Licensing of Investment & Foreign Exchange Services in Cyprus

Transcription

1 Licensing of Investment & Foreign Exchange Services in Cyprus This document provides a high level review of the licensing process, taking into account the requirements, for a company to obtain a license from the Cyprus Securities and Exchange Commission (CySEC) to operate as a Cypriot Investment Firm (CIF), providing investment services in Cyprus. Who needs a license Legal entities offering investment and ancillary services in the Republic of Cyprus, as defined below. The investment and ancillary (non-core) services are as follows: Investment services Reception and transmission of orders on behalf of clients Execution of orders on behalf of clients Dealing on own account Portfolio Management Investment Advice Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis Placing of financial instruments without a firm commitment basis Operation of Multilateral Trading Facility Ancillary (non-core) services Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management Granting of credits or loans to and investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings Foreign exchange services where these are connected with the provision of investment services 1 Licensing of Investment & Forex Services in Cyprus Legal Partners-Orphanides,

2 Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments Services related to underwriting Investment services and activities as well as ancillary services related to underlying of certain derivatives included under the financial instruments where these are connected with the provision of investment or ancillary services. It is noted that there are exceptions where a license may not be required for the provision of the above services. Such cases need to be assessed on a case by case basis according to the provisions of the relevant Law. Outline of the application package that needs to be prepared and submitted to the CySEC In order to obtain a license from the CySEC to operate as a Cypriot Investment Firm (CIF) an application package has to be submitted for approval to the CySEC. The documents that constitute the application package include, but are not limited to, the following: Completed application form as provided by the CySEC Information by the directors, managerial staff and shareholders with special participation (for example CVs, completed questionnaires as provided by the CySEC, etc.) Company legal documents (certificate of incorporation, Memorandum and Articles of Association, etc) Certificates of the registered office in Cyprus (confirming there is a registered company in the Republic of Cyprus) Certificates by the Republic of Cyprus confirming the Directors and Secretary of the company Group structure Organisational structure Clean criminal records and Certificates of Good Standing for the shareholders with special participation, the Board of Directors and employees of the company Company procedures manual for all activities and operations 2 Licensing of Investment & Forex Services in Cyprus Legal Partners-Orphanides,

3 Two-year business plan Financial statements for the past three years How much time does it take? We estimate that it takes around 1-2 months for the preparation of the application package. Upon submission of the application package, CySEC has a period of maximum 6 months to review the application and come back to the company asking for additional information and clarifications. Based on our experience CySEC normally takes 2-3 moths to respond. Usually the company is then given 2-3 weeks to provide CySEC with the required information and given that no additional clarifications will be required by CySEC, the company will be given a conditional licence. This means that CySEC will give the applicant company a list of conditions that will have to fulfilled (such conditions may include the setting up of the company s offices in Cyprus including employees for the key positions, etc). Overall it can be expected that a licence can be issued around 4-5 months after submission. This also depends on CySEC s workload at the time and may change. How much does it cost? There is a fee charged by CySEC of plus per investment service, except for a Multilateral Trading Facility (MTF) for which the additional amount is , as well as 500 per ancillary service. Conditions for the granting of a license Minimum issued share capital (see below) Setting-up of a Cypriot company Organisation adequacy and administrative structure of the company Efficiency of the company s internal control mechanism (to be described in the procedures manual) Company s structure and organisation designed to minimise the risk of conflict of interest between the client and the company or between the clients Proper staffing of the company (actual staff employed not required for the license to be issued) as per submitted organisational chart Suitability of the company s shareholders and directors 3 Licensing of Investment & Forex Services in Cyprus Legal Partners-Orphanides,

4 Company s technical and financial resources Share capital requirements The minimum issued share capital depends on the investment services provided by the company as follows: Reception and transmission of orders > Execution of orders > Portfolio Management > Investment Advice > Dealing on Own Account > Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis > Placing of financial instruments without a firm commitment basis > Operation of Multilateral Trading Facility > A company that provides the investment services of Reception and Transmission of orders and or Investment Advice and does not hold clients money or/and clients financial instruments, and which for that reason may not at any time place themselves in debt with their clients, may have an initial capital of at least or at least and professional indemnity insurance. Key benefits of obtaining a CIF license Passporting the license granted by CySEC to operate as a CIF, provides the opportunity to the company to offer cross-border investment services or establish a branch in another EEA jurisdiction without the need to obtain any additional licenses Tax regime Cyprus has an attractive tax regime for companies providing investment services and a number of double tax treaties with other jurisdictions Relatively low set-up and operational costs the company s set-up costs and the cost of providing services in Cyprus can be generally lower than some other EU countries (e.g. office space, staffing, professional services providers, etc) 4 Licensing of Investment & Forex Services in Cyprus Legal Partners-Orphanides,

5 Steps to be followed: 1. Preparatory Stage a. The first step is to arrange to have in place the documents in the attached list of the Application for granting of a CIF authorisation (Form ). The certificate of Incorporation, the certificate of the registered office of the applicant and the certified copy of the memorandum and articles of association of the applicant (Greek) will be provided by us on registration of the company. We shall also prepare and have ready the suggested amendment of the memorandum and articles of association of the applicant. b. The remaining documents can either be provided by yourself and we will review them or we can assist you in their preparation. We can provide assistance in compiling the internal operations manual, a business plan, a policy manual and antimoney laundering procedures in order for these to comply with the requirements of the Cyprus Stock Exchange Commission. 2. Filing an application a. Once we have the documents ready we will be in a position to file the application. 3. Practical Issues a. At this point it is advisable that the proposed Executive Director, who will be appointed, moves to Cyprus (if not a Cypriot resident). If you wish to employ a Cypriot to take on this task please bear in mind that there is a minimum salary depending on the market. b. A General Manager (non-executive) must also be appointed. He may be outside Cyprus but must visit Cyprus regularly. Both the Executive director and the General Manager must be approved by CYSEC as persons having the reputation and knowledge to hold their respective positions. In this respect certain criteria apply of which we shall inform you in process. 5 Licensing of Investment & Forex Services in Cyprus Legal Partners-Orphanides,

6 4. CYSEC review a. Once filed, the application will be reviewed by CYSEC. Normally CYSEC takes around three months to reply. How Legal Partners can help We can assist the company with the application process, as described below: (a) Assist the company in preparing and submitting an application package to CySEC to obtain a license, including advice on the best way to set up this company as regards staffing, organisational structure, costs, etc. (b) Prepare or assist with the preparation of the Procedures Manual for all activities and departments of the company to be included in the application package. (c) Assist with the preparation of the two-year Business Plan to be included in the application package, as required by CySEC. (d) Support the company and assist with any additional work in connection with the follow up of the processing of the application with CySEC until the license is granted or the application is rejected. 6 Licensing of Investment & Forex Services in Cyprus Legal Partners-Orphanides,