Cypriot Investment Firms (CIFs)

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Know the numbers? Now learn the why.Read the Cypriot Investment Firms (CIFs) study notes: short answers, key numbers and the law behind each rule.

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Authorisation

Within what period must CySEC inform a CIF applicant whether its authorisation is granted?: Within six months of a complete application. This is a statutory deadline (Law 87, Article 7(3)).
Once granted by CySEC, where is a CIF's authorisation valid?: In all EU member states (the single-passport principle). The CIF can provide the services it is authorised for across the EU, either directly or through a branch, without separate national licences.
Can a CIF be authorised solely for the provision of ancillary services?: No. CySEC will not grant authorisation sought only for ancillary services. A firm must seek authorisation for core investment services; ancillary services can be added on top but cannot stand alone.
What must a CIF publish on all its official documents?: Its authorisation number and the fact that it is authorised and supervised by CySEC.
What must a CIF's website state?: That the firm is authorised by CySEC, together with its authorisation number and the scope of that authorisation.
To whom does CySEC communicate all CIF authorisations?: To ESMA, which maintains the central EU-wide register of investment firms.
What must CySEC do when authorising a CIF that is a subsidiary of an institution authorised in another member state?: Request the opinion of the competent authorities in that member state, so both regulators share information and co-assess shareholder suitability and management quality.

Withdrawal & renouncement

A CIF's authorisation may be withdrawn if it has not been used within how long of being granted?: Within 12 months. A licence never used within a year is treated as abandoned.
A CIF's authorisation may be withdrawn if it has not provided investment services for what period?: Six months. This is distinct from the 12-month rule for never having used the authorisation at all.
During a suspension period, what is a CIF prohibited from doing?: Unless CySEC decides otherwise, it may not provide investment services, enter into business with anyone, accept new clients or advertise itself, and it must post a notice on its websites. At existing clients' wish it may still complete their pending transactions and return their money and instruments.
What must a CIF's notification of intent to renounce its authorisation include?: The original authorisation document, the reasons for renouncing, and a proposed timetable for implementation. Client names are not part of the formal notification.
What must a CIF return to clients when renouncing its authorisation?: All funds and financial instruments owned by or accounted for the clients, including any profits. Partial returns are not permitted.
Where are client funds deposited if they cannot be returned during an authorisation revocation?: In a bank account in the Investor Compensation Fund (ICF), which then acts as the mechanism through which clients can seek compensation.
If a CIF's funds are insufficient to cover its liabilities to customers during withdrawal, what must it do?: Cover the additional amount from its own funds. The CIF is the primary source of client protection; the ICF is only the ultimate backstop for any residual amount.
What can CySEC apply to the Court for in relation to a CIF losing its authorisation?: Exam material: liquidation of the CIF and the appointment of a liquidator or temporary liquidator. Since 11 November 2022: that paragraph of CySEC Directive DI87-05 has been deleted (R.A.D. 425/2022), so the directive no longer reserves this right.
After its authorisation is revoked, what must a CIF do with public information about its former services?: Delete it without delay, both online and offline, so it no longer appears to be an active, regulated investment firm.

Board & governance

What is the minimum number of a CIF's management members that must be directors?: Two — the 'four-eyes principle', preventing single-person control over critical decisions.
For a significant CIF, what is the maximum directorship combination involving one executive role?: One executive directorship plus two non-executive directorships (the 1+2 rule).
How do directorships in non-commercial organisations count toward a CIF director's limit?: They do not count at all: seats in organisations that do not pursue predominantly commercial objectives, such as charities, are left out of the directorship count.
How do multiple directorships held within the same group count toward the limit?: As a single directorship, because the director is effectively serving one enterprise.
On what ground can CySEC reject a CIF's authorisation application relating to its directors?: If it considers the directors are not of sufficiently good repute or experience — the fit-and-proper test is a primary gatekeeping tool.
Can the chairman of a CIF's board also be its CEO?: Only if the CIF justifies it and CySEC approves. Otherwise the roles must be separate, to preserve independent board oversight of executive management.
Who may sit on a CIF's nomination committee?: Members of the board of directors who do not perform any executive function in the CIF (non-executive directors only).
What must the nomination committee of a significant CIF assess at least annually?: The structure, size, composition and performance of the board of directors.
What is the board of directors responsible for supervising?: Senior management. The board provides strategic oversight and holds senior managers accountable, while management executes.
How often must senior management receive written reports on compliance, risk management and internal audit?: At least annually (the minimum floor).
What must those periodic reports to senior management specifically confirm?: Whether appropriate remedial measures have been taken where any deficiencies were identified — closing the loop between findings and action.
What standard must a CIF's periodic internal review ensure its authorisation arrangements remain?: Appropriate, effective, comprehensive and proportionate to the nature, scale and complexity of its business.
What must a CIF do if its conflict-of-interest arrangements cannot adequately prevent damage to a client?: As a last resort, clearly disclose to the client, before acting for them and on a durable medium, the general nature and/or sources of the conflicts and the steps taken to mitigate the risks.

