The legal framework of the Cyprus securities market becomes fully harmonized with all European Directives

After the accession of Cyprus to the EU in 2004, CySEC ensured the proper harmonisation of the entire legal framework with the acquis communautaire and most importantly with the European Directive for the financial markets, known as MiFID. From then on, CySEC ensures that the legal and supervisory framework is harmonized in a timely manner with all new European Directives, in order to reflect the European standards and the best practices.

At the same time, CySEC modernises the national legislation in line with the latest developments in European and international capital markets and the specific characteristics of the local capital market.

CySEC is gradually being strengthened with significant powers

From its establishment in 1996 until 2000, CySEC had very few powers. The CySEC Law of 2001 re-established CySEC as an organization with a clearly defined structure, responsibilities and powers.

CySEC was further granted new, increased and expanded powers pursuant to the 2019 CySEC Law and subsequent amendments. CySEC now has at its disposal the necessary dissuasive and repressive tools to ensure the regulatory compliance of supervised entities, while the need for additional enforcement powers is assessed by CySEC regularly.

New identity, with a modern logo and an upgraded website

In 2012 and after a public logo design contest, CySEC adopted the logo it uses today. Three years from then, it created a completely new website with significant technological upgrades, in order to meet the growing needs of the market.

CySEC acquires vision, mission and long-term strategic planning

In 2012, CySEC formulated a multi-annual strategic plan based on its vision and mission, and on the basis of five long-term strategic goals. The strategic plan is updated at regular intervals to record the progress made and any changes brought about by market developments.

For transparency purposes, CySEC conducts reviews of its work through press conferences and publishes annual reports and annual work reviews.

CySEC grows and is strengthened with successive recruitments

From a staff of just four employees in 1999, 34 in 2005 and 55 in 2011, CySEC now employs 121 people covering a wide range of specialisations in Finance, Accounting, Law and Programming.

CySEC has taken steps to increase the number of its employees gradually, so that it can meet its growing responsibilities and the development of the sector.

CySEC contributes extensively to the Cyprus Presidency of the Council of the European Union

In 2012, CySEC played an important role in the successful organization of the Cyprus Presidency of the Council of the EU.

CySEC chaired the EU Council Working Groups on capital market issues, on behalf of the Republic of Cyprus and in cooperation with the Ministry of Finance, and participated constructively in the negotiations for the reform of a total of 11 legislative proposals of the European Commission concerning the capital markets.

Further, an Officer of the CySEC legal department was seconded to the Permanent Representation of Cyprus to the EU for purposes of the Cyprus Presidency of the Council of the EU throughout its duration.

CySEC sheds light on the events of March 2013 in the banking sector

CySEC conducted a thorough and impartial investigation into several cases related to the events leading up to the banking crisis and the imposition of bail-in in 2013 in order to achieve full transparency, accountability, and the ability of the banking system to regain its credibility.

Furthermore, it was actively involved in the efforts to deal with the consequences of the possible misleading marketing of capital securities issued by two Cypriot banks.

The relevant complex and time-consuming investigations completed in the following years led to the imposition of total fines of approximately 11 million Euros on supervised entities and individuals in the banking sector.

Measures taken to minimize the effects of March 2013

Before the bail-in was finalised, CySEC mediated to ensure that the relevant decrees recognised that the deposits of CIFs in bank accounts for the benefit of their customers and belong to the individual customers and not to the CIFs themselves.

CySEC closely monitored the developments and investigated the difficulties they faced and assisted in the resolution. During the period 09/2013 – 06/2014 the CySEC Chairwoman was instrumental in this process through her participation in the Resolution Authority, together with the Governor of the Central Bank and the Minister of Finance.

A comprehensive framework is created for the regulation and supervision of collective investment funds

CySEC, in cooperation with the Ministry of Finance, promoted a series of new legislations and legal amendments leading to the growth of the collective investment sector, a key alternative form of financing.

Specifically, in 2012 the Law on Undertakings for the Collective Investment in Transferable Securities (UCITS 4) is passed; in 2013 the Law on Alternative Investment Fund Managers, and in 2014 the Law on Alternative Investment Funds (AIFs) enter into force, while in 2016, the Law is harmonized with the European Directive UCITS 5.

