The financial regulation authority in Cyprus is the Cyprus Securities and Exchange Commission. Also widely known as CySEC. Cyprus is the small island in-between Europe, the Middle East and Africa, and full of forex companies due to the beneficial tax system. The headquarters are in Nicosia, the capital of Cyprus. CySEC takes care of all the country’s financial operations. Regarding investment firms, brokerage firms – especially binary options brokers – and any individual or entity regarding financial involvement.
Since 2001 CySEC has been in regulation. The Cyprus Securities and Exchange Commission has kept its high quality standards and its name. Cyprus Securities and Exchange Commission oversees the matter that involves the safety and financial security of the firms that are registered. All the financial firms have to register themselves under CySEC to obtain their license. It is for the broker’s gain to get registered with the Cyprus Securities and Exchange Commission. As part of the European Union, CySEC’s financial operations and regulations have complied with the MiFID – European economic law. CySEC is responsible for providing the licenses and registrations to brokerage firms and oversees their financial matters. A prominent amount of international Binary Option and Retail Forex Brokers and have successfully registered within Cyprus Securities and Exchange Commission.
Cyprus Securities and Exchange Commission – A History
CySEC has been through some challenging and prominent periods throughout the years since its establishment. Cyprus Securities and Exchange Commission started in 2001. The body was established as a public-corporate organisation – a part of section 5 of the 2001 Law of CySEC. In 2004, when Cyprus joined the European Union, the Cyprus Securities and Exchange Commission eventually evolved to be a part of MiFID – A European Regulation body. Because of this simultaneous merger, all the companies and entities under the supervision of CySEC gained access to European markets – recognising themselves in a broader scale.
However, one significant change has occurred. By joining the European Union and accepting the use of the currency of the Euro, Cyprus’s financial regulation and framework went through a significant fluctuation. The framework that Cyprus policed for, previously considered as a tax haven.
On the 4th of May 2012, Cyprus Securities and Exchange Commission announced a change in policy in regards to the classified categorisation of Binary Options brokers. Becoming a valid financial instrument, ultimately bringing the result where binary options platform was necessarily regulated in Cyprus. This change in the policy established CySEC as the first-ever financial regulator to recognise and regulate Binary Options as a global financial instrument.
CySEC’s decision to recognise and regulate with Binary Options brokers was somewhat backlashed with constant criticism. Misconceptions were created – which are explained later in this article. CySEC maintained their integrity and continued their operations on a better and broader scale, with new policies in response to the criticism.
Responsibilities of Cyprus Securities and Exchange Commission (CySEC)
Cyprus Securities and Exchange Commission, being a financial regulator of the country, bear specific responsibilities to maintain financial operations smoothly. These responsibilities are not just for the organisation’s betterment and improvement, but, are spread widely over aim and purpose to provide every firm with the attentive assistance and ensure the safety and legality of their operations as well as client’s protection in these firms. To maintain smooth and safe financial operations all over the country, CySEC has the following responsibilities.
- Imposing law in regards to administration, sanctions in case of need, and penalties to rectify disciplinary issues, if needed – on brokerage firms or brokers and investment firms and consultants, and any other legal entity or individual who falls under the rule of SML or Stock Market Legislation.
- Supervising and have total control over Licensed Investment Service Companies, Collective Fund Companies, Investment Firms and Consultants, and mutual fund management companies.
- Supervise and have complete control over the Cyprus Stock Exchange operations and transactions carried out in the registered companies, brokerage firms, and Stock Exchange itself.
- To grant operation licenses to investment firms, investment consultants, brokerage firms, and brokers.
Apart from these points, a recent addition to the governing Law of Cyprus Securities and Exchange Commission says that CySEC has also received the responsibility to have a significant amount of authority over the individuals.
This absolute power includes entering their premises, searching their grounds, and sharing their relevant findings to foreign regulators during the investigations that CySEC may carry out on these entities and individuals.
