CySEC Asks CIFs for Customer Data as New Risk-Based Supervision in Development

The financial markets regulator for the Republic of Cyprus, operating under the Cyprus Securities and Exchange Commission (CySEC ) agency, has today announced a project underway to supervise its members based on a risk-based framework that it expects to transition to over the next twelve months.

The circular titled no. CI144-2014-05, dated January 29, 2013, included an accompanying form which Cyprus Investment Firms (CIFs) must complete and provide certain customer metrics and risk-related financials and submit these details to CySEC by February 3rd, 2014, as per the description.

The information requested is based on each CIFs 2013 figures -including data such as the total number of active clients and a breakdown of client type (retail, institutional, etc.). Also requested is the volume of transactions (EUR value) from customers, on a firms own proprietary accounts, as well as any market-making volumes, and a balance of client assets as of the year-end (including exposure on-balance sheet and off-balance sheet), among other country-specific data, as well as other related fields. A copy of the forms is available on the CySEC website, as part of the circular.

CySEC Asks CIFs to Complete and Submit Form by February 3rd

CySEC said the initial request was an effort to work with firms and use collective feedback from CIFs to develop the processes that it is considering and aiming to create under the new framework.

The changes will apply to the categories of registration under CySEC regulatory status:

1. Cyprus Investment Firms (CIFs)
2. UCITS Management Companies
3. Administrative Service Providers (ASPs)

ASPs and UCITS companies were not noted as required to supply data on the annexed form. As the aim of transparency and effective supervision of regulated entities is expected to help ensure that the financial health and status of firms can be readily determined, the regulator said it is in the process of developing a framework for a risk-based supervision which it expects to take more than 12 months to complete.

The new Risk-Based Supervision Framework (RBS-F) program will include processes and procedures, methodology and software tools that will be used by the Commission to enhance its supervisory capabilities under the new paradigm.

Regulator Gets Techie as New Approach Expected to Use Software System

While the project is expected to be completed well into 2015, the mention of a software tool hints of a centralized electronic filing or report system that could be implemented.

Combined with the other processes expected to be developed under RBS-F, these are aimed to enable CySEC to determine its supervisory approach by evaluating and accounting for the risks faced by each regulated entity, as firms will be required to submit detailed data and information on financials, customer accounts and trade data in order for the regulator to determine various levels of exposure across several dimensions of operational risk.

The changes are expected to bring significant benefits to the regulator with regards to the internal and external risk that regulated firms face.

CySEC is part of numerous bilateral and multilateral memorandums of understanding (MoU) with foreign regulatory agencies, and the modernized approach to risk-assessment of its members by means of data collection/submission and using a centralized software system (similar to how the NFA uses WinJammer for members' reporting), can help build the integrity of its local markets as the allure of Cyprus as a destination for investors competes for its place as an efficient regulatory hub and financial center.

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