In 2020, CySEC introduced in the legislation the Registered AIFs and the small AIF managers (Mini-Managers), while a draft Law is currently being prepared regarding the companies that undertake the administration of AIFs (fund administrators).

The CySEC supervisory mandate is broadened to cover new entities, products and services

The total number of entities supervised by CySEC, as well as the size and complexity of their work, has been constantly increasing.

In 2012, many administrative service providers were included under the supervisory umbrella of CySEC, pursuant to a new Law, while in 2013 the collective investment sector began to flourish.

In December 2011 CySEC supervised a total 247 entities, today it supervises more than 790 entities, recording an increase of 217%.

Holding events that add value to the participants in the Cyprus securities market

In 2013, CySEC hosted a reception for the supervised entities with a central message of support for the investment services sector, attended by the President of the Republic and the Chairman of Invest Cyprus.

In 2016, CySEC held a ceremony at the Presidential Palace for its 20 year anniversary, addressed by the President of the Republic, the Minister of Finance and the Chairman of ESMA.

In 2019, CySEC hosted a formal conference dinner for the supervised  entities and other stakeholders, with speeches by the Chairman of ESMA and the Chairwoman of CySEC, and a welcoming note by the President of the Republic.

CySEC establishes a framework for the certification of persons working in the provision of investment services

In 2014, CySEC implemented a framework for the certification of persons for the provision of investment services, which included specialised examinations, mandatory annual vocational training, and registration in a dedicated public register.

From 2017 onwards, the process of registration for and participation in the exams, as well as the renewal of the registration in the register became fully automated and processed electronically, through the CySEC’s website.

In 2019, CySEC expanded the framework so that AML compliance officers are also subject to certification with specialized examinations.

CySEC launches an annual programme of lectures and seminars for the continuous training of the supervised entities

The framework created by CySEC for the certification of persons working in the provision of investment services was strengthened in 2014 with the launch of a Continuous Professional Development training programme. At the same time, CySEC conducted seminars for the training of the supervised entities regarding the provisions of new legislations, in order to ensure their compliance.

In 2009, 2014 and 2017 CySEC also held specialized workshops addressed to the Media representatives and journalists in order to increase their understanding of important issues related to the securities market.

CySEC acquires a new organizational structure and new Departments

In 2013, CySEC implemented a new organizational structure and its supervisory responsibilities are shared among its newly created departments. At the same time, an Internal Audit Unit was set up to analyse, assess and advise CySEC on the improvement of its internal procedures.

In 2015, the Department for the Prevention of Money Laundering (AML/CFT) and the Department of Risk Management and Statistics were established. The CySEC structure was expanded again in 2017 with the creation of the Department of Policy.

CySEC creates and implements a Risk-Based Supervisory Framework

The Risk-Based Supervisory Framework (RBSF) entered into force in 2015 to categorize supervised entities according to their risk profile and to determine the frequency and depth of supervisory audits. With this specialized and comprehensive supervisory tool, the available CySEC resources are channeled more efficiently for greater investor protection and CySEC effectively adopted a new overall supervisory approach, in line with international best practices.

The publication of regular statistical bulletins concerning the securities market is introduced

Considering the growing importance of the study and analysis of market data, CySEC created in 2015 a dedicated Department of Risk Management and Statistics. The said Department is entrusted with the management of the Risk-Based Supervisory Framework, the collection and analysis of market numbers and data, and the preparation of statistical bulletins for publication or for internal use, in order to better inform CySEC decisions and policies.

CySEC promotes cooperation at local, European and international level

CySEC signed Memoranda of Understanding (MoUs) with Supervisory Authorities and other Bodies for mutual assistance.

To date, it has signed 22 bilateral Memoranda of Understanding and Cooperation and 51 bilateral MoUs with supervisory authorities outside the EU, based on the European Directive on Alternative Investment Fund Managers, and is a signatory to the Multilateral Memorandum of Understanding and Cooperation of ESMA and IOSCO.

