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Cyprus Investment Firms (CIFs)

The general requirements and departmental structure that a Cyprus Investment Firm (or a company which is intending to apply to the Cyprus Securities and Exchange Commission (CySEC) to provide investment and ancillary services) is obliged to comply with:

Authorisation - Legal Requirements

A company shall apply for granting authorisation by Cyprus Securities and Exchange Commission (CySEC) to provide one or more of the following investment and ancillary services:

1.Investment Services
1.1.Reception and transmission of orders in relation to one or more financial instruments
1.2.Execution of orders on behalf of clients
1.3.Dealing on own account
1.4.Portfolio Management
1.5.Investment Advice
1.6.Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
1.7.Placing of financial instruments without a firm commitment basis
1.8.Operation of Multilateral Trading Facility

2.Ancillary Services

2.1.Safekeeping and administration of financial instruments for account of client, including
custodianship and related services such as cash/collateral management
2.2.Granting credits or loans to one or more financial instruments, where the firm granting the
credit or loan is involved in the transaction
2.3.Advice to undertakings on capital structure, industrial strategy and related matters and
advice and services relating to mergers and the purchase of undertakings
2.4.Foreign exchange services where these are connected to the provision of investment
services
2.5.Investment research and financial analysis or other forms of general recommendation
relating to transactions in financial instruments
2.6.Services related to underwriting
2.7.investment services and activities and ancillary services where these are connected to the
provision of investment or ancillary services

3.Initial Capital

A CIF that provides one or more of the above investment and ancillary services or a company that intends to apply to provide one or more of the above investment and ancillary services must have initial capital which is set out as follows:

3.1.For the provision of one or more of the investment services as per clauses 1.1, 1.2, 1.4
and 1.5 as per above, and the holding of clients' money and / or financial instruments, it
must have an initial capital of at least two hundred thousand euro (EURO200.000)
3.2.For the provision of one or more of the investment services as per clauses 1.1 and 1.4 as
per above, it must have an initial capital of at least eighty thousand euro (EURO80.000)
provided that it does not hold clients' money and / or financial instruments.
3.3.For the provision of one or more of the investment services as per clauses 1.3, 1.6, 1.7 and 1.8, as per above, it shall have an initial capital of at least one million euro (EURO1.000.000)

4.General Organisational Requirements

A CIF is required to comply with the following organisational requirements:

4.1.To establish, implement and maintain decision making procedures and an organisational
structure which clearly and in documented manner specifies reporting lines and allocates
functions and responsibilities.
4.2.To ensure that its relevant persons are aware of the procedures that must be followed, for
the proper discharge of their responsibilities.
4.3.To establish, implement and maintain adequate internal control mechanisms designed to
secure compliance with decisions and procedures at all levels of the CIF.
4.4.To employ personnel with the skills, knowledge and expertise necessary for the discharge
of the responsibilities allocated to them.
4.5.To establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the CIF.
4.6.To maintain adequate and orderly records of its business and internal organization.
4.7.To ensure that the performance of multiple functions by its relevant persons is not likely to prevent those persons from discharging any particular function soundly, honestly and professionally.

It is noted that at the compliance with the abovementioned requirements, a CIF shall take into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business.

5.Departmental Structure

Taking into consideration the investment and ancillary services for which application should be submitted, the following departments need to be set up within the Company accordingly.

5.1.Dealing Room
The main activities performed by the Dealing Room shall comprised by the provision of the investment service of reception and transmission of clients' orders. Dealing Room shall be responsible for executing clients' requests through the selected execution venues used by the Company. This department needs to be physically located in Cyprus.

5.2.Own Account Trading Department
The responsibilities of Own Account Trading Department shall be the execution of own account trading and the implementation of Company's hedging policy. This department needs to be physically located in Cyprus.

5.3.Asset Management/Investment Advice
The responsibilities of Asset Management Department shall be the managing of client's portfolios and the implementation of Company's investment strategy. The department will also ensure the provision of Investment Advice to the Company's clients. This department needs to be physically located in Cyprus.

