Before relying on anything in this Blog please read the disclaimer
With an announcement of 31st of July 2019 the Cyprus Securities and Exchange Commission (“CySEC”) informed the public that it published the latest consolidated law regarding the structure, the authorities, the powers and the organization of CySEC, Laws Ν.73(Ι)/2009 until Ν.56(Ι)/2019.
The Law includes the latest amendments which came into effect on April 2019. They provide CySEC powers that can adequately react to the local and international demands placed upon CySEC in exercising it’s prudential and regulatory supervision of the Cyprus regulated entities.
More specifically the new legislation combats a serious deficiency of the previous law which allowed any person under investigation to refuse to share information with CYSEC. The amending law aimed at specifying and extending the powers afforded under the previous law.
Request for Information
Under the new law, CySEC may request any type of documents and information, including the minutes of meetings and information stored in electronic form as well as any information held on trust, including the real identity of the beneficial owner.
CySEC may impose an administrative fine and thereafter an additional daily fine on any person providing false, or misleading documents, books, accounts or other information.
Right to Enter and Search
Interestingly enough, CySEC has the right to enter and search offices, and professional premises and to look into the documents, books, accounts or other information and If they refuse to comply with the sharing of information, then CySEC has the power to cease the required documents, books, accounts or other information.
In order to search the premises, CySEC is required to notify the investigated party in advance. Such notice must specify the time and date that the search will commence, the scope of the investigation as well as the possible sanctions from noncompliance. The law expressly excludes the entry into a living dwelling without first obtaining a court order.
Exchange of Information
CySEC works with local, foreign governmental and supervisory authorities in order to collect and exchange information and documents regarding ongoing investigations into the business of regulated entities.
The foreign authorities are required to provide a guarantee, that they will apply professional confidentiality equal to that applied in Cyprus prior to any exchange of information taking place. Furthermore, the law provides that the foreign regulator may disclose the collected information upon receiving written approval from CySEC.
CySEC may not respond to an inquiring foreign jurisdictions if the investigation may:
- Jeopardize the safety and/or the public interest of Cyprus
- Legal measures have already been taken against the investigated
- For the investigated persons a final court judgment has been issued by a competent authority.
CySEC Regulated Entities
CySEC’s powers to request information and to enter and search business premisses will extend to:
- Cyprus Investment Firms (CIFs)
- Cyprus branches of Investment Firms (Ifs) of other EU member-states
- Tied Agents of CIFs
- Undertakings for Collective Investment in Transferable Securities (UCITS)
- UCITS (Undertakings for Collective Investment in Transferable Securities) Management Companies
- UCITS Agents
- Cyprus branches of UCITS Management Companies of other EU member-states
- Administrative Services Companies – Trustee and Fiduciary Service Providers
- Variable Capital Investment Companies (AIF)
- Alternative Investment Fund Managers (AIFMs)
- Regulated Markets
- Central Counterparty Clearing House (CCPs) of over-the-counter (OTC) derivatives
- Trade depositories of over-the-counter (OTC) derivatives
CySEC’s role is key to establishing the Cyprus securities market as one of the safest, most reliable and attractive destinations for investment in Europe and its effective supervision of investor protection and the healthy development of the securities market cannot be performed without the power to collect information. The expanding cross-border activity of regulated entities means that such information should be able to flow between supervisors.
Although CySEC’s policies regarding the exchange of information are not made available, the law, as understood and reviewed, provides wide discretion to CySEC. Such power allows CySEC to either act as an agent of the foreign authority or its representative. A representative being someone who represents the best interest of the foreign regulator would conduct it’s own research and asses on its own account any allegations. Whereas in an agency role, CySEC will push to its regulated entities whatever request is provided by the foreign authority.
With the absence of actual complaints, data, and scope in an investigation, I believe that most likely CySEC will act as an agent and requests for information will be pushed to regulated entities without any filter or control.