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HOME  /  BRIEFINGS  /  CYSEC PROPOSES NEW RULES FOR LICENSE APPLICATION PROMOTERS

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Cysec proposes new rules for license application promoters

The Cyprus Securities and Exchange Commission (“CySEC”) has published a Consultation Paper on 10/06/2021 to propose the introduction of specific rules and obligations on promoters of applications that engage in the submission and promotion of applications for the granting of licenses to regulated entities of CySEC (or other material changes).

The majority of applications received by CySEC, whether these are for the granting of a license of a supervised entity (for example Investment Firms, AIFMs, AIFs or UCITS or other type of licensed entity), or the submission of material changes in licensed entities, are submitted by legal persons i.e. legal firms, who act as promoters and represent these entities in their dealings with CySEC. Such legal firms fall under the definition of “obliged entities” according to the Anti Money Laundering Law.

Promoters of applications usually provide the following services:

  • The preparations and/or submission of an application for the granting of an operational license according to the relevant legislation of CySEC.
  • The submission of notifications for material changes in relation to the relevant legislation.
  • The representation and liaising with CySEC during the examination and evaluation of an application or notification of a material change.

Many promoters and the services they provide, however, are not regulated by any regulating body and they have no legal obligation to comply with any rules when they provide such services. CySEC’s regulatory initiative is designed to enhance the quality of applications submitted to CySEC by requiring promoters of applications to carry out due diligence and KYC procedures to clients that wish to apply to CySEC for a license.

CySEC proposed that the above mentioned services are added under Section 4 of the Law regulating companies providing administrative services & related matters as administrative services 0f 2012 (ASP Law), for which an entity needs a license as an ASP.

The submission and promotion of applications or notifications of material changes to CySEC by legal firms will not require an ASP license because these entities according to the ASP Law are considered to be exempted persons and may provide administrative services without an ASP license. CySEC anticipates that these entities apply AML procedures when acting as promoters of their clients.

CySEC’s plan is to create a Register of Promoters, which will include the ASPs and exempted entities that wish to act as promoters and provide the services described above. Only entities included in this register will be able to act as promoters in relation to CySEC applications and notifications for material changes.

In conclusion, a Code of Conduct for promoters is proposed, in order to give guidance to ASPs that wish to act as promoters, and set the minimum level of due care that is expected from them when providing such services in order to ensure that promoters are transparent in their dealings, act in a professional manner and refrain from spreading false or misleading information.

For more information on ASP Law, please visit https://www.pirilides.com/en/publications/companies-offering-administrative-services-in-cyprus-require-authorisation/ppp-301/86/.

N. Pirilides & Associates LLC provides various services to supervised entities such as:

  • Advice and application to Cysec to obtain approval and incorporating the entity with the Registrar of Companies.
  • Assistance in drafting the constitutional documentation and the offering memorandum of the scheme.
  • Guidance in providing information, documentation and certificates
  • Consultation on structure and on initial setup
  • Preparation of required manuals
  • Guidance on the relevant business plan
  • Legal Advice
  • Acting as promoters