CySEC Circular C801: CIFs may not keep interest earned on client money (ESMA Q&A 2785)

Circular C801, dated 29 September 2026, informs CIFs that ESMA has published Q&A 2785 on interest earned on client funds deposited with credit institutions. In light of that answer, CySEC withdraws Circular ΕΓ144-2009-07, issued in 2009 on interest from client money bank accounts, with immediate effect, so firms should no longer rely on it.

CySEC expects CIFs to review without delay their arrangements for interest generated on client money held with credit institutions and to comply with Article 17(9) of Law 87(I)/2017, the Cyprus provision that transposes Article 16(9) of MiFID II, and with the Q&A. Firms should be able to show that they have assessed and documented their arrangements and considered clients' rights and interests. Senior management should oversee the response and make sure it is implemented promptly. Compliance officers, internal auditors and external auditors are expected to cover the point in their reviews and reports to CySEC, and CySEC may ask firms to demonstrate compliance during supervision.

The Q&A asks whether MiFID II lets investment firms earn interest on client funds placed in a savings account at a credit institution. The answer, published on 21 September 2026, was given by the European Commission and is a plain no. Article 16(9) of MiFID II requires a firm holding client funds to safeguard clients' rights and prevent the use of those funds for its own account, and the Commission reads that duty as covering interest accrued on the deposits.

The answer contains no conditions or exceptions and no transitional period. It is framed as a ban on retention; it does not set out how interest should be credited to clients. For the underlying safeguarding rules, see our study note on safeguarding client assets.

List every account in which client money is held with a credit institution and check where the interest on each one goes: to the client money account, to the firm's own account, or netted against charges. Compare the result with the client agreement, the costs and charges information and the accounting treatment of interest income.

Where the firm keeps any of that interest, stop the practice, record the decision and the reasoning, and have senior management approve the new arrangement. Ask compliance and internal audit to include the point in their next reviews and inform the external auditor. The published summaries do not say how interest retained before 29 September 2026 should be treated; read the official circular and take advice where needed.