The Cyprus Securities and Exchange Commission (CySEC) has recently issued guidance on what it considers to be significant Cyprus investment firms (CIFs) for regulatory purposes. The Investment Services and Activities and Regulated Markets Law, Law 144(I) of 2007 as amended and CySEC Directive DI 144-2014-14 for the Prudential Supervision of Investment Firms impose more stringent corporate governance requirements on CIFs that are deemed to be significant by reference to their size, internal organisation or the nature, scale and complexity of their activities. For example, the Investment Services Law limits the number of directorships an individual may hold and requires such firms to establish a nomination committee, and the Directive requires them to establish an independent risk committee and an independent remuneration committee.
CySEC's policy is to apply an objective definition with pre-defined thresholds to determine which CIFs are considered significant for the purposes of these requirements. A CIF is deemed to be significant if it meets any of the following criteria: total assets in excess of €43 million ($45 million); revenue for the preceding 12 months in excess of €50 million; clients' money in excess of €60 million; and, clients' assets in excess of €2 billion.
CIFs must regularly assess whether they meet the criteria. As soon as a CIF becomes aware that it is likely to meet any of them, it must make arrangements to establish and have in place sound, effective and comprehensive strategies, processes and systems to achieve compliance with the requirements that apply to a significant CIF. These arrangements must be in place and effective no later than three months from the date the CIF meets any of the criteria.
If a significant CIF falls below all of the thresholds, it must nevertheless continue to comply with the requirements until the first anniversary of the date on which it ceased to be a significant CIF. In cases where it deems it appropriate, CySEC may require a CIF to comply with the requirements that apply to a significant CIF, even though the CIF does not meet any of the criteria.
On written application by a CIF, CySEC may waive any of the criteria or specific governance requirements if it considers that the CIF is not significant, taking into account its size, internal organisation and the nature, scale and complexity of its activities, and that the governance requirement is disproportionate.