Cyprus investment firms (CIF)
There are many reasons why the access to the European securities markets is becoming increasingly attractive. In recent years European exchanges have favorably distinguished from the US exchanges both in terms of IPO volume and value. In addition to providing the liquidity and access to a diverse pool of investors, European listings provide companies with the appropriate status for further European and international expansion.
Since joining the EU in May 2004, Cyprus has become one of the most attractive countries for the creation and distribution of the investment and financial services.
The legal framework for the provision of the investment services, registration, regulation of operations and supervision of Cyprus Investment Firms (CIF) is provided by the Cyprus Investment Firms Law 144 (I). Under the provisions of the Law, the CIF can provide investment services on a professional basis, provided that the company has received appropriate authorization from the Cyprus Securities and Exchange Commission (CySEC).
Investment and additional services provided by Cyprus investment firms:
Investment services provided by Cyprus investment firms include any of the following services:
a) receiving and transmitting the orders in relation to one or more financial instruments;
b) fulfillment of the orders on behalf of the clients;
c) working at own expense;
d) managing the portfolio;
e) investment advice;
f) underwriting of the financial instruments and/or placement of the financial instruments with firm commitments;
g) placement of the financial instruments without firm commitments;
h) operation of the multilateral trading platforms (MTF).
Apart from the major services, Cyprus investment firms may provide the following additional services related to the investment:
a) storage and administration of the financial instruments at the expense of the client;
b) providing loans or borrowings to the investor to enable him to complete the transaction with one or more financial instruments;
c) advising the enterprises on the capital structure, industrial strategy and related matters;
d) currency exchange services if they are related to the provision of investment services;
e) investment research and financial analysis;
f) services related to the underwriting.
Minimum share capital of a CIF
In accordance with the legislation, Cyprus investment firms are subject to the following minimum capital share requirements:
The initial capital of at least two hundred thousand Euro (€200,000) is required if the CIF provides one or more of the following investment services and holds the client’s money and/or financial instruments:
- receiving and transmitting the orders in relation to the financial instruments;
- fulfillment of the orders on behalf of the clients;
- managing the portfolio;
- providing investment advice.
- 1.1. eighty thousand Euro (€80,000) or
- 1.2. forty thousand Euro (€40,000) and professional liability insurance covering the EU member states or some other comparable guarantee against the liability arising from the professional negligence that the investment company enters into with the insurance company in the amount of at least one million Euro (€1,000,000).
The initial capital of at least one million Euro (€1,000,000) is required if the CIF provides one or more of the following investment services and/or carries out the following investment activities:
- working at own expense;
- underwriting of the financial instruments and/or placement of the financial instruments with firm commitments;
- placement of the financial instruments without firm commitments;
- operation of the multilateral trading platforms (MTF).
A CIF that is also registered under the Insurance Law to provide the services of an insurance intermediary in the insurance sector, must comply with the requirements of the Law and, in addition, should have the additional capital in the amount of:
- 3.1. forty thousand Euro (€40,000) or
- 3.2. twenty thousand Euro (€20,000) and professional liability insurance covering the EU member states or some other comparable guarantee against the liability arising from the professional negligence that the investment company enters into with the insurance company in the amount of at least five hundred thousand Euro (€500,000).
Licensing procedure for a CIF
The business goal of a CIF should be to provide those investment and value-added services for which it received the CySEC license.
A CIF must be licensed by CySEC, which is its regulatory and supervisory authority. For licensing you must submit a written application to CySEC, attaching to it a number of the documents, including:
- A business plan that should include the description of the operations, organizational structure, forecasts for the first two financial years and the names of at least two experienced and reliable persons who will be running the business.
- Draft Memorandum and the Charter expected to be formulated after the CIF authorization is granted.
- Certificates of No Criminal Record, Certificates of the Absence of Bankruptcy and CVs of the members of the Board of Directors, managers and the shareholders with the significant participation, as well as their responses to the questionnaire issued by CySEC.
- Draft internal regulations (operational guidelines) depending on the investment and the additional services that the company offers to provide.
- Description of the computer network and electronic infrastructure of the applicant company.
- Draft of the company’s regulation on the measures aimed at combating money laundering and terrorist financing, developed in accordance with the legislation and the accepted international practice.
CySEC reserves the right to request with the application the submission of any additional documents not listed above. If the shareholders holding a qualified interest in the applicant company (that is, 10% of the company's shares or more) are legal entities, CySEC will also require the data on all the individuals who are the ultimate beneficial shareholders of these legal entities.
CySEC will make a decision within 4 months after submitting a duly completed application for a CIF authorization or refusal to grant a license. During this 4 month period CySEC may request additional information or clarification regarding the submitted application.
CySEC must be satisfied with the submitted documents, including:
- the content of the company’s regulations and guidelines;
- the information on the due diligence of the legal and physical shareholders and the company personnel;
- the sufficiency of the number and the level of quality (qualifications) of the personnel for hiring.
Practical criteria that must be met by a Cyprus investment firm in order to obtain the appropriate licenses:
In general, in order to grant a CIF the clearance, CySEC should ensure that the applicant company has and supports though its business:
- Minimum capital required by the law.
- The shareholders who own a certain block of the shares or are otherwise able to influence the management and business strategy must be able to ensure prudent management of the company.
- The company has two experienced and reliable persons to manage the business, and these persons are able to fulfill their duties. One of the two managers must work for the company on a permanent basis and reside in Cyprus. Both the managers must be available and ready to appear before the Commission with the reasonable reports and explanations regarding the company and them personally.
- Adequate technical and financial resources.
- Appropriate control and protection measures for the electronic data processing and adequate internal control.
- Reliability, experience, professionalism and professional diligence of the people who run the company’s business.
- Adequate structures and mechanisms capable of guaranteeing the protection of the investors’ assets and eliminating any conflict of interest that may arise between the company or the personnel and the interests of the clients.
- The complete office with the established communications and computer networks, staffed by the full-time or part-time staff members as described in the organizational structure of the applicant company.
- Main service managers must hold appropriate professional competency certificates from the Cyprus Ministry of Finance. A CIF has a 12 months post-license period to fulfill the above requirements.
Once the license is granted, the CIF must comply with the current legal requirements and relevant CySEC directives.Read more
Amazon Corporate&Immigration Services provides the following services related to the investment firms:
- Creation and registration of an investment firm in Cyprus.
- Preparation of the business plan.
- Preparation of the management documentation, regulations and guidelines for the investment firm.
- Preparation of a package of the documents for obtaining the appropriate licenses for the investment firm.
- Development and organization of the measures to bring the company in line with the requirements of the legislation on the investment firms.
- Assistance in organizing the company’s business processes.
- Selection of the qualified personnel.
- Certification of the company employees.