Latvian Financial Regulator Sends a Message to Cyprus Brokers

Brokers looking to operate in Latvia are asked to open a subsidiary or use a local tied agent.

In a rare display of targeted communication toward specific brokerages, the Latvian financial regulator has teamed up with the Cyprus Securities and Exchange Commission (CySEC). The watchdog is sending a message to Cyprus Investment Firms (CIFs) outlining some provisions in Latvian law.

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A document sent by the Cypriot regulator to locally regulated brokerages says that the Financial and Capital Market Commission of Latvia (FCMC) only allows brokers that have a local representative office to operate in the country.

The Latvian regulator needs to be notified by the CIF about the above.

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CIFs Need to Oversee Any Marketing by Tied Agents

Another legal way that the regulator proposes for CIFs looking to provide services in Latvia is the use of local tied agents. Any illicit actions on the part of the intermediaries will incur civil liability on the CIF, since they are acting on its behalf.

While the provision under Latvian law has apparently been valid since 2011, starting from next year with the introduction of MiFID II more changes are due. Under the new EU-wide regulatory framework, tied agents will be allowed to hold client money and every tied agent will only be allowed to partner up with one brokerage company.

Any marketing materials used by the tied agent are subject to inspection by the CIF. In addition the company needs to ensure that the tied agents are not targeting clients illicitly via direct advertisement or using the broker’s information to misled clients.

The CySEC advises CIFs to consult with a legal representative regarding the provision of their services in Latvia.

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