It has also signed an MoU with the Central Bank of Cyprus and the National Betting Authority.

Market surveillance procedures are modernized

In 2014, CySEC implemented an internal central digital (paperless) document management system and archive and automates its processes. In 2015, it created a digital signature for the supervised entities in order to securely transmit electronic data. In 2016, it created an Web Portal for the submission of documents by the supervised entities easily and safely. Also, technological systems such as TREM and the CIF Database (CIF Record) were developed in the previous years.

CySEC contributes in the efforts for preventing money laundering and terrorist financing (AML/CFT)

In December 2012, the licensing and supervision of a large number of Administrative Service Providers in relation to their compliance with the provisions of the Anti-Money Laundering (AML) legislation is assigned to CySEC. In 2015, CySEC created a dedicated Department for the supervision of the compliance of the supervised entities in relation to AML.

The above actions also contributed to the implementation of the Action Plan agreed with the International Lenders of the Republic of Cyprus and also to the positive evaluations of Cyprus in relation to AML by Moneyval and the Global Forum. Furthermore, CySEC contributed constructively for the purposes of the National Risk Assessment of the Financial Action Task Force by collecting and analyzing data from its supervised entities.

CySEC places the protection of the investing public as a top priority

In order to better protect investors, in addition to Investor Warnings, CySEC publishes on its website a frequently updated list of Unauthorized Websites/Domains, which was established in 2016. In 2014, CySEC assisted in the revision of the Penal Code in order to include provisions on Ponzi Schemes. A year later, CySEC participated in the preparation of the legislation for the establishment of the Financial Ombudsman of Cyprus, for the out-of-court settlement of disputes between CIFs and their clients, while in 2018 it completely reformed the operation of the Investor Compensation Fund, an additional safety net for CIF clients.

CySEC moves to a large, modern exclusively and building

As CySEC grows , there wa a need to move to larger offices, to be exclusively used by CySEC for security purposes. After successive relocations in 2013, 2017 and 2019, the CySEC offices are now housed at 19 Diagorou Avenue in Nicosia in a building suitable for its current and future development.

CySEC supports the development and progress of the securities market

CySEC supports the healthy development of the securities market and the efforts of the investment promotion organization Invest Cyprus, in cooperation with other governmental and non-governmental organizations and bodies.

In particular, the Chairs and Vice-Chairs of CySEC participate as speakers or panelists in important conferences organized in Cyprus and abroad, in order to present the regulatory and supervisory framework of the Cyprus securities market.

CySEC encourages the penetration of new technologies in the financial sector

In 2018, CySEC created the Innovation Hub with the aim of exploring and understanding the proliferation and uses of financial technology (Fintech-Regtech), such as DLT technology, crypto-exchanges, etc. In 2020, CySEC regulated  Crowdfunding with its own Directive, an alternative way of financing for start-ups that deal with innovative products. In 2021, CySEC issued a Directive and Policy Statement in relation to Crypto Assets Services Providers.

Imposition of administrative sanctions on companies and individuals who violate the rules

Over the last decade, CySEC has imposed fines/settlements of over €30 million. In addition to the fines, it suspended the operating license of CIFs in 25 cases and proceeded to the complete revocation of the operating license of 12 CIFs. It also banned 8 senior management executives of supervised entities from working in the financial sector for up to 10 years, depending on the merits of each case. For the purposes of transparency and investor access to information, CySEC publishes all the CySEC Board decisions concerning the imposition of administrative sanctions, while from 2019 it maintains a updated Sanctions Archive on its website.

CySEC advocates the need for public education in financial matters

Through market surveys conducted on a nationwide basis in 2010 and 2014, CySEC notes the low level of public awareness of financial issues and undertakes various actions and initiatives, such as the regular publication of informative articles in the Press.

Among other things, in 2016 and 2018 CySEC submits proposals to the President of the Republic and the Minister of Education for the introduction of a financial education course in schools. Since December 2020 CySEC is a member of the ad-hoc committee for the drafting of Cyprus’ national policy for promoting financial literacy.

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