CySEC warns Cyprus Investment Firms' board members of compliance risks.


CySEC issues a warning to CIF board members. The CySEC Chairman emphasized a zero-tolerance stance towards CIFs that do not comply with the regulatory framework.

CySEC has issued a series of warnings to the industry and introduced stricter regulatory measures. The CySEC has warned members of CIFs' boards that it is their responsibility to improve performance to promote a culture of integrity and high ethical standards following regulatory actions that reveal compliance gaps.

CySEC Chairman George Theocharides emphasized that a zero-tolerance stance will be taken towards CIFs that fail to comply with the regulatory framework. Cyprus is open only to those companies that consistently consider their clients' best interests and fulfill their regulatory obligations. This is foundational to building a healthy, robust market where new products and services can effectively leverage financial technology and innovation.

At an online seminar for CIFs' board members, Dr. George Theocharides outlined CySEC's expectations and the current European regulatory environment, focusing on regulatory compliance and investor protection.

He outlined how the European Securities and Markets Authority (ESMA) and CySEC are working together to strengthen the regulation of cross-border retail financial services. Regulatory restrictions will increase, and only companies with strong compliance can survive in this strict regulatory landscape.

Dr. George Theocharides added that CySEC will take a serious approach to any misconduct by regulated entities, believing that through rigorous regulation and continuous monitoring, investor protection and market integrity will be enhanced. For this purpose, CySEC is determined to stop non-compliant operations.

Providing cross-border services, especially those high-risk products offered to retail customers, still poses significant investor protection issues. The rapid development of financial service digitalization and the increased use of social media for promoting investments make it easy for retail investors to access financial products with varying risk profiles, but not all retail investors fully understand the risks involved.

Enhancing Regulatory and Penalty Measures

Over the past three years, CySEC has fined CIFs €5.3 million for violations of the Investment Services and Activities and Regulated Markets Law of 2017, with one company alone receiving a €1 million fine.

CySEC has also invested in human resources and new regulatory systems to strengthen its regulatory infrastructure, enhancing its overall efficiency and effectiveness. Key initiatives include adopting professional systems to analyze and monitor CIFs' online marketing materials and social media activities. CySEC has also incorporated financial literacy and raising investor education awareness into its strategic objectives.

CySEC has introduced stricter enforcement and regulatory measures, including personal liability for key individuals responsible for CIFs' non-compliance, with several administrative proceedings already initiated against individuals.

CySEC also refuses, revokes, and suspends CIF companies' licenses until specific actions are taken to address weaknesses or omissions discovered during regulatory inspections.

Regulatory Reviews

CySEC has conducted desk-based and thematic reviews and on-site inspections, with further checks by its Anti-Money Laundering/Counter-Terrorist Financing department to assess the adequacy of specific measures and procedures adopted by regulated entities, in line with its annual regulatory action plan. These inspections included reviewing compliance reports and internal audits.

Dr. George Theocharides urges board members to consider the issues of responsibility for CIFs' board members presented today and to act immediately to ensure their duties are fulfilled. There will be no tolerance or grace period for non-compliant companies.

One of CySEC's top goals is to implement effective regulation within regulated entities and further strengthen its compliance functions.

CySEC currently regulates 838 entities, including 250 investment firms (as of 2023), compared to 248 in 2022 and 243 in 2021. Out of these, 159 companies offer Forex products (CFDs) to retail investors, and 90 companies provide traditional products.


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