CySEC’s thematic reviews for 2025: MiFID II Sustainability Requirements

The Cyprus Securities and Exchange Commission (CySEC) has issued on 31st of January 2025 Circular C680, informing Cyprus Investment Firms (CIFs) about the European Securities and Markets Authority (ESMA)’s Common Supervisory Action (CSA) for 2024-2025. This CSA, conducted in collaboration with national competent authorities (NCAs), will assess the integration of sustainability factors into suitability assessments and product governance frameworks across investment firms.

With a growing emphasis on sustainability in financial markets, CySEC has highlighted that product governance will remain a key area of focus for thematic reviews in 2025. As part of the CSA, CySEC plans to conduct on-site visits and desk-based reviews on CIFs providing investment advice and portfolio management services to retail clients. The objective is to evaluate compliance with MiFID II sustainability requirements and enhance investor protection.

CySEC emphases as well the applicable regulatory framework:

1. Articles 25(1), 25(4) and 25(5) of Law 87 (I) / 2017.
2. Articles 9 and 10 of the MiFID II Delegated Directive.
3. Articles 2(7), 21, 54(1), 54(2) 54(5), subparagraph 2 of Article 54(7), Articles 54(9), 55(3) of the MiFID II Delegated Regulation.
4. Guidelines on certain aspects of the MiFID II suitability requirements:
   • Guideline 1 – Information to clients about the purpose of the suitability assessment and its scope (paragraph 16).
   • Guideline 2 – Arrangements necessary to understand clients (paragraph 19 and paragraphs 26 to 29).
   • Guideline 5 – Updating client information (paragraphs 53 and 57).
   • Guideline 7 – Arrangements necessary to understand investment products (paragraphs 71 and 73).
   • Guideline 8 – Matching clients with suitable products – Arrangements necessary to ensure the suitability of an investment (paragraphs 76, 81, 85 and 88).
5. Guidelines on MiFID II product governance requirements:

• • Section 5.2 – Guidelines for manufactures (paragraph 20).
  • Section 5.3 – Guidelines for distributors – (paragraphs 42 and 62).
  • Section 5.4 – Guidelines on issues applicable to both manufacturers and distributors (paragraph 81).

6. ESMA Q&A (ESMA_QA_1966) submitted to the European Commission on 2 October 2023 concerning integration of sustainability within the MiFID II product governance             requirements.

At SALVUS, we continuously monitor regulatory developments and support CIFs in implementing robust compliance frameworks. If your firm requires assistance in shaping its product governance infrastructure to align with CySEC’s expectations, please contact the SALVUS Regulatory Compliance team at info@salvusfunds.com; We are here to support you and address any questions you may have.

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