Establishing a CySEC Investment Firm in Cyprus in 2024
Given the economic expansion of Cyprus, the country navigates on an upward trajectory in the establishment of a Cypriot Investment Firm (CIF). Responsible for this significant growth is the Republic’s independent public authority, the Cyprus Securities and Exchange Commission (CySEC). CySEC’s aim is the enhanced supervision of the securities market, deeming it as one of the safest, and the effective protection of investors, as this is reflected in the ground-breaking demand of a CIF license.
In this article, the SALVUS Investment Firms Licensing team discusses the many benefits of establishing an Investment Firm in Cyprus. Our team offers valuable insights into investment and ancillary services, along with the corresponding capital requirements. Furthermore, the team explains how SALVUS can facilitate the entire process. The article focuses on the following core areas:
1. Why establish a Cyprus Investment Firm (CIF) under CySEC?
2. Investment & Ancillary Services and Capital Requirements
3. Licensing Timeframe
4. How SALVUS can support your CIF licensing
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1. Why establish a Cyprus Investment Firm under CySEC?
The Cypriot financial ecosystem maintains a solid foundation for the establishment of an Investment Firm in Cyprus, evolving it into a reputable and an international financial center. The investment services sector in Cyprus, thrives, due to its unique combination of memberships. Cyprus holds memberships in the European Union, the Eurozone, the Council of Europe, the United Nations, the World Bank, the World Trade Organization, the International Monetary Fund, and the British Commonwealth. Along with this, an established Investment Firm in the Republic benefits from:
- Numerous international conventions and a strategic location bridging three continents,
- A cost-efficient plan of administrative, operating, and living expenses,
- A contemporary legal framework and its extensive affiliations, providing its investment services within the European Economic Area (EEA) through the European Union (EU) passporting framework; eliminating the necessity for additional licenses in the EEA,
- Cyprus’s attractive tax regime, which is one of the lowest among the EU member states, and includes more than 60 double tax treaties,
- The outsourcing of various services offers flexibility in terms of the number and skill set of required employees; the emerging sectors of payment and crypto services have contributed to the development of a diverse and well-educated workforce.
2. Investment and Ancillary Services & Capital Requirements
Cyprus Investment Firms can operate through varying business models, using a combination of investment and ancillary services, offered for different financial instruments. Each model shall be strategically designed to align with the business plan and objectives established during the licensing phase. The following table outlines the range of investment and ancillary services that a firm can potentially offer as a Cyprus Investment Firm.
| Type of service | Included services |
|---|---|
| Investment Services | 1. Reception and transmission of orders relating to one or more financial instruments 2. Execution of orders on behalf of clients 3. Dealing on own account 4. Portfolio management 5. Investment Advice 6. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis 7. Placing of financial instruments without a firm commitment basis 8. Operation of a Multilateral Trading Facility (MTF) 9. Operation of an Organised Trading Facility (OTF) |
| Ancillary Services | 1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management and excluding maintaining securities accounts at the top tier level 2. Granting credits or loans to an investor to allow them to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction 3. Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings 4. Foreign exchange services where these are connected to the provision of investment services 5. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments 6. Services related to underwriting 7. Investment services and activities as well as ancillary services of the type included under Section A or B of Annex 1 related to the underlying of derivatives included under points (5), (6), (7) and (10) of Section C of the MiFID II Directive where these are connected to the provision of investment or ancillary services |
In adherence to the European Investment Firms Regulation and Directive (IFR/IFD), CIF entities shall maintain specific capital levels based on the investment and ancillary services they provide. During the licensing process, potential CIF are required to satisfy the regulator of their ability to maintain the prescribed permanent minimum capital requirements, as illustrated in the table below.
| Investment Services | Capital Requirements |
|---|---|
| Any of the below: 1. Reception and transmission of orders concerning one or more financial instruments, 2. Execution of orders on behalf of clients, 4. Portfolio management, 5. Investment advice, 7. Placing of financial instruments without a firm commitment basis. Without holding client funds. | €75,000 |
| Any of the below: 1. Reception and transmission of orders concerning one or more financial instruments, 2. Execution of orders on behalf of clients, 4. Portfolio management, 5. Investment advice, 7. Placing of financial instruments without a firm commitment basis. With holding client funds. | €150,000 |
| Any of the below: 3. Dealing on own Account 6. Underwriting of financial instruments and/or placing financial instruments on a firm commitment basis. Plus any of the below: 1. Reception and transmission of orders concerning one or more financial instruments, 2. Execution of orders on behalf of clients, 4. Portfolio management, 5. Investment advice, 7. Placing of financial instruments without a firm commitment basis. With holding client funds | €750,000 |
Once the CIF receives its license and commences operations, capital requirements are recalibrated, factoring for the firm’s fixed overheads and the associated risks stemming from the services rendered.
3. Licensing Timeframe
The completion of the entire application process is estimated to be between 8 to 12 months. However, in our experience, this is subject to the varying workload of CySEC and the quality of the required information that has been provided to the regulator.
It is also essential to recognize that the process of CIF licensing is inherently dynamic. Its success depends greatly on the applicant’s readiness to respond to regulatory inquiries promptly, providing the information and documentation needed.
4. How SALVUS can support your CIF licensing
The SALVUS Investment Firms Licensing team leverages its unique and extensive experience in the licensing of Cyprus Investment Firms across diverse business models and objectives. Our sophisticated project management approach is tailored to enable the selection of investment and ancillary services that precisely align with your business vision and requirements.
We serve as a dependable intermediary between the regulatory authority and your applying firm, streamlining the entire licensing process by facilitating the collection and submission of all necessary information and documentation. Furthermore, our expertise extends to supporting you in recruiting an efficient team and optimising the allocation of your financial resources between human and technological assets.
Upon the successful acquisition of your CIF license, our Regulatory Compliance team stands ready to guide you through the activation of the license and ensure the fulfilment of all post-licensing regulatory obligations.
Contact us at info@salvusfunds.com if you are interested in establishing a Cyprus Investment Firm; our Investment Firms Licensing team is ready to answer your questions.
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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.