5.4.Custody
Custody Department shall be responsible for custodianship and related services, including cash management on behalf of clients. The department will monitor the holding of client's cash and financial instruments in accordance with the legal requirements set by the Law. This department needs to be physically located in Cyprus

5.5.Back Office
Back office shall be responsible for the opening of new accounts with clients, deposits and withdrawals of funds, and the provision of credit facilities to clients, provided that it is requested by the transaction, and support clients' accounts. In addition, Back Office shall be responsible for the keeping, maintenance and updating of all clients' files. This department needs to be physically located in Cyprus.

5.6.Investment Research
Investment Research department shall be responsible for providing financial analysis or other forms of general recommendation relating to financial instruments, in a way that its visible that the recommendations do not constitute the provision of investment advice. This department does not need to be physically located in Cyprus

5.7.Accounts Department
Accounts Department shall be responsible for the due keeping of the books and records and the diligent keeping of records of each client's funds so as to segregate clients' funds from Company's funds. This department is recommended to be in Cyprus but is not an obligation.

5.8.Marketing and Customer Services Department
Marketing and Customer Services Department shall be responsible for the sourcing of potential clients, acting as an initial contact with clients and providing general marketing and customer services to the clients. This department does not need to be physically located in Cyprus.

5.9.IT Department
The Information Technology Department shall be responsible for ensuring the Security and Integrity of the network and servers to be used by the C1F, and the personal computers of Company's personnel. This department does not need to be physically located in Cyprus.

5.10.Risk Management Department
Risk Management Department shall be responsible for identifying and assessing significant risks that might impact upon the achievement of the Company's objectives, developing risk management strategies to manage identified risks and designing and implementing appropriate risk management policies and procedures, and monitoring the performance and improving the effectiveness of risk management procedures.

It is noted that the establishment of a separate Risk Management Department by CIFs is required, where appropriate and proportionate in view of nature, scale and complexity of CIF's business and the nature and range of the investment services and activities undertaken in the course of that business.
This department needs to be physically located in Cyprus.

5.11.Legal and Compliance Department
Legal and Compliance Department shall be responsible to ensure that the Company operates in accordance with the legislative requirements and the internal procedures manual of the Company. This department does not need to be physically located in Cyprus.

5.12. Internal Auditor.
Internal Auditor shall be responsible for the maintenance of the Manual, and for the review and consequential updating of the Manual to track both (i) changes in the policies and procedures of the Company's operations and provision of investment services, (ii) changes in legislation resulting in alteration of the legal framework of the Company.

More specifically, internal auditor's duty is the provision of a constant review and evaluation of the operations and activities of the Company in all respects and to offer recommendations and advice to ensure that the Company operates at the highest standards and in accordance with the best practice and the legal framework as formulated by the competent authorities. The Internal Auditor needs to be a resident of Cyprus.

6.Client Classification

The Company, prior to engaging in any business relationship with their potential clients, shall notify the potential clients of the clients' classification in use by the Company, and inform them of the category in which they shall initially be classified by the Company.

7.Certificates required by Head of Departments and Key Employees

Persons employed by a CIF, in order to be able to perform one of the following duties, must be holders of the relative certificates and registered in the public register. Such certificates shall be granted upon taking examinations organized by CySEC or by

Commissions of other European countries:

7.1.Reception and transmission of orders in relation to one or more financial instruments
7.2.Execution of orders on behalf of clients
7.3.Dealing on own account
7.4.Portfolio management
7.5.Investment advice
7.6.Underwriting of financial instruments or/and placing of financial instruments on a firm commitment basis
It is noted that persons who at the date of the law came into force, 1 November 2007, do not hold certificate of professional competency, must within two examination periods register in the public register.

8.General Manager

The overall business and activities of the Company shall be over sighted by a General Manager. The duties of the General Manager shall be performed from Cyprus.

Our office can provide the running and management of CIFs for clients who possess the necessary licence through the European Union. In addition to the above, the same applies to the following non European Countries:

  • Argentina
  • Australia
  • Brazil
  • Canada
  • Hong Kong
  • Japan
  • Mexico
  • New Zealand
  • The Russian Federation
  • Singapore
  • Switzerland
  • South Africa
  • The United States
  • Jersey
  • Guernsey
  • Isle of Man.

Instructions for the formation of a Cypriot Company