Through a clear press release on the 23rd of October 2023, the CySEC has warned the board members of Cyprus Investment Firms of their role and responsibility in promoting a culture of integrity and high ethical standards. The press release follows recent supervisory actions by CySEC that have exposed gaps in compliance as well as a series of warnings issued to the industry, following the introduction of stricter supervision measures.
Setting CySEC’s expectations and the current regulatory environment in Europe during online workshops for CIFs’ board members, the chairman of CySEC Dr. George Theocharides has stressed that there would be no tolerance for CIFs that do not comply with the regulatory framework, highlighting that there are a lot more restrictions on the way and that only firms with a strong compliance culture will be able to survive.
Going further, Dr. Theocharides clarified that the Commission takes any misconduct by supervised entities seriously, noting that, through intense supervision and continuous monitoring, CySEC will enhance market integrity and investor protection while putting non-compliant operations to a halt.
Apart from the above, the chairman of CySEC noted that the provision of cross-border services, and specifically of the high-risk products offered to retail clients, continue to pose significant investor protection concerns, explaining that the increasing use of social media to promote investments provide retail investors with easy access to financial products that exhibit diverse risk profiles and that are not always fully understood by all retail investors.
The press release also provides an overview of CySEC’s enhanced supervision and fines, while it makes references to the supervisory reviews carried out under CySEC’s annual supervisory action plan.
In terms of enhanced supervision and fines, it is noted that:
- CySEC has fined CIFs a total of €5,3 million over the last three years, including a million euro fine against a single company.
- CySEC is investing in new supervisory systems and human resources to fortify its oversight framework and raise its general efficiency. A key acquisition is a specialised system that tracks and evaluates CIFs’ social media posts and online marketing collateral.
- One of CySEC’s primary strategic objectives is to raise awareness of investor education and financial literacy.
- Stricter enforcement and supervision measures introduced by CySEC include potential personal liability for the key persons found responsible for a CIF’s non-compliance.
- CySEC has also moved to reject applications for acquiring a CIF licence, withdrew licences and suspended licences until specific actions were taken to remediate weaknesses or omissions identified during supervisory checks.
In relation to supervisory reviews, the press release specifies that:
- CySEC has performed desk-based and thematic assessments of CIFs and on-site inspections in accordance with its yearly Supervisory Action Plan.
- CySEC’s AML/CFT Department has performed further checks to assess the sufficiency of particular measures and procedures carried out by supervised firms. The checks included reviewing compliance reports and internal audits.
Dr. Theocharides urged board members to consider the above-raised issues regarding their responsibilities as members of the Boards of CIFs and take immediate actions to ensure that they respond and fulfill their duties, clarifying that there is no more tolerance and/or grace period for firms with non-compliant behavior.