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CySEC Issues Warning to Investment Firms in Cyprus on Regulatory Compliance

Updated: Oct 26, 2023

The Cyprus Securities and Exchange Commission (CySEC) has issued a stern warning to board members of Cyprus Investment Firms (CIFs), emphasizing their responsibility to adhere to all regulatory standards. In an announcement, CySEC called upon local investment firms to enhance their performance and promote a culture of integrity and high ethical standards, following recent supervisory actions that exposed compliance gaps.

CySEC Issues Warning to Investment Firms in Cyprus on Regulatory Compliance

CySEC Chairman George Theocharides made it clear that there would be no tolerance for CIFs that fail to comply with the regulatory framework. He emphasized the importance of acting in the best interest of clients while fulfilling regulatory requirements. Theocharides stated, "This is the basis for a healthy, strong market, with new products and services deploying financial technology and innovation."

Theocharides conveyed these expectations while addressing board members of local investment firms at online workshops, focusing on regulatory compliance and investor protection. He highlighted the evolving regulatory landscape in Europe and noted that "only firms with a strong compliance culture will be able to survive within this intense regulatory environment."

Theocharides stressed that CySEC takes misconduct by supervised entities seriously and is determined to halt non-compliant operations. He discussed the challenges of cross-border services, especially high-risk products offered to retail clients, which continue to raise significant investor protection concerns.

CySEC has been actively increasing its regulatory supervision in recent years, resulting in more robust repercussions for violating companies. Over the past three years, the commission has imposed fines totaling €5.3 million against CIFs for violations of the Investment Services and Activities and Regulated Markets Law of 2017. Stricter enforcement and supervision measures introduced by CySEC include potential personal liability for key individuals responsible for CIF non-compliance.

Incorporate Cyprus Company

The commission has also invested in human resources and new supervisory systems to strengthen its infrastructure and efficiency. CySEC now uses a specialized system to analyze and monitor the online marketing materials and social media activities of Cyprus investment firms.

The commission has placed financial literacy and investor education awareness among its key strategic objectives. It has carried out desk-based and thematic reviews of CIFs and conducted on-site inspections, along with checks to assess the adequacy of measures and procedures implemented by supervised entities. CySEC currently supervises 838 entities, including 250 Investment Firms, 159 of which provide forex products (CFDs) for retail investors, while 90 offer traditional products.

The message from CySEC is clear: there is no tolerance or grace period for firms with non-compliance behavior, and effective supervision and strong compliance within supervised entities are top priorities.

CySEC Chairman George Theocharides concluded, "The exercise of effective supervision and further enhancement of a strong compliance function within supervised entities is one of CySEC's utmost objectives." This latest warning and commitment to regulatory enforcement underscore the commission's dedication to maintaining integrity and standards in the financial industry.



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