Cyprus Securities and Exchange Commission (CySEC)

What is CySEC and what does it do?

The Cyprus Securities and Exchange Commission (CySEC) is the independent public authority responsible for the supervision of the investment services market, the collective investment and asset management sector, and the crypto-asset activities conducted in and out of the Republic of Cyprus. CySEC’s vision is to establish the Cyprus securities market as one of the safest, most reliable, and most attractive investment destinations.

Why establish an Investment Firm in Cyprus?

An established Cyprus Investment Firm (CIF) benefits from:

  • Cyprus’s unique combination of memberships (e.g. European Union, Eurozone, Council of Europe, United Nations, World Bank, World Trade Organisation, International Monetary Fund, British Commonwealth).
  • Cyprus’s proximity to 3 continents.
  • Providing its investment services within the European Economic Area (EEA) through the European Union (EU) passporting framework.
  • Cyprus’s attractive tax regime, which is one of the lowest among the EU member states, and includes more than 60 double tax treaties.
  • A cost-efficient plan of administrative, operating, and living expenses.

Investment & Ancillary Services

Cyprus Investment Firms have the opportunity to operate through varying business models. Each model is achieved using a combination of investment and ancillary services, offered for different financial instruments, based on the company’s business plan and objectives.

The investment and ancillary services, as well as the financial instruments, are defined by the European Markets in Financial Instruments Directive (MiFID II) which governs the operations of CIF through its transposition into national legislation according to the Investment Services and Activities and Regulated Markets of 2017, L. 87(I)/2017.

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 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

Regulatory Capital Requirements

Investment ServicesCapital 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

Application Fees

Fees payable to CySEC for the examination of the application depend on the selection of investment, ancillary and other services that the potential CIF applies to be licensed for, as indicated below:

ServicesFee
Investment Services

1. Reception and transmission of orders concerning one or more financial instruments,
2. Execution of orders on behalf of clients,
3. Dealing on own account,
4. Portfolio management,
5. Provision of investment advice,
6. Underwriting of financial instruments and/or placing financial instruments on a firm commitment basis,
7. Placing of financial instruments without a firm commitment basis
€7,000
8. Operation of an MTF
9. Operation of an OTF
€25,000
Ancillary Services€500/service
Other Services
1. Engaged in Algorithmic Trading€2,000
2. Registration in the public register of tied agents
Use of tied agents established in another EU member state
€3,000
3. Use of tied agents established in another EU member state€3,000
4. Establishment of a branch in another EU member state and/or third country€3,000

Annual Fees

The annual fees payable to CySEC for the extension of the investment services license are a combination of a fixed charge, a variable charge, and other additional fees depending on the investment services provided and the entity’s turnover or income, as follows:

CIF TypeFixed ChargeVariable ChargeAdditional Fees
Portfolio Management or Investment Advisory€5,000 annually if also registered under the Insurance Services and other Related Issues Law otherwise:
€6,500 annually
If turnover > €500,000 the accumulated increment for the product of the turnover by the following respective scale percentages:

Turnover | Percentage
• €500K - €1 MM | 0.75%
• > €1 MM - €5 MM | 0.1875%
• > €5 MM - €10 MM | 0.1125%
• > €10 MM | 0.0975%
• €3,000 annually if offering services in relation to CFDs
•€2,000 annually if engaged in algorithmic trading
Straight-Through Processing (STP)

€8,000 annually
Market Maker or Dealing on Own Account (DOA)€10,000 annually
Multilateral Trading Facility (MTF)€7,000 annually11% * income
semi-annually
-
Organised Trading Facility (OTF)-
11% * income
semi-annually
-

Investor Compensation Fund (ICF)

The purpose of the ICF is to compensate covered clients for claims against its members to enhance investor protection. All CIF are required to join and contribute to the ICF in the following way:

  • Initial contributions equal to €2,000 per investment service and €35,000 if providing the ancillary service of safekeeping and administration of client funds and financial instruments.
  • Annual contributions as per the following conditions:
    • 5‰ of clients’ eligible funds and financial instruments with an 80% discount, if deadlines are met, the auditor’s opinion was “Unmodified Opinion” and there are no uncorrected misstatements.
    • 6‰ of clients’ eligible funds and financial instruments, when all deadlines are met, the auditor’s opinion was “Unmodified Opinion” but there are misstatements that have not been corrected.
    • The higher of €130,000 or 1% of clients’ eligible funds and financial instruments, when deadlines are not met or the auditor’s opinion differs from “Unmodified Opinion”.
  • Additional annual contributions as follows:
    • €700 if holding eligible funds and clients’ financial instruments,
    • €100 if not holding eligible funds and clients’ financial instruments.
  • Extraordinary contributions whenever required by the ICF to cover material excessive claims.

Maintain an independently audited and client-segregated minimum cash buffer of 3‰ of clients’ eligible funds and financial instruments as these were presented in the previous year.

Licensing Timeframe

In our experience, the CySEC licensing procedure takes on average 8 months, yet this is also subject to the varying workload of CySEC and the applicant’s preparedness on reverting promptly with the required information and/or documentation.

Obtaining a CIF license with SALVUS

The SALVUS Investment Firms Licensing team employs a project management approach for selecting the investment and ancillary services that suit each client’s business model and vision. Throughout the entire licensing process, we act on your behalf for collecting and submitting all the necessary information and documentation to CySEC.

Once you are granted the CIF license, our Regulatory Compliance team is ready to support your regulatory obligations, providing a wide range of post-licensing services.

If you are interested in establishing a Cyprus Investment Firm, please contact us at [email protected]; our Investment Firms Licensing team is ready to answer your questions.