The Cyprus Securities and Exchange Commission (CySEC) is continuing its effort to keep Cyprus Investment Firms (CIFs) diligently informed about the latest regulatory updates. The watchdog has reminded brokerages that are regulated on the island that they have to adequately train and monitor their staff.
A CySEC spokesperson commented to Finance Magnates on the matter: “Aggressive sales techniques deployed by certain firms providing online trading instruments are proven to harm investors and damage consumer confidence in the industry as a whole.”
“Firms under our supervision must communicate with their clients in a fair and honest manner, in compliance with the regulation we have in place to protect investors. This cannot be guaranteed if sales and marketing functions are outsourced to a third party country outside of the European Union where service providers are not bound by the MiFID regime,” the spokesperson elaborated.
No Investment Advice
CySEC outlines in its latest circular that employees of CIFs must not provide investment advice to the clients of Cyprus regulated brokerages. Only specifically qualified personnel and not support staff should be addressing topics related to investment decisions.
The circular makes clear that both the brokerage and the employee violating CySEC regulations are responsible for any noncompliance. Companies should be supervising their workers’ qualifications and competence.
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Testing the knowledge of employees is essential to monitor compliance, and with the rules of MiFID II requiring all communication between clients and brokers to be recorded for a period of several years, the move by CySEC to highlight this aspect of the new regulation is timely.
Real Names and Mandatory Employee Knowledge
CySEC mandates that brokerages themselves place their staff on hot sales and serious violations of the law should be addressed with dismissal. Employees should be mindful of the risks associated with trading financial products.
Costs of transactions, instrument specific characteristics, financial market culture and the impact of economic events are among the key points which employees of CIFs need to be familiar with.
Other aspects of the brokerage business which include anti-money laundering (AML) procedures, market abuse, past and future performance and specific market structures are also highlighted by CySEC.
Outsourcing activities are limited almost entirely to the EU under the new regulations as companies that are outsourcing to non-EU member countries will have a hard time proving their compliance. The circular should be presented to all employees involved in service provision.