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Setting up and licensing a Cyprus Investment Firm (CIF)

A Cyprus Investment Firm “CIF” is an entity that provides investment services and activities in the Republic. It can also be a third-country firm operating through establishing a branch in Cyprus. They shall be set, licensed, and authorized to act under the below legislation:

“Law Which Provides For The Provision Of Investment Services, The Exercise Of Investment Activities, The Operation Of Regulated Markets And Other Related Matters Law 87(I)/2017” (from now on the “Law”)

Under the same Law, the Cyprus Security and Exchange Commission (CySEC) processes applications for the licensing of Cyprus Investment Firms. It also regulates and issues guidelines and regulations on the activities and operations of the CIFs.

A Cyprus Investment Firm, depending on its license, can offer the below services:

  • Forex trading
  • Portfolio management
  • Investment advice
  • Brokerage services

Investment services and financial instruments

The type of investment services to be offered are the following:

  • Reception and transmission of orders
  • Execution of orders
  • Dealing on own account
  • Portfolio management
  • Provision of investment advice.
  • Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
  • Operation of an OTF
  • Operation of an MT
  • Placing of financial instruments without a firm commitment basis

Minimum start-up and initial regulatory capital of CIF’s

The CIF requires minimum regulatory capital to be authorized to operate. This capital must be available at the beginning of the process and kept throughout the licensed activity.

Minimum regulatory capital requirements

Activities

Capital in Euro

I.

Dealing on Own Account

Underwriting or placing on a firm commitment basis

750.000

II.

Reception and transmission of orders

Execution of orders

Portfolio management

Investment advice

Placing of financial instruments without a firm commitment basis

(not permitted to hold client money or securities belonging to clients)

75.000

III.

Operation of an Organized Trading Facility

750.000

IV.

With activities other than those referred above

150.000

Cyprus investment firm requirements

Legal identity

A Cyprus Investment firm can only exist in the form of a legal entity (company). As such, it must:

  • Be registered through the Cyprus registrar of companies.
  • Explicitly state within the Memorandum of Association the below:

    the operations of the company will be the ones of an investment firm offering investment and ancillary services

Read more about Cyprus company formation.

Substance

The CIF shall have a physical presence and a head office in Cyprus. This office can be either rented or owned. It shall also employ a sufficient number of employees to carry the business operations.

Documents

For the preparation of an application to CySEC for a CIF license, the below are needed:

  • A business plan
  • Internal operation manual which will include the Anti-Money Laundering Procedures
  • The completed questionnaires by the members of the board and shareholders

Board of directors

A CIF shall have at least two executive directors and two independent non-executive directors. The majority of the board must be Cyprus residents.

Directors have to be Fit and Proper according to CySEC’s requirements:

  • Have a good reputation, sufficient experience to ensure sound and prudent management
  • Provide a clean criminal record and non-bankruptcy certificate.

There are no restrictions in appointing foreign nationals as directors. However, the decisions affecting the management and control of the investment firm must be taken in Cyprus. The above will allow the CIF to benefit from the favorable Cyprus Tax regime.

Other employees not being directors

Any other employees who will provide investment services and act as the Compliance Officers of the CIF must:

  • Have the necessary knowledge and expertise for performing their assigned responsibilities.
  • Be registered in the public register maintained by CySec (CySEC’s public register requires success in CySEC’s exams).

CySEC’s application charges and annual fees

CySEC’s application charges:

  • €7000 with the submission of the CIF’s application.
  • €3500 with the submission of an application for the license extension.

Depending on the license type and the license extension, charges may vary.

CySEC’s annual fees (euro)

  • a) A fixed charge from €5000 to €10,000 depending on which services are provided
  • b) A charge depending on the turnover, provided that the turnover exceeds €500.000, as below:
  • 0.75% - between €500.001 - €1.000.000
  • 0.1875% - between €1.000.001 - €5.000.000
  • 0.1125% - between €5.000.001 - €10.000.000
  • 0.0975% - if exceeding €10.000.001.

The above is calculated based on the annual audited financial statements.

CIFs that provide services in relation to CFDs shall pay an additional €3.000.

The time frame of the CIF licensing procedure

CySEC must reply within six months of submitting a duly completed application. The reply will either grant a CIF license or refuse the application.

The CIF Step-by-Step Licensing Process

Step 1

After the initial communication, our compliance department will collect the required KYC information from the client for due-diligence purposes. At the end of stage 1, we sign an engagement letter between the client and our firm.

Step 2

We design and build the CIF’s structure according to the client’s specific needs. Once this is completed, we will draft the Memorandum of Association according to the requirements of the Law. We will also provide qualified non-executive director candidates (if needed). At the same time, we will proceed with the company’s formation.

Step 3

Our firm will draft and finalize the following:

  • Operation manual
  • Business plan in accordance with the CySEC’s requirements
  • Anti-Money Laundering Guidelines and Know Your Customer (KYC) policy
  • Internal Capital Adequacy Assessment Process (ICAAP)

Step 4

The below are completed by our firm:

  • The application form
  • The appropriate checklists
  • All necessary letters regarding the application

We assist with the provision of all the necessary documentation and certificates.

The application form (87-00-01) for the Authorization of CIFs (DOC, 188 KB).

Step 5

Filing of the CIF’s application together with the supporting documentation to CySEC.

Step 6

We promote the CIF’s application to CySEC. We provide CySEC with any necessary replies and maintain open communication regarding application inquiries and proposals.

Step 7

Issuance of authorization certificate and registration of the CIF in the registry.

Requirements after licensing and services

Cyprus Investment Firm’s responsibilities do not come to an end upon receiving the license. CySEC will still regulate the CIF. So it must comply with the obligations and requirements as provided by the Law and the relevant directives. Otherwise, the license can be revoked at any time.

Our firm also provides post-authorization services, which include but are not limited to:

  • Ongoing support/consultation and preparation of relevant reports for Regulatory Compliance.
  • Ongoing support/consultation and preparation of relevant reports for Anti Money Laundering Compliance.
  • Risk Management support for the Internal Capital Adequacy Assessment Process (ICAAP).
  • Internal Audit.

Our Team

Our team is made up of professionally qualified lawyers. Also, we have financial advisors with reputable experience in the sectors of Legal, Corporate, and Financial Services.

Due to the specific nature of the licensing process, it is crucial to acquire services from experienced and professional consultants. In cases where CySEC rejects an application, appeal procedures can take up to two years. In the meantime, the company’s shareholder(s) cannot operate anywhere in the EU.

Our Services

We provide complete services for your CIF license application which include:

  • General advice on laws and requirements
  • Company registration
  • Drafting relevant documents and application forms
  • Preparation and submission of the application to CySEC
  • Respond and maintain open communication with CySEC on the client’s behalf regarding application inquiries and proposals.

Our Fees

Our payment policy is as follow:

  • 30% upon our engagement,
  • 50% upon/before the submission of the application to CySEC,
  • 20% upon CySEC’s final comments and conditions.

How We Can Help?

George K. Konstantinou LLC

We have been serving clients since 1983 with measurable success.
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