CySEC LICENSE

FOREX AND BINARY OPTIONS LICENSE

In order to setup a Forex or a Binary Options business in Cyprus, the company must be licensed as Cyprus Investment Firm (“CIF”).

 

ESTABLISHMENT OF A CYPRUS INVESTMENT FIRM

In order for a Cyprus company to provide any of the investment services listed below, it must operate as a CIF within the meaning of Law 144(I) cited as the Investments Services and Activities and Regulated Markets Laws of 2007 to 2012 (as consolidated and/or as it may be amended from time to time and/or other legislation replacing it) (the “Law”) and it shall be supervised by the Cyprus Securities and Exchange Commission (“CySEC”).

Investment Services:

  1. Reception and transmission of orders in relation to one or more financial instruments
  2. Execution of orders on behalf of clients
  3. Dealing on own account
  4. Portfolio management
  5. Investment advice
  6. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
  7. Placing of financial instruments without a firm commitment basis
  8. Operation of multilateral trading facility

In addition one or more of the following ancillary services may be selected to accomplish the company’s objectives (without affecting the share capital requirements which are mentioned hereinbelow).

Ancillary Services

  1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management
  2. Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction
  3. Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings
  4. Foreign exchange services where these are connected to the provision of investment services
  5. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments
  6. Services related to underwriting
  7. Investment services and activities as well as ancillary services of the type included above related to the underlying of the derivative contracts concerning the financial instruments in points 5, 6, 7 and 10 below, where these are connected to the provision of investment or ancillary services: 

Financial Instruments:

  1. Transferable securities;
  2. Money-market instruments;
  3. Units in collective investment undertakings;
  4. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash;
  5. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (other than by reason of a default or other termination event);
  6. Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market or/and an MTF;
  7. Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in point 6 above and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls;
  8. Derivative instruments for the transfer of credit risk;
  9. Financial contracts for differences;
  10. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (other than by reason of a default or other termination event), as well as any other derivative contract relating to assets, rights, obligations, indices and measures not otherwise mentioned in this list, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.

CySEC in granting authorisation pays special attention to the following:

  1. The organisational adequacy and administrative structure of the Applicant
  2. The efficiency of the Applicant’s internal control mechanism such as frequency of internal audit
  3. Segregation of Applicant’s assets from the assets of its customers and of customer assets between themselves
  4. Adequacy and efficiency of the mechanism and of the procedures for the prevention and the resolution of conflict of interest situations
  5. The proper staffing of the Applicant

Please find below a list of requirements that need to be satisfied in order to be granted a license by CySEC to operate as a CIF:

  1. Capital Requirements

For the provision of one or more of the investment services numbered (1), (2), (4) and (5) above, must have an initial capital of at least €200.000.

For the provision of one or more of the investment services numbered (3), (6), (7) and (8) above, must have an initial capital of at least €1.000.000.

A confirmation must be provided in this respect that the Applicant possesses the capital required as its initial capital and that it will undertake to block it in a bank account held by a credit institution of a Member State when and if CySEC so requests.

  1. Organizational Requirements 
  • A CIF is required to
  1. To establish, implement and maintain decision-making procedures and an organisational structure which clearly and in a documented manner specifies reporting lines and allocates functions and responsibilities. Furthermore to establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the CIF
  2. To establish, implement and maintain adequate risk management policies and procedures which identify the risks relating to the CIF’s activities, processes and systems, and where appropriate, set the level of risk tolerated by the CIF
  3. To maintain and operate effective organisational and administrative arrangements so as to take all reasonable steps to prevent conflicts of interest from adversely affecting the interests of its clients
  4. To take reasonable steps to ensure continuity and regularity in the performance of investment and ancillary services and activities by employing appropriate and proportionate systems, resources and procedures.
  5. To apply appropriate client identification procedures, record maintenance and internal reporting
  6. To establish and maintain a permanent and effective compliance function (with respect to legislative matters) which operates independently. A compliance officer must be appointed and must be responsible for the compliance function and for reporting to the senior management of the CIF at least annually
  7. To establish, implement and maintain accounting policies and procedures that enables the timely submission to CySEC of financial reports.
  • The management of the CIF must be undertaken by at least two persons of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the CIF. Furthermore, it must employ persons that are of sufficiently good repute and have the necessary skills, knowledge and expertise for performing their assigned responsibilities. In particular the Head of the portfolio management department and the Head of investment advice, Head of underwriting, Head of the department for reception and execution of orders and Head of dealing on own accounts, should be registered in the public register of CySEC after being successful in exams that are held at least once a year and are organised by the Ministry of Finance.
  • What can be outsourced:
  • Accounting
  • IT
  • Human Resource
  • Compliance and Risk Management functions (Compliance includes the position of Compliance Officer for Legislative matters and Anti Money Laundering Compliance Officer)
  • Internal Audit

