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Cyprus: AIF Law’s smooth transition

Elias Neocleous
Following the entry into force of the Alternative Investment Funds Law of 2014 (AIF Law) on July 27, the Cyprus Securities and Exchange Commission (CySEC) has issued guidance on transitional arrangements. The AIF Law regulates the establishment and operation of alternative investment funds (AIFs) in Cyprus and replaces the International Collective Investment Schemes Laws of 1999 and 2000 (ICIS Laws). It designates CySEC as the supervisory authority for AIFs.

Following article 4(1)(a) of the Alternative Investment Fund Managers Directive, the AIF Law defines an AIF as 'a collective investment undertaking, including investment compartments thereof, which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors and is not authorised as an Undertaking for Collective Investments in Transferable Securities (Ucits) in accordance with section 9 of the Open-Ended Undertakings for Collective Investments Law of 2012'.

International Collective Investment Schemes (ICIS) established under the ICIS Laws fall within this definition. Article 120(1) of the AIF Law provides that ICIS that have been authorised under the ICIS Laws by the Central Bank of Cyprus (CBC) may continue to operate on one of three bases.

First, they may operate as AIFs with a limited number of persons, subject to complying with articles 114 to 118 of the AIF Law and providing CySEC with the information and documents specified in article 120(1)(a). Under this option, they may continue to operate on the basis of the authorisation issued by the CBC, and need not apply for re-authorisation by CySEC.

Second, they may operate as AIFs under Part II of the AIF Law, subject to obtaining authorisation from CySEC in accordance with article 13 of the AIF Law.

Third, they may operate as AIF managers, subject to obtaining authorisation from CySEC in accordance with article 8 of the Alternative Investment Fund Managers Law of 2013.

The information needed in the first instance and the applications referred to in the second and third options above must be submitted to CySEC by November 27 2014. Until that date, or until the information has been submitted to CySEC, whichever occurs first, the CBC will continue to supervise ICIS that it has authorised. ICIS that submit an application may continue to operate until their application has been considered and they have been informed of the outcome. ICIS that do not follow this procedure, or that do not fulfil the conditions of the AIF Law for continuation on the chosen basis, will be dissolved in accordance with the ICIS Laws.

The CBC has already transferred to CySEC its register of the ICIS that it has authorised. Any pending applications as of July 27 2014 from ICIS meeting the requirements of article 114(1) of the AIF Law are to be transferred from the CBC to CySEC and will be determined without the need for a new application to be submitted. CySEC will contact the applicants to resolve any questions.

Elias Neocleous

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