Tied agents

Under whose responsibility does a tied agent act?: The full and unconditional responsibility of only one investment firm (the 'one principal' rule).
Within what period must CySEC approve the appointment of a tied agent?: Within one month when a registered tied agent is appointed by a new principal; a first registration and appointment may be decided within three months of a complete notification. The agent may act only after registration and appointment.
Who bears responsibility for a tied agent's actions or omissions?: The CIF, fully and unconditionally. Liability cannot be shifted to the tied agent or disclaimed.
What must a tied agent established in Cyprus possess?: Sufficiently good repute and appropriate general, commercial and professional knowledge and competence — not necessarily formal academic qualifications.
When must a CIF notify CySEC of its intention to use a tied agent?: Prior to the use of the tied agent — pre-notification and registration are mandatory.
Within what period is the public register updated after a principal–tied-agent relationship is terminated?: Within three working days, except where the tied agent is being replaced with a new principal (a more complex case).

Eligible counterparties

How may a CIF obtain an eligible counterparty's confirmation that it agrees to be treated as such?: Either as a general agreement or transaction by transaction. Exam material: every eligible counterparty gives this express confirmation. In law (since 3 January 2018): only undertakings treated as eligible counterparties because they meet CySEC's predetermined criteria must give it.

Crowdfunding (RAD 12/2020)

What does CySEC Directive RAD 12/2020 concern?: Exam material: crowdfunding services in respect of transferable securities, under this national directive. Since 10 November 2021: crowdfunding offers of up to €5 million are governed by Regulation (EU) 2020/1503, and national regimes ended on 10 November 2023.
What website requirement applies to a CIF acting as a crowdfunding service provider?: Exam material (the national directive): a website owned and used exclusively for its crowdfunding platform. Since 10 November 2021: providers need authorisation under the EU Crowdfunding Regulation (Regulation (EU) 2020/1503) instead, and national regimes ended on 10 November 2023.
Who issues the Key Investment Information Sheet (KIIS) in a crowdfunding offer?: The project owner seeking to raise capital. The CIF verifies that the KIIS is complete, accurate and understandable before offering it on its platform.
When may a crowdfunding CIF transfer the money raised to the project owner?: Exam material (the national directive): only after the offer succeeds, meaning the capital goal is reached. Since 10 November 2021: crowdfunding offers of up to €5 million are governed by Regulation (EU) 2020/1503, and national regimes ended on 10 November 2023.
What is a crowdfunding bulletin board operated by a CIF allowed to do?: Allow investors to communicate buying or selling interest — but it may not act as a trading system that matches orders or concludes transactions.

CFD & binary option restrictions

Under which legal provision does CySEC impose restrictions on CFDs and binary options?: Article 42 of Regulation (EU) 600/2014 (MiFIR) — the product-intervention power. Note it is a MiFIR article, not a MiFID one.
Name a condition under which the CFD restrictions do not apply.: The provider gives the retail client negative balance protection, one of five cumulative conditions (with initial margin protection, margin close-out protection, no incentives other than realised profits, and a risk warning).
To which clients do the CFD and binary option restrictions apply?: Private (retail) clients. Professional clients and eligible counterparties are excluded, being presumed able to manage the risks.
The binary option restrictions do not apply where the option's validity period (issue to expiry) is at least how long?: At least 90 days. Exam material: one of four joint conditions (with a lower payout at least equal to the client's total price, a published prospectus and no market risk for the provider). Under CySEC Directive DI87-08 (since 7 July 2019): one of three joint conditions (with a published prospectus and no market risk for the provider) of one of two separate exceptions; the other exception is a lower payout at least equal to the client's total payment.

SME growth markets

An issuer listed for under three years is an SME (for SME growth market purposes) if its market capitalisation is below what?: Below €200 million.
What proportion of an MTF's issuers must be SMEs for it to be registered as an SME growth market?: At least 50%. CySEC calculates the ratio as the average of the twelve end-of-month ratios, referenced at 31 December.
Within what period must SME growth market issuers publish their annual financial reports?: Within six months of the end of the financial year (half-yearly reports have a separate four-month deadline).

Regulated markets & DRSPs

Within what period must CySEC decide on a regulated market authorisation application?: Within six months of submission of a duly completed application.
When must changes in significant ownership of a regulated market be reported to CySEC?: Prior to the transfer of ownership, so CySEC can assess suitability before control changes. CySEC then notifies its decision within one month.
Who may provide direct electronic access to a regulated market?: Exam material: only members or participants that are authorised investment firms. In law (since 3 January 2018): members that are authorised investment firms or credit institutions, and they remain responsible for the orders and trades.
Can a financial instrument be admitted to trading on multiple regulated markets without the issuer's consent?: Yes for a transferable security already admitted to a regulated market, provided the issuer is informed (subject to the prospectus rules). The issuer then has no obligation to provide information directly to the additional markets.
Within what time must a consolidated tape provider (CTP) make trading information available free of charge?: Exam material: 15 minutes after publication. Since 28 March 2024: the 15-minute rule applies to trading venues, APAs and systematic internalisers; CTPs instead give free access to retail investors, academics, civil society organisations and supervisors.
By when must an approved reporting mechanism (ARM) report transaction information to regulators?: As soon as reasonably practicable, and at the latest by the close of the next business day.

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