 

  • Up to the discretion of the Applicant:

 

  • Investment Committee
  • Audit Committee
  • Risk Management Committee

 

  • CIF’s head office:

 

The CIF’s head office must be situated in the Republic of Cyprus

A minimum set up therefore for the establishment of a CIF will require:

  1. A Board of Directors consisting of two executives (that could also act as the general managers, one of which must be resident in Cyprus) and three non-executive directors, the majority of which must be Cyprus residents
  2. A Head for each Investment Service Department employed on a full time basis
  3. The outsourced functions referred to above

Please note that the above list is an indication as to what constitutes the minimum organisational requirements. However, in accordance with our experience and feedback from CySEC, all applications are examined on a case by case basis, depending also on the ancillary services that the CIF will provide and whether the provision of such services will justify the employment of additional employees.

  1. Other supporting documents

 

  • Organisational Chart showing the different departments and their heads (e.g. IT, asset management, accounting, etc.)
  • Internal Regulations that the CIF is required to establish, implement and maintain, which must include all policies, procedures, regulations and mechanisms in accordance with the Law and the Directives issued pursuant to the said Law.
  • Business Plan (BP) which must include an analytical description of the nature and the manner of development and organisation of the investment and ancillary services for the provision of which the authorisation is sought, with a reference to the markets in which the CIF plans to operate, the composition and expected structuring of its clientele and of the manner of its canvassing and servicing, as well as of the expected development of the CIF’s personnel and of its technical-financial facilities.
  • Personal Questionnaires
  • Main agreements regarding the CIF’s activities

 

  1. Memorandum and Articles of Association

The Memorandum and Articles of Association of the company must state that the company is operating as a CIF within the meaning of the Law and that it provides those investment and ancillary services and/or performs those investment activities in relation to those financial instruments, as specified in its authorisation.

  1. Application

The preparation of the application to CySEC normally takes 2-3 months depending always on how quickly the client provides us with the required information and feedback. As regards CySEC, in accordance with the provisions of the abovementioned law, it must within 6 months from the date of submission of a duly completed application reach a decision.

There is a fixed application fee of €3.000 plus an additional fee (the amount of which will vary) for every main investment service requested and €500 for every ancillary service to be undertaken.

 

FinancialInstruments Investment Services/Activities     Ancillary Services Sum of charge€
  Ι(1) Ι(2) Ι(3) Ι(4) Ι(5) Ι(6) Ι(7) Ι(8)   ΙΙ(1) ΙΙ(2) ΙΙ(3) ΙΙ(4) ΙΙ(5) ΙΙ(6) ΙΙ(7)  
ΙΙΙ(1)                    
ΙΙΙ(2)                      
ΙΙΙ(3)                      
ΙΙΙ(4)                            
ΙΙΙ(5)                            
ΙΙΙ(6)                            
ΙΙΙ(7)                            
ΙΙΙ(8)                            
ΙΙΙ(9)                            
ΙΙΙ(10)                            
(1) fixed charge of€3.000 + … 1.000 1.500 2.000 1.500 1.000 2.000 1.000 10.000 500 500 500 500 500 500 500 = (2) Other charges
(3) Total charges to be paid (in euro) (3)=(1)+(2)

 

FOR BINARY OPTIONS LICENSE

CySEC regulated Binary Options as Forex activity. If you apply for a CIF licence for instruments 4-7 it also includes Binary options as well now. Therefore there is no special treatment from the standard licensing process required for a CIF.

Our proposed fee for setting up a Forex company and licensing it is 20.ooo euro.

Additional cost to be taken into consideration by the client is 0,6 % on the subscribed capital (the minimum is the required guarantee).

Should you require more information on this service or further assistance please contact us on office@fiduciara.com or by phone: + 357 99196411.