If you choose Forex trading as your activity, Cyprus is the best option for you.
The following is a list of services provided by the companies having CIF status under Law 144(I). It is mentioned in the list of Acts regulating investment services and operations. Firms get under the supervision by the Cyprus Securities and Exchange Commission (CySEC).
The Core Services Include:
- Receipt and transfer of orders on one or several financial instruments;
- Execution of client orders;
- Transactions in an account;
- Portfolio management;
- Advice on investment issues;
- Disposition of financial instruments under firm commitment or without it;
- Operational activities.
In addition to this list, for the purpose of implementing the company’s plans on the presence in the Forex market, Cyprus provides the opportunity to select one supplementary (or several) related service(s):
- Management of financial instruments on behalf and in the interests of a client.
- Safekeeping of valuables in banking institutions (including collateral management).
- Granting loans to investors for transactions where the creditor is a participant.
- Advice on various issues, such as capital structure, obligation purchasing or business strategy.
- Operation in the foreign-exchange market relating to investment.
- Financial analysis of transactions and capital expenditures with the provision of recommendations.
- Services associated with the client obligations, and so on.
The companies operate through various financial instruments, including the most demanded:
- traded securities;
- futures and options;
- money-market financial instruments;
- blocks of securities for the statutory obligations;
- forwards and other derivative instruments related to financial indexes, interest rates, and cash payments;
- contracts for commodities, cash or clearing settlements when working on multilateral trading platforms;
- derivative securities and forwards for the commodity contracts, which may be committed in the form of clearing settlements, unless otherwise stipulated in paragraph 6 above;
- financial cash-settled contracts;
- options, futures, forward contracts for interest rates and any other derivative instruments relating to climatic variables, freight rates, emission quotas, made in cash and so on.
When Issuing a Business License, CySEC Pays due Consideration to the Following Aspects:
- Organizational adequacy and administrative arrangements of an applicant.
- The effectiveness of the internal audit mechanisms, its regularity among them.
- Segregating of the applicant’s assets from the assets of his clients, as well as segregating of the client’s assets from one another.
- Adequacy and efficiency of the mechanism and procedure for the prevention and solution to the conflict of interest.
- Adequate staffing of an applicant.
Here is a list of requirements, which must be met to get a CIF status.
To render investment services listed in paragraphs (1), (2), (4), and (5) above, the firm’s initial capital shall not be lower than €200,000. To carry out activities described in paragraphs (3), (6), (7) and (8), the company shall have the initial capital of at least €1,000,000. It is required to confirm that an applicant has the necessary funds for generating initial capital and that he agrees to freeze them in the bank account for settlements if required by CySEC.
Cyprus Investment Firm is obliged:
- To establish, implement and support decision-making procedures and organizational structure that determine reporting lines and assign roles and responsibilities in a clear and documentary form. Then, to establish, implement and support adequate mechanisms of the internal audit provided to assure compliance with decisions and procedures at all levels of CIF.
- To establish, implement and support an appropriate risk and procedure management policy identifying risks associated with the CIF’s activity, processes and systems; to establish the level of risk acceptable for CIF, where applicable.
- To support and undertake effective organizational and administrative arrangements to take all reasonable measures for preventing conflicts of interest and protecting from the negative impact on the interests of clients.
- To undertake reasonable measures for ensuring the continuity and regularity of investments, supplementary services and actions, by applying appropriate and proportionate systems, resources and procedures.
- To implement appropriate procedures for identifying clients, record keeping and internal reporting.
- To establish and support the function of continuous and efficient compliance (with due account for legal provisions) operating independently. A person, being in charge of internal control and reporting to the CIF’s management at least once per year, shall be assigned.
- To establish, implement and maintain the accounting principles and procedures for the on-time lodging of financial reports to CySEC.
Functions That can be Delegated
The following tasks may be outsourced:
- IT support;
- HR management;
- internal control and risk management (the function of internal control shall be fulfilled by a person in charge of internal control and a person responsible for the anti-money laundering);
- internal audit;
At the applicant’s discretion:
- investment committee;
- audit committee;
- risk management committee.
It shall be located in the Republic of Cyprus. By establishing a firm here, it is crucial to meet a number of requirements:
- The Board of Directors shall comprise:
- at least two executive directors (they could be general managers), one of whom is a resident;
- three non-executive directors, at least two of whom have citizenship of Cyprus.
- A head of each Investment Service Department works full time.
- The above-mentioned outsourcing functions.
These are the minimum mandatory requirements. However, as the practice shows, CySEC evaluates candidates on an individual basis, depending on particular circumstances, nature of their activity, a range of supplementary services, specificity of staff employment, etc.
- An organization chart, showing different departments and their managers (e.g., IT, asset management, accounting, etc.).
- Internal regulations to be established for CIF, implemented and supported, which include all the policies, procedures, instructions, and mechanisms drawn up according to the Law and Directives issued under the said Law.
- A business plan that should include an analytical description of nature and way of development and organization of capital investments and supplementary services to provide for what a firm seeks permission, referring to the markets where CIF intends to operate, the composition of its clientele and expected customer mix, the way to research and serve customers, as well as the potential development of CIF personnel and its technical and financial capacities.
- Individual questionnaires.
- Basic agreements related to CIF activities.
Memorandum and Articles of Association of a Firm
These documents testify that a firm operates as a CIF. Cyprus investment firms act under the Law, providing core and supplementary services authorized by relevant Acts.
The process of preparing an application to CySEC takes two or three months, as a rule. The time frame depends largely on how rapidly customers provide our experts with the necessary set of documents and feedback. There is a legal time frame within which CySEC must take an action on a duly completed application. Six months from the date of submission are set aside for this purpose. There is a fixed application fee of €3,000 plus an additional fee (the amount of which can vary) for each core investment service requested and €500 for each supplementary service requested.
CySEC regulated Binary Options as the activity of the world’s Forex market. If you apply for a CIF license for instruments 4-7, it includes Binary Options as well. Therefore, there is no specific procedure in addition to standard licensing process required for CIF. Our proposed rate for the establishing a Forex company and its licensing is €30,000. The extra client’s expenditure of at least 0.6% for the subscribed share capital should be taken into account (requisite guarantee).