This responsibility, specifically, is essential, is highlighting the authority and power of the Cyprus Securities and Exchange Commission. Because of this authority, there is a chance that fraud and spam-contracts do not occur by the brokers in the first place.
Criticism, Regulation and Response
Cyprus Securities and Exchange Commission has received a considerable number of registrations due to the country’s ever-growing financial firms. With the registration, CySEC has also gained many more responsibilities over each registered firm or individual.
For instance, monitoring and regulating the requirements of the companies have always been under the fluctuations. The process to provide each registered firm with the proper attention and response is what the EU regulator and CySEC include in their regulation criteria.
As it is discussed above, the Cyprus Securities and Exchange Commission went through a significant critical period. Here are some details about it. 2014-15 were critical years for Cyprus Securities and Exchange Commission. CySEC received tons of criticism for traders and industrialists who put on a word that CySEC needs a better organizational plan to regulate and monitor the investment plans with higher risk altitude.
The critiques suggested that CySEC should shorten their amount of fines levied on companies due to disciplinary issues. They highlighted that CySEC should impose smaller penalties than those that are directly set by European Union regulators. Apart from that, a dominant amount of criticism discussed specific binary options. CySEC took these critical remarks and used them to create better and more promising laws.
As discussed above, the Cyprus Securities and Exchange Commission became the first-ever financial regulator to regulate and recognize binary options. Because of that, a prominent and permanent number of binary options brokers registered with CySEC so they can operate within European regions and maintain their credit on the international level. With basically a new platform given to binary options brokers, they have been asking for faster processing.
Although individual unregulated brokers are writing that Binary Options brokers came into regulation in Europe through CySEC in 2012, it doesn’t mean that CySEC regulates brokers. Traders should examine the License Number of CySEC (composing five digits) and verify on CySEC’s website if the license is valid.
CySEC responded in a way by implanting significant changes to the regulation processes of all registered entities and their registration. The changes done at Cyprus Securities and Exchange Commission included more transparency to existing entities, more stringent fines – to stop the issues happening in the first place, broker suspension, and license termination. CySEC has set a very tough approval regulation for policies of a firm’s name changing.
In the 2016 circular, the regulator states that entities’ names must represent their work and activities they are involved in – and not mislead the investors/clients. Cyprus Securities and Exchange Commission has additionally imposed an updated structure to improve the response to investor’s complaints.
Structure of Cyprus Securities and Exchange Commission
Cyprus Securities and Exchange Commission has a precise and robust structure. With few members in the administrative board and involvement with the European Union, CySEC maintains the authority of its structure countrywide.
Cyprus Securities and Exchange Commission consists of a five-member board that oversees the body’s administrative laws and operations. The board consists of the chairman, the vice-chairman – employed full-time – and three other members.
In addition to that, the Governor of the Central Bank of Cyprus is represented by a non-voting member. The five governing members of the board are named and elected by Council of Ministers, following the proposal of Minister of Finance of Cyprus. The service years of members are exactly five years. Approximately 103 employees work under Cyprus Securities and Exchange Commission as of 2017.
CySEC Employee Certification
Firms that provide the services to investment companies and brokerage firms are always qualified and certified. That is how they hold their relevance and authority. As for the firm’s employees, they have to pass a specific test to engage in work. There are similar laws at Cyprus Securities and Exchange Commission for potential employees of investment firms.
According to state law, the employees working in investment firms and providing investment services or executing activities that involve investment-related operations are bound to get themselves certified in the public register after taking and exam.
In addition to that, they must have to comply with the Guidelines of the Investment Firms’ requirements, which specify the minimum requirement in the field of academic and profession for the employee to work in an investment firm potentially.
This law and guideline aim to empower Investment Firms with employees having good and long-term knowledge of the national and international/European regulatory and legal operation and structure. Employees with required qualification and knowledge will understand the essential practice and framework regarding local and international issues of economic fluctuations, illegal handling of money, and management of risk.
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