The Cyprus Securities and Exchange Commission or CySEC is the agency that regulates the financial industry in Cyprus, which is a European Union member state. As a member of the EU, the regulations and operations of this organization must comply with the European Union’s Markets in Financial Instruments Directive or MiFID that became effective in 2004.
The MiFID is a harmonizing law that provides regulation for the financial industry across the 31 member states of the European Economic Area. This includes Norway, Iceland and Lichtenstein in addition to the 28 European Union member states.
Due to its compliance with the MiFID, and the fact that Cyprus is a member state of the European Union, many binary option and retail forex brokers have headquartered themselves in Cyprus and registered with CySEC.
CySEC is administered by a board consisting of five members, composed of a Chairman, a Vice Chairman and three other members, which serve on the board for a term of five years. The Governor of the Central Bank of Cyprus is represented by a non-voting board member.
CySEC was created as a public corporate body in 2001 in accordance with Section 5 of the Cyprus Securities and Exchange Commission Law of 2001 (Establishment and Responsibilities).
After Cyprus became a member of the European Union in 2004, the agency automatically became part of the MiFID regulatory scheme, and firms already registered with CySEC had instant access to all European markets via the MiFID passport program.
Nevertheless, with Cyprus then a member of the EU, and with the adoption of the Euro as the country’s official currency, the financial regulatory environment was significantly altered since the island nation was previously considered a tax haven.
In May of 2012, CySEC announced it was reclassifying binary options as financial instruments. CySEC consequently became the first financial regulator to recognize and regulate binary options as financial instruments.
In April of 2014, the European Parliament approved MiFID II and the Markets in Financial Instruments Regulation or MiFIR, which covered a larger group of financial institutions and products.
Location and Jurisdiction
CySEC’s headquarters are in the capital city of Nicosia, Republic of Cyprus. The agency’s jurisdiction is the Republic of Cyprus, and through the MiFID, the 31 nations of the European Economic Area. The regulator’s official website is situated at https://www.cysec.gov.cy.
Due to the Republic of Cyprus’ low taxation levels and ease of entry, Cyprus has become the largest home base for forex brokers in the world. Brokers that open an office in Cyprus must obtain a certification known as a CIF Certification, which allows them to carry out investment activities after passing the appropriate exams and registering in the public register of certified persons.
CySEC has a number of responsibilities, which include the following:
- Supervision and operation of the Cyprus Stock Exchange.
- Supervision of the issue of securities listed on the Cyprus Stock Exchange, Collective Investment Schemes, and Licensed Investment Service companies.
- Inspect companies that have stock traded on the Cyprus Stock Exchange, as well as brokers and brokerage firms, investment advisors and mutual fund managers.
- Request and gather information needed for the exercise of its duties, including information provided in writing from all persons and organizations which can provide this information.
- Grant licenses to investment professionals including, investment firms, consultants, brokers and brokerage firms.
- The recall of operational licenses in the event of special circumstances determined by the published Regulations and which harmonize with the Law of Establishment of the Cyprus Securities and Exchange Commission.
- Impose sanctions and disciplinary actions to investment consultants, advisors, brokers and brokerage firms and any other legal or natural person which have violated the provisions of Cyprus Stock Market legislation.
CySEC in the News
This link connects to an article that reports on CySEC suspending XTrade’s license for violating CySEC’s marketing regulations: