations aiming at operational improvement. After being adopted by European bodies, regulations are applicable usually by the end of the transitional period prescribed therein. The transitional period is required for Member States to transpose such regulations into national laws, and for NCA to guide regulated entities through the measures and controls required to be established.
The Cyprus Securities and Exchange Commission (CySEC) is the authority responsible for the supervision of the securities and crypto asset markets in Cyprus. Thus, it facilitates its regulated entities on how to adequately implement legislative provisions. This is achieved through the adoption of supplementing Directives and the issuance of Circulars.
Implementation of regulatory updates requires significant care and diligence by obliged entities. It is our opinion that members of the management body and key function holders must always remain aware of such developments. This is to avoid the loss of valuable time and ensure that all regulatory deadlines are met.
4. Important Circulars for the year 2022
CySEC issues circulars whenever it wishes to communicate important information to its regulated entities. Circulars can be addressed to specific entity types such as Cyprus Investment Firms (CIF), Crypto-Assets Service Providers (CASP), Alternative Investment Fund Managers (AIFM), Management companies (MC), or a combination of them.
Circulars are published through CySEC’s website. They usually outline the regulatory framework, inform on potential reporting obligations or actions to be taken and provide deadlines to meet.
Throughout 2022, CySEC issued in total 61 circulars, some of them introducing new legislative provisions and others enhancing existing ones. The following list contains selective circulars the SALVUS Regulatory Compliance team considers important for the operations of regulated entities:
- Circulars C489 & C501 regarding the restrictive measures and sanctions imposed by the European Union in response to the ongoing crisis in Ukraine.
The Circulars are addressed to a combination of regulated entities including CIF and CASP, imposing a set of actions to be taken, including the freezing of assets and access prohibition to funds.
- Circular C513 for the obligation of CIF regulated entities to monitor on an ongoing basis their prudential requirements.
The Circular serves as a reminder of the steps required to be taken in case a CIF does not meet its own funds requirements or exceeds its concentration limits. A notification to CySEC is mandated.
- Circular C516 on CySEC’s findings through the annual assessment of the Anti-Money Laundering Compliance Officer’s Annual Report (AMLCO) submitted by all obliged entities.
The Circular is issued by CySEC on an annual basis discussing the weaknesses observed in the reports submitted each year. Emphasis is given both to the structure and the content of the reports and whether the regulatory standards provided are followed.
- Circular C526 about the common deficiencies identified during CySEC’s desk-based review of the simplified recovery plans submitted by CIF.
The Circular indicates the deficiencies identified in the reporting areas of government arrangements, strategic analysis, stress scenarios and recovery options.
Circulars such as C516 and C526 are of significant importance, as they constitute a warning to entities for the indicated practices to be avoided in the future.
- Circular C538 for the requirement of Alternative Investment Funds (AIF) to raise the minimum capital required from investors within a specified period.
The Circular is addressed to Alternative Investment Fund Managers (AIFM) and in continuation to Circular C321, reminding them of the 12-month period AIF are granted for the raise of capital.
Concluding this article, obliged entities need to understand that the ultimate responsibility of regulatory compliance remains with them. For that reason, the relevant stakeholders must ensure that they remain up-to-date and act methodically when dealing with regulatory updates.
To this end, SALVUS Funds continuing its cooperation with the Institute for Professional Excellence (IforPE), has developed a self-study course named Annual Review of Regulatory Updates and CySEC Circulars.
The course aims to educate professionals on the way that regulatory frameworks are developed on the EU level and are further adopted on a national level. Most importantly it provides them with detailed information on the regulatory updates introduced and all the circulars issued within 2022. It is worth noting that the CySEC Circulars and the actions taken by the Company for the year under review shall be included in the Annual reports presented to the Board of Directors by the Anti-Money Laundering Officer (AMLCO), the Compliance Officer (CO) and Risk Manager (RM) of the regulated entity.
Professionals who undertake this course are presented with a comprehensive summary of the annual regulatory developments and the necessary actions to ensure compliance. Furthermore, they can utilise this course as a reference tool when preparing their annual regulatory reports including the Annual AMLCO Report, the Annual Compliance Report, and the Annual Risk Management Report.
The SALVUS Regulatory Compliance team can support CIF, CASP and other CySEC regulated entities to achieve regulatory compliance. In coordination with the SALVUS Risk Management team, we can help you establish appropriate policies and procedures and fulfil your reporting obligations. Finally, we can support you through onsite and desk-based inspections to prepare the annual reports for submission to the Board of Directors.
Please contact us at email@example.com or call us at +357 7000 7898 if you require support with your regulatory obligations or if you have questions about our Annual Review of Regulatory Updates and CySEC Circulars course with IforPE.
Should you be interested in reading more about the AMLCO Annual Report, Alternative Investment Funds or the Lamfalussy process, please visit the selected articles below:
- How to prepare the AMLCO Annual Report in 2023
- Establishing an Alternative Investment Fund in 2022 in Cyprus
- The Lamfalussy process, ESMA & the EU Commission
The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.