Following yesterday’s ruling by Cypriot regulator CySEC in which non-EU citizens would be unable to become a client of a CySEC regulated FX company without prior authorization from the domestic regulator of the country of origin of such clients, executives and legal professionals acting on behalf of the highly represented Cyprus FX sector have acted quickly.
CySEC issued a notice yesterday afternoon decreeing that all FX firms under its auspices must disist immediately from accepting non-EU business without prior authorization, a ruling which could have an industry wide impact.
Dr. Stelios Platis, Managing Director of law firm MAP S.Platis which specializes in legal procedure for Cyprus based FX and binary options companies explained to Forex Magnates after the ruling was set in place that “in every respect as regards the ruling by CySEC, let me confirm that the Association of Cyprus International Investment Firms (ACIIF) which I chair, has already objected strongly to this.”
” ACIIF has pointed out to CySEC a number of practical as well as legal arguments against its immediate implementation and enforcement whilst having requested an extension for any implementation or enforcement at least until the end of September in order for CySEC together with the sector to re-evaluate and re-assess the reason, need and purpose for this Circular in line with current EU policies and practices” Dr. Platis detailed.
Today, Dr. Platis met with CySEC officials in an attempt to mitigate the impact that these rulings could have on the industry, and returned from the meeting more confident of the future ability for FX brokers in Cyprus to continue their operations in a practical manner as his negotiations resulted in a suspension of the implementation date.
Dr. Platis explained today to Forex Magnates: “CySEC has made an amendment to the implementation date, extending it to the end of October and has also agreed to also accept a more practical approach to this issue as regards what is required as a proof for accepting third country clients.”
“I have to say that I am satisfied for now with this development, but most importantly it goes to show that CySEC, albeit strict, really does care about the sector and is willing to listen and be reasonable” stated Dr. Platis. He concluded by describing the outcome as being “A good overall development!”
Company Executives Provide Further Perspective
Charalambos Psimolophitis, Chief Executive of FxPro Financial Services today spoke to Forex Magnates and shared his interpretation of how the ruling should be navigated: “In relation to the recent circular of CySEC my opinion is that this just reiterate the current practice which is applicable to all MiFID regulated companies” said Mr. Psimolophitis.
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“It is our opinion that the directive does not imply in any way that CySEC regulated companies cannot accept clients from third countries but rather it stress the point that MiFiD regulated companies cannot set up shop in a third country and actively solicitate clients in the third country without the prior approval from the local regulator.”
Although this could cause a decreased target market or a potential extra cost in establishing further non-EU offices for brokers, thus having to bear the cost of adhering to the regulatory requirements of more than one authority, Mr. Psimolophitis is in support of CySEC’s methodology: “We strongly support the approach of CySEC as a number of regulated brokers through the use of sometimes misleading and other times illegal approaches advertise local presence in numerous jurisdictions including countries such as USA, Brazil, India, China and so on that is a clear breach of the regulation which eventually might hurt the credibility of the industry as a whole and companies that have presence in Cyprus.”
Status Quo Maintained – Until October
Following today’s meeting between Dr. Platis and CySEC, the regulator issued a statement to amend the ruling and push back the date.
The regulator announced that It came to the attention of the Commission from internal sources as well as from complaints received from Third Country Competent Authorities that Cyprus Investment Firms (‘CIFs’) provide investment services or perform investment activities in certain third country jurisdictions without seeking the necessary prior authorisation.
In some instances Third Country Competent Authorities have taken measures against the CIFs involved ranging from the issuance of an investor warning to taking formal legal action against the relevant CIF in order to cease the unauthorized activity in their territory. It should be noted that the obligation to comply with the Third Country legal framework exists irrespective of the country of registration of the Firm providing the service.
The provision of investment services and performance of activities in third countries is regulated by the laws and regulations that apply in those countries. CySEC confirmed that it consents to the provision of investment services and activities by a CIF, if it complies with the provisions of section 79 of the Investment Services and Activities and Regulated Markets Law of 2007 (the ’Law’) which transposes MiFID. In giving its consent the Commission clearly communicates to the CIF the fact that it is the responsibility of the CIF to be informed about the relevant legal provisions of the third country to the residents of which the CIF intends to provide services.
The amended ruling concludes that the regulator recommends that it would be in the best interest of the CIFs to refrain from providing any unauthorized activity (such as having physical presence and/or active solicitation of clients) in third country jurisdictions, especially in jurisdictions where the regulator specifically requires prior approval for the provision of the CIF’s services, until such time as they obtain authorisation or legal advice that authorisation is not required, in order to be in compliance at all times.
CySEC concluded by confirming by written notice signed by CySEC Chairman Demetra Kalogirou that it has decided to extend the deadline for providing CySEC with the correct legal documentation to comply with these rulings to the end of October 2013, therefore alluding to a more optimistic perspective emerging.
Forex Magnates will continue to provide in-depth updates as this progresses.