YIOLA STAVRAKI
L.L.C.
ADVOCATES

Conditions for obtaining a CIF authorization

We may assit clients with incorporating a Cyprus Investment Firm.

The following criteria apply and the following information is required on our part:
  • We need to be informed on the exact nature of services to be offered / activities to be performed by this Cyprus Company;

  • To be specific, the client must inform us on the category of the following activities he wishes to perform, each having a different set of criteria:

    • Dealing with and holding client’s money and/or client’s financial instruments, which includes any of the following:

      • reception and transmission of orders in relation to financial instruments;

      • execution of orders on behalf of clients;

      • portfolio management; and

      • provision of investment advice.

      Requirement:

      For the above services, an initial capital of at least EURO 200.000,00 (two hundred thousand euro) is required.

    • For services (a) and/or (d) above (reception and transmission of orders in relation to financial instruments / provision of investment advice) but not dealing with nor holding client’s money and/or client’s financial instruments and which may not at any time place themselves in debt with their clients:

      Requirements:

      • at least EURO 80.000,00 (eighty thousand euro) as an initial capital; OR


      • at least EURO 40.000,00 (fourty thousand euro) as an initial capital and professional indemnity insurance covering all EU member-states or some other comparable guarantee against liability arising from professional negligence entered into with an insurance undertaking, representing an amount of at least EURO 1.000.000,00 (1 million euro) per claim, and in aggregate at least EURO 1.500.000,00 (one million five hundred thousand euro) per annum for all claims;


      AND

      If the CIF under the above category B to provide insurance intermediary services in the insurance sector, it must also comply with certain additional requirements pursuant to that Law.


    • For any of the following services:

      • 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; and


      • operation of Multilateral Trading Facility (MTF).

      Requirement:

      An initial capital of at least EURO 1.000.000,00 (one million euro).


  • Further, the following requirements apply to all the above categories:

  • Persons managing / directing the business of the CIF – these must be:

    • two (2) executive directors; and


    • two (2) independent non-executive directors (not dealing with every day matters of management BUT supervising all corporate matters of the CIF).

    Please note that an “Independent Director” means a director who:

    • has not been a member of the staff of the CIF or the group of the CIF during the last five (5) years preceding the relevant application;


    • has no first degree blood relationship or relationship through marriage or employer-employee relationship with other members of the Board or senior management or shareholder who controls, directly or indirectly, the majority of the share capital or voting rights of the CIF;


    • has no relationship (either blood relationship or business relationship or any other relationship) with the external consultants or auditors of the CIF;


    • has not been a member of the Board for a period exceeding nine (9) months from the date of his/her first appointment in the CIF;


    • does not maintain during the last three (3) years preceding the application any business relationship with the CIF, directly as shareholder, member of the Board or senior manager of another company which had such a relation with the CIF;


    • has not been appointed senior manager or executive director, directly or indirectly, of a subsidiary company or an affiliate company, directly or indirectly, during the last twelve (12) months;


    • is not a member of the Board of other companies in which members of the Board of the CIF are also directors, or has such business relations with such other directors; and


    • has no other connections which may be considered to impede his/her objective and impartial judgment.


    The Directors need not be Cypriot nationals (can be any foreign nationals) but the majority of the Directors must be Cypriot residents (ie. reside permanently in Cyprus and be contactable by CYSEC during normal working hours);

    In general, all employees of the CIF must be employed on a full-time basis, and be readily available and contactable by CYSEC during working hours;

    Further, the Directors must be:

    • of sufficiently good reputation; and


    • sufficiently experienced to ensure the sound and prudent management of the CIF.


  • CIF shareholders (whether direct or indirect / natural or legal persons):


    • their identities and shareholdings must be disclosed, provided that they hold at least ten per cent (10%) in the capital or voting rights of the IF or exercise an important influence over the management of the IF; and


    • in case of legal persons – the identity of the natural persons managing this company and holding shares in this company must be disclosed, reaching the beneficial owners.


  • Persons employed in CIF must:


    • be of sufficiently good reputation; and


    • have the necessary skills, knowledge and expertise to perform their assigned responsibilities.


    The relevant Cyprus Legislation and Directives currently in place do not pose any legislative requirement on the number of employees or specific posts which a CIF must have, except for the following positions:


    • The CIF must definitely have a “Compliance Officer” who shall be responsible for the compliance and reporting functions; yhis person must not be involved in the performance of the services of the CIF which it monitors, and the method of determining his/her remuneration should not compromise his/her objective judgment;


    • We note that the risk management and compliance functions may be performed by the same person, without necessarily jeopardizing the independent nature of each function


    • The CIF must also appoint independent auditors who shall carry out the function of internal audit, independent from all other functions and activities of the CIF, and who shall establish and maintain the audit plan of the CIF, evaluate adequacy and effectiveness of the CIF’s systems, issue recommendations, verify compliance with such recommendations and make reports in relation to internal audit matters;


    • Clearly, the CIF must submit annual audited financial statements and implement all necessary accounting policies and procedures;

    • The CIF must also establish and maintain a “complaints handling” procedure to handle with all potential claims and/or complaints from retail or other clients, and to keep records of such complaints.


  • Head Office: This must be situated in the Republic of Cyprus.


  • Operational Requirements:

    The CIF must have in place / ensure:

    • adequate policies and procedures to ensure its compliance with relevant legislative requirements and Directives;


    • effective organizational and administrative arrangements (including taking measures to prevent any conflicts of interests with clients);


    • ensure continuity and regularity in the performance of investment and ancillary services, by employing appropriate systems, resources and procedures;


    • ensure, when relying on third parties, the continuous and satisfactory service to clients and the performance of investment activities on a continuous and satisfactory basis;


    • maintain robust governance arrangements which include a clear organizational structure, with well defined, transparent and consistent lines of responsibility;


    • have sound administrative and accounting procedures, internal control mechanisms and effective procedures for assessing risks and control mechanisms;


    • keep records of all services provided and transactions undertaken;


    • apply appropriate “KYC (Know Your Client) procedures” and client identification procedures to avoid money laundering;


    • when holding financial instruments belonging to clients – safeguard clients’ ownership rights (especially in case of CIF insolvency); and


    • when holding funds belonging to clients – make adequate arrangements to safeguard client’s rights and prevent the use of client’s funds for its own account.


  • In case of MTF (Multilateral Trading Facility) – the CIF must establish:


    • transparent and non-discretionary rules and procedures for a fair and orderly trading and objective criteria for the efficient execution of orders;


    • transparent rules regarding the criteria for determining the financial instruments that can be traded under its systems;


    • access to sufficiently publicly available information to enable its users to form an investment judgment;


    • transparent rules for the access to its facility; and


    • information to users of their respective responsibilities for the settlement of transactions executed in that facility and to ensure efficient settlement of the above.


Finally, a CIF and market operator operating an MTF must comply immediately with any instruction from the Commission to suspend or remove a certain financial instrument from trading.