Cross Border Investment Firm Activity


     By Michael Chambers & Co. LLC

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Activities of all investment firms in Cyprus are governed by CySEC, the Cyprus Securities and Exchange Commission. CySEC isresponsible for authorizing investment firms to undertake investment and ancillary services and governs ongoing transactions and compliance with the various applicable regulations. Investment firms may consider undertaking their activities abroad through establishment of a branch in the intended market or by providing services in that territory where authorized.

Establishment of a Branch

Cypriot Investment Firm (“CIF”) Establishing a Branch in Another Country

Where a CIF wishes to establish a branch in another country then the services it is proposing to provide must be the services which it is already authorized to provide by CySEC. CySEC may grant or deny authorization to establish the branch, based on the adequacy of the administrative structure and the financial situation of the CIF.

In order to gain authorization to establish the branch, the CIF must notify CySEC of its intention and provide the Commission with full details of a) the EU Member State or third country in which it plans to establish the branch; b) the address of the branch; c) the details of those persons who will be responsible for the management and organizational structure of the branch; d) the program of operations; and e) (in the case of establishment of a branch in the territory of another member state) whether the CIF intends to use tied agents. A decision will be made by CySEC within three months of submission of the relevant information and notification may need to be made to the relevant host venue.

EU Member State Investment Firms Establishing a Branch in Cyprus

The services and activities which the investment firm is seeking to provide via its branch in Cyprus must be the same as those it is already authorized to undertake in its home country. The EU investment firm must send to CySEC: a) details of its address; b) names of those responsible for management of the branch and organizational structure; c) program of operations; d) details of intention to use tied agents; and e) information regarding the applicable investor compensation scheme.

The EU investment firm will be required to comply with certain provisions of the Cypriot legislation governing investment firm activity on the island and should record its transactions in a manner which allows CySEC to monitor compliance and will also need to submit to CySEC annual reports relating to activities undertaken.

Third Country Investment Firm Establishing a Branch in Cyprus

An application to establish a branch in Cyprus will need to be submitted to CySEC and the relevant documentation to be submitted will be proportional to that required to establish a home Cypriot Investment Firm. Operational conditions and provisions concerning manner of operation must be at least equivalent to those applying to a CIF and during its operations the third country investment firm must comply with all of those laws and directives applicable to an investment firm established in Cyprus, together with any additional directives issued by CySEC in relation to the third country branch.

Freedom to Provide Investment and Ancillary Services and / or Perform Investment Activity

Freedom of a Cypriot Investment Firm to Provide Investment and Ancillary Services and / or Perform Investment Activities in Another Country

An investment firm originally created in Cyprus may provide investment and ancillary services and/or investment activities in another country provided that the services provided are within the scope of its authorization by CySEC.

In order to enjoy the freedom to provide such service/activity an application must be submitted to CySEC which includes: a) details of the Member State or third country where such activities are envisaged; b) program of operations; c) whether it intends to use tied agents.

In the case of another EU member country, CySEC will inform the competent authority of the EU member state that such activities are proposed. In the case of a third country, CySEC will permit the activity provided that there is no reason to doubt adequacy of administrative structure and financial position and provided that such actions will not risk investor interests.

Freedom of an EU Member State Investment Firm to Provide Investment and Ancillary Services and / or Perform Investment Activities in Cyprus

An investment firm which is authorized by the governing authority of another EU member state may exercise freedom to provide investment and ancillary services and/or perform investment activities in Cyprus provided that such activities are permitted by
its EU member state authorization.

A notification will need to be provided by the home authority of the investment firm to CySEC which outlines the program of operations which the investment firm intends to undertake in Cyprus and which particularly identifies the investment services and ancillary services or investment activities it intends to undertake in Cyprus and whether it intends to use tied agents.

There are many opportunities for investment firms to undertake cross border activity, be it through establishment of a branch or through freedom to undertake certain activities. The process and authorizations required will depend on the nationality of the investment firm itself and the host country in which it intends to do business.

ABOUT THE AUTHOR: Michael Chambers
Michael Chambers and Co. LLC are experts in the law of investment firms and can assist clients with incorporating a CIF as well as advising on cross border activity. We are also able to help with the ongoing compliance aspects of investment firms. If you wish to speak to one of our lawyers, then please contact us.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.