This document provides a high level review of the licensing process, taking into account the MiFID 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.
Requirement of a Licence
All legal entities offering ‘investment’ and ancillary services in or from Cyprus require a CIF licence. The investment and ancillary services are defined in the law 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
- 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 to be noted that there are exceptions where the requirement of a license is done away with. CySEC determines these on a case-by-case basis.
Documentation to be submitted to 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 Commission. 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
- Two-year business plan
- Financial statements for the past three years
Timeline
The process takes approximately 1-2 months for the preparation of the application package. Upon submission of the application package, CySEC has a maximum period of 6 months within which to review the application and issue a request for additional information and clarifications. This period of 6 months can be reduced depending on the level of information submitted in the first drafts. Our regulatory team will assist you with the proper submission of applications in order to ensure that these time periods are reduced as much as possible.
CySEC will issue a conditional licence and upon fulfillment of these conditions a full licence is issued. Conditions vary but they would be mainly centred around the company's presence in Cyprus, setting up the necessary entities etc.
Official Costs
The official application fee is of €3.000 plus €1.000 per investment service. In the case of a Multilateral Trading Facility (MTF) there is an additional amount is €10.000, as well as €500 per ancillary service.
Conditions for the granting of a license
- Minimum issued share capital (refer to section 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
- Company’s technical and financial resources
Share capital requirements
The minimum issued share capital required depends on the investment services provided by the company as follows:
- Reception and transmission of orders > €200.000
- Execution of orders > €200.000
- Portfolio Management > €200.000
- Investment Advice > €200.000
- Dealing on Own Account > €1.000.000
- Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis > €1.000.000
- Placing of financial instruments without a firm commitment basis > €1.000.000
- Operation of Multilateral Trading Facility > €1.000.000
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 €80.000 or at least €40.000 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)