In order to render any services from the list below, the Cyprian company should function as CIF in eye of the Law 144 (I), which is mentioned among Laws on investment services and operations and controlled markets 2007 - 2012 (in a summary version and/or as it can be changed periodically and/other laws replacing it) (Law) and is subject to supervising by Cyprus Securities and Exchange Commission (“CySEC”).
- Reception and transfer of orders in connection with one or more financial instruments
- Fulfillment of orders in the name of customers
- Deals on own account
- Portfolio management
- Investment consulting
- Financial instruments underwriting and/or a placement of financial instruments on the firm commitment basis of
- A Placement of financial instruments not on the firm commitment basis
- Operating activities of multilateral trading platform
Besides, to achieve the company’s aims one or more following additional services can be chosen (without prejudice to the below mentioned requirements of the mandatory share capital).
- Financial instruments storage and management for a benefit of the customer in the name of customers including safe custodianship and services bound with it, like collateral management/ monetary deposit management;
- Providing of credits or loans to an investor in order to give him a possibility to carry out a deal in one or more financial instruments, when a firm giving the credit or the loan participates in the deal;
- Consultations regarding the obligations undertaken on capital structure, production strategy and corresponding questions, as well as consultation and services in connection with a merge or a purchase of undertaken obligations;
- Services of foreign exchange market when they are related to the investment services provision;
- Investment analysis and financial analysis or other forms of the general recommendations in connection with deals in financial instruments;
- Services related to the undertaken obligations;
- Investment services and activity as well as additional services of such type which are the basis of such derivative financial instruments which are included in items 5, 6, 7 and lower, when they are bound with investments or additional services rendering.
- Marketable securities;
- Money market instrument;
- Securities units for undertaken commitments of authorized funds;
- Options, futures, exchange of one securities to the others, forward contracts under interest rates and any other derivative instruments in connection with securities, currencies, interest rates or results, or other derivative financial instruments, financial indexes or indicators which can be made in the form of physical payments or in money form;
- Options, futures, exchange of one securities to the others, forward contracts under interest rates and any other derivative instruments in connection with commodity sources which should be made in cash or can be made in cash at the discretion of one of the parties (on other bases than a default of payment or other basis for cancellation);
- Options, futures, exchange of one securities to the other ones, any other derivative instruments in connection with commodity sources which can be made in the form of physical payment provided that they are traded on a controlled market or/or multilateral trading platforms (MTF);
- Options, futures, exchange of one securities to the other ones, forward contracts under interest rates and any other derivative instruments in connection with commodity sources, which can be made in the form of physical payments unless otherwise stated in clause 6 mentioned above and if they are not intended for commercial objectives, which have characteristics of other derivative financial instruments if they, among others, are repaid and paid by the licensed clearing houses or are subject to requirements of regular additional deposits;
- Derivative financial instruments on credit risk transfer;
- Financial cash settlement contract;
- Options, futures, exchange of one securities to the other ones, forward contracts under interest rates and any other derivative instruments in connection with climatic parameters, freight rates, quotas on emissions or inflation rates or other official economic statistics which should be made in cash or can be made in cash at the discretion of one of the parties (on the other bases than a default of payment or other basis for cancellation), as well as any other derivative instruments related to assets, rights, obligations, indexes and indicators, which are not mentioned in the given list, which have characteristics of other derivative financial instruments, if, among other, they are trade on a controlled market or MTF and are repaid and paid through the licensed clearing houses or are subject to the requirements of regular additional deposits.
At issue of the permission issue CySEC Commission pays a special attention to the
- Organizational adequacy and administrative following: structure of the candidate
- Efficiency of the internal audit mechanism, such as its regularity
- Separation of assets of the candidate from assets of his customers and division of assets of the customer among themselves
- Adequacy and efficiency of the mechanism and procedure on prevention and decision of interests conflict
- Necessary staffing of the candidate
Please get acquainted with the list of requirements below, which should be met in order to receive the license from CySEC to operate as investment company CIF.
To deliver one or more investment services listed above in items (1), (2), (4) and (5) the initial capital not less than €200,000 is required.
To deliver one or more investment services listed above in items (3), (6), (7) and (8) the initial capital not less than €1,000,000 is required.
It should be confirmed, that the candidate possesses the necessary capital as his initial capital, that he assumes a liability to freeze it up on a bank account of monetary settlements institution of the EU-member-state when and if it will be required by SEC Commission.
The Cyprus investment company is obliged:
- To establish, introduce and support decision-making procedures and organizational structure which in the clear and documentary form defines directions of the reporting and distributes functions and responsibilities. Further, to establish, introduce and support the adequate mechanisms of internal audit provided for with the purposes to provide a conformity to decisions and procedures at all levels of CIF company
- To establish, introduce and support the adequate policy of management of risks and procedures which identify risks in connection with activity, processes and CIF systems, and where it is appropriate to establish a risk level, admissible for CIF
- To support and carry out effective organizational and administrative actions in order to undertake all reasonable measures for prevention of interests conflicts from negative effect to the customers’ interests
- To undertake reasonable measures to provide continuous and regular investments, additional services and actions by applying suitable proportional systems, resources and procedures.
