Cyprus Investment Firms (CIFs): Directors’ liabilities in case of an offense

Author: N. Pirilides & Associates LLC
Date:2016-11-28

The Board of Directors of a CIF shall consist of at least two executive Directors and two independent non-executive Directors. The majority of the Directors shall be Cyprus residents. The independent non-executive Directors shall be persons of reputation and good standing, experienced and well-known in the business community for their skills and abilities, who can themselves, promote the company’s goals.

According to Section 138 of the Investment Services and Activities Regulated Markets Law 144(1) 2007 (the ‘Law’), “the Commission may impose an administrative fine not exceeding €175.000 to anyone who is in violation of the provisions of this Part and, in case of relapse or continuation of the violation, an administrative fine not exceeding €350.000”.


General Obligations

The responsibility for the correctness, completeness and accuracy of the application for the granting of a CIF authorisation as well as for the details and documents that shall accompany the application, rests on the members of the board of directors of the applicant, who sign the application and confirm that they have exercised due diligence in ensuring that the information included in the application, as well as the details and documents that accompany it are correct, complete and truthful.

According to Section 139(1) of the Law, ‘any person under an obligation pursuant to ... to submit or notify to the Commission or to make public any information, details, documents or forms, must ensure their correctness, completeness and accuracy’Under Section 139(2) ‘the provision of false or misleading information or details or documents or forms, or the withholding of material information from any application or notification submitted to the Commission ... in addition to constituting a violation subject to an administrative fine as stated in section 141, it also constitutes a criminal offence punishable pursuant to section 140, without prejudice to section 25’.

Criminal Liability

According to Section 140 of the Law, a person who does not comply with Section 139 is guilty of a criminal offence, punishable, in the event of conviction by:

 

a) a term of Imprisonment not exceeding 5 years, or
b) by a fine not exceeding €350,000 or both.


In case the offense is performed by a legal person, criminally liable besides the legal person, is also any member of the board of directors, of the managerial, supervisory or auditory bodies, where it is established that it has consented or is party to the offence.  Where the legal person is a CIF, criminally liable besides the CIF is also any of its relative persons.

Such persons criminally liable for the offences carried out by a legal person are liable together with the legal person and/or separately for any damage caused to third parties by the act or omission comprising the offence.

Administrative Sanctions

The Commission may impose an administrative fine not exceeding €350.000 to any person(s) violating Section 141(1) of the Law. In case of remission or continuation of the violation, an administrative fine not exceeding €700.000 may be imposed.

 

Moreover, according to Section 141(2) of the Law, where a person has obtained a gain by violating the Law, the Commission may impose an administrative fine of up to double the amount the said person gained by the violation.

Civil Liability

Any criminal liability or liability of administrative nature does not relieve the offender from any civil liability.

 

According to Section 143(1) of the Law, anyone who violates the Law must compensate anyone who suffers damage or loss of profit or both which has arisen due to his act or omission.

Following Section 143(2), one or more legalized bodies can apply to the court requesting a prohibitive or peremptory order, including an interim order, against any person in which is involved and/or is responsible for any violation of the Law and in offending the collective interests of consumers which this body protects:

 

a) Public bodies or their representatives;
b) Consumer organisations having a legitimate interest in protecting consumers;
c) Professional organisations having a legitimate interest in acting to protect their member.

 

Furthermore, according to Section 143(5) of the Law, the court has the power to issue (before any application is submitted pursuant to this section) a prohibitive or peremptory order, including an interim order, by which to order:

 

a) The immediate cessation of the said violation and/or not to be repeated, and/or
b) To take such corrective measures as the court thinks fit, and/or
c) To make public the whole or part of the relevant court decision/reparatory announcements, and/or
d) Any other action or measure it may consider necessary or reasonable under the circumstances of the particular case.

 

Non-compliance with any court order issued pursuant to this Law constitutes contempt of court and is governed by the provisions of the Courts of Justice Law.

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