Who must be told when a CIF is failing, and how is the information kept confidential?

The duty starts inside the firm. When the management body of a CIF, or of a holding company or financial institution covered by Law 20(I)/2016, considers that the entity is failing or likely to fail, it must notify CySEC, and failing to do so can be sanctioned. The term has the meaning used for the resolution conditions; see Who resolves a failing CIF, which tools can it use, and what does CySEC do?

CySEC then informs the relevant resolution authorities of the notification. It also tells them of any crisis prevention measure, such as an early intervention measure, and of any other supervisory action it requires the entity to take. In Cyprus the resolution authority is the CBC.

The circle widens when CySEC determines that the CIF is failing or likely to fail and that no private-sector or supervisory alternative would prevent failure within a reasonable time. CySEC then notifies, without delay and where these are different bodies: the entity's own resolution authority and competent authority; the competent and resolution authorities of any branch; the CBC, or the relevant central bank of another Member State; the deposit guarantee scheme, where the entity is a credit institution and this is necessary; the body responsible for resolution financing arrangements, where necessary; the group-level resolution authority, where relevant; the Minister of Finance or the competent ministry of another Member State; the consolidating supervisor; and the European Systemic Risk Board (ESRB) together with the national macroprudential authority, which in Cyprus is the CBC.

ESMA, the EBA and courts are not on this list, although CySEC informs the EBA in other contexts, such as simplified recovery obligations. Think of two stages: first the firm alerts CySEC and CySEC alerts the resolution authorities; then, once failure is confirmed, the supervisors, central banks, funding bodies, the ministry and the systemic-risk bodies are told.

Telling many bodies about a failing firm risks leaks. If passing information to the deposit guarantee scheme or the resolution financing body would not ensure appropriate confidentiality, CySEC uses alternative communication procedures that achieve the same objectives. The duty to inform remains; only the channel changes.

CySEC applies its general secrecy rules by analogy when it acts under Law 20(I)/2016. Professional secrecy also binds everyone else involved: the resolution authority, the EBA, the Minister, temporary administrators, potential purchasers, advisers, deposit guarantee and investor compensation bodies, the resolution financing body, central banks, bridge institutions and asset management companies, and their staff. They may disclose confidential information only in summary or aggregate form, or with express prior consent. Staff may share it within their own body, and CySEC may exchange it with the resolution authority and the other authorities involved, such as central banks, deposit guarantee schemes and the EBA. For CySEC's general secrecy and cooperation duties, see What must CySEC do as supervisor, and how does it work with other authorities?

Two further duties keep the authorities informed. CySEC and the resolution authority give each other all necessary information on request, and a CIF must notify CySEC without delay of any application to open normal insolvency proceedings against it.