- To apply appropriate procedures of customer identification, documentation and internal reporting management
- To establish and support an independently acting function of constant effective monitoring (taking into account legislative issues). To nominate a responsible for the internal control person, who should be responsible for the internal control and report to CIF management at least once a year
- To establish, introduce and support accounting principles and procedures, which allow timely submit financial reports to CySEC commission.
CIF management should employ not less than two persons with good enough reputation and experience for maintenance of reliable and rational management of CIF. Moreover, it should employ persons with good reputation and having necessary skills, knowledge and abilities to fulfill the responsibilities assigned to them. In particular, a head of portfolios management department, a head of investment consulting, a head of obligations undertaking, a head of department of obligations acceptance and fulfillment and a head acting at own risk, should be registered in CySEC state register after a successful pass of examinations, which take place at least once a year and are organized by the Minister of Finance.
Functions which can be transmitted on the subcontract basis:
- Personnel management
- The internal control and risks management (the internal control includes a position of a responsible for the internal control person and a person responsible for counteraction to money-laundering)
- Internal audit.
At the discretion of a candidate:
- Investment committee
- Audit committee
- Risk management committee
- Head office of CIF company
Head office of CIF should be in the Republic of Cyprus
Therefore minimal requirements to CIF establishment include:
- The board of directors consisting of two chief executives (which can execute also a role of the general managers, one of which should be a resident of Cyprus), and three non-executive directors, the most of them should be residents of Cyprus
- The head of each department of investment services works full-time.
- The subcontract functions are stated above.
Please, pay attention, that the above mentioned list indicates minimum organizational requirements. However, our experience and a feedback from CySEC shows that all candidates are evaluated individually in each concrete case, also depending on additional services which can deliver CIF and whether employment of additional workers is reasonable for such services.
Other Supporting Documents
- The organizational scheme, which shows various departments and their heads (e.g. IT, assets management, accounting department etc.)
- Bylaw, which should be established for CIF, are introduced and should be supported, that includes all policy, procedures, instructions and mechanisms according to the Law and the Directives published on the basis of the Law specified.
- Business plan, which should include an analytical description of the nature and a method of development and organization of investments and additional services for a provision of that is indicated in the petition for the permission, referring to the markets where CIF plans to act, line-up and prospective structure of their customers and a method of their studying and servicing, as well as a potential development of CIF staff and its technical and financial possibilities.
- Individual questionnaires
- Main agreements related to CIF activities.
Articles of Association and the Charter of a Joint-Stock Company
The articles of association and the Charter of a joint-stock company should declare, that the company acts as CIF in the eye of the Law and offers such additional investment services and/or executes such investment actions in connection with the financial instruments indicated in the permission.
Articles of Association and the Charter of a Company
These documents testify that the company acts as CIF. The Cyprian investment companies carry out an activity within the limits of the Law, rendering the main and additional services allowed by corresponding statements.
The Most General Requirements to CIF
- A CIF company providing investment service of orders acceptance and transfer in connection with financial instruments and storing money and/or financial instruments of customers should have the initial capital not less than two hundred thousand Euro (€200,000):
- A CIF company which renders the investment service declared above, but does not store money and/or financial instruments of customers and which therefore can not be indebted to the customers, can have the initial capital:
- not less than eighty thousand Euro (€80,000); or
- not less than forty thousand Euro (€40,000) and the professional insurance against loss or damage which is valid in all member-states, or the comparable guarantee of liability for a professional negligence which it undertakes, for an amount of at least one million Euro (€1,000,000) per claim, and in the aggregate not less than for one million five hundred thousand Euro (€1,500,000) annually per all claims.
In the eye of above mentioned item 2 the CIF company, registered according to the Law on insurance services and other relating issues for rendering of intermediary services in insurance, should meet the requirements of subparagraph (1) of article 171 of the stated Law, and, besides that, have the initial capital:
- not less than forty thousand Euro (€40,000); or
- not less than twenty thousand Euro (€20,000) and the professional insurance against loss or damage, which is valid in all member-states, or the comparable guarantee of a professional negligence liability , which it undertakes, for an amount of at least five hundred thousand Euro (€500,000) per claim, and in the aggregate not less than seven hundred fifty thousand Euro (€750,000) annually per all claims.
A preparation of the petition for CySEC usually takes 2-3 months, depending on how fast the customer will submit us the required information and the feedback. As regards to CySEC, it should give the decision within 6 months from the date of the duly documented application submission in accordance to clauses of the above mentioned law. There is a fixed payment €4,000 plus the additional fee (which amounts can vary) for each requested investment service and €500 for each additional service which they wish to undertake.