ESMA Follow-Up Review Recognises CySEC’s Stronger Oversight of Cross-Border Investment Firms

The Cyprus Securities and Exchange Commission (CySEC) has welcomed the publication of a follow-up assessment by the European Securities and Markets Authority (ESMA), which acknowledges the substantial progress made by the Cypriot regulator in strengthening its supervision of investment firms engaged in cross-border activities. The review, conducted by ESMA’s Peer Review Committee (PRC), concludes that CySEC has significantly enhanced its supervisory and enforcement framework since recommendations were issued during the 2022 peer review of cross-border investment firm supervision, highlighting the regulator’s continued efforts to reinforce investor protection and improve regulatory effectiveness.

The follow-up assessment examined the measures implemented by several national competent authorities in response to the recommendations outlined in the 2022 review. The evaluation focused on key supervisory areas, including authorisation processes, ongoing supervision, enforcement practices, and cooperation between national regulatory authorities. According to the PRC, supervisory authorities across Europe have made notable progress in incorporating cross-border business activities into their risk-based supervisory models, allowing regulators to better identify and address risks associated with firms providing investment services across multiple jurisdictions.

CySEC was specifically recognised for introducing structured and regular monitoring of cross-border business conducted by Cyprus Investment Firms (CIFs). The PRC highlighted the regulator’s efforts to establish dedicated supervisory processes that enable continuous oversight of firms operating beyond Cyprus while also acknowledging improvements in the authority’s cooperation with other supervisory bodies throughout the European Union. ESMA noted that the strengthened coordination arrangements developed by CySEC have enhanced its ability to exchange information and work more effectively with fellow national competent authorities in supervising firms with cross-border operations.

The review also praised organisational changes implemented by the Cypriot regulator to improve the handling of supervisory requests. According to the PRC, the structural reforms introduced by CySEC have enabled requests to be processed more efficiently, with the report noting that these improvements have already become evident in practical supervisory work. In addition, the committee described CySEC’s decision to reinforce its supervisory capacity through the recruitment of an additional 32 employees as “a significant achievement”, recognising the expansion of supervisory resources as an important step in strengthening the regulator’s oversight capabilities.

The PRC further observed that CySEC has adopted a considerably stronger supervisory and enforcement approach since the original peer review was conducted. According to the committee, “the increased supervision and enforcement path by CySEC since the peer review is a constructive and encouraging development,” reflecting the regulator’s commitment to implementing meaningful reforms aimed at improving oversight of investment firms conducting cross-border activities.

Commenting on the findings, CySEC Chairman George Theocharides said the latest assessment demonstrates the considerable progress achieved in strengthening Cyprus’ regulatory framework for investment firms operating across European markets. “Today’s follow-up report to the 2022 peer review, and the tangible improvements it highlights, reflect the significant progress that has been achieved,” Theocharides said.

He added that the regulator welcomed the committee’s acknowledgement of the work undertaken to reinforce supervision of Cyprus Investment Firms with international operations. “We welcome the PRC’s recognition of the strengthened framework that has been created in Cyprus to enhance the supervision of Cyprus Investment Firms with cross-border activities,” he added.

Theocharides also emphasised that ESMA’s conclusions serve as a reminder that regulators across Europe must continue adapting to the evolving risks associated with increasingly complex cross-border investment services. He noted that ongoing digitalisation is accelerating the expansion of investment services throughout the European Union, creating new supervisory challenges that require continuous vigilance from national authorities.

“As the ESMA report points out, all national competent authorities must remain vigilant to the risks arising from the continued growth and increasing complexity of cross-border investment services, further driven by ongoing digitalisation,” he said.

Theocharides stressed that safeguarding retail investors remains the regulator’s primary objective as greater numbers of individuals gain access to investment opportunities throughout the European Union. “Retail investors are gaining ever greater access to investment opportunities across the European Union and, as a result, investor protection remains at the heart of everything we do,” Theocharides added.

CySEC reaffirmed that it intends to build on the progress already achieved following the implementation of the PRC’s recommendations and will continue strengthening both its supervisory practices and its cooperation with other European regulators. The commission stated that its objective remains to ensure consistently high standards of investor protection while maintaining effective oversight of Cyprus Investment Firms operating across borders.

Concluding his remarks, Theocharides reiterated the regulator’s ongoing commitment to robust supervision and international cooperation. “We will continue to closely supervise Cyprus investment firms to ensure a consistently high level of investor protection, while further strengthening our supervisory approach and cooperation with other National Competent Authorities,” Theocharides concluded.

By fLEXI tEAM