Cyprus Forex License MIFID
FX or forex (foreign exchange) trading is a relatively new type of market which investment firm’s worldwide conduct business in. It encompasses generally an over-the-counter market where buyers and sellers conduct foreign exchange transactions.
Cyprus, due to its attractive tax regime, coupled with its EU Member status, its implementation of the Markets in Financial Instruments Directive (‘MiFid’), and regulatory regime has proved the perfect jurisdiction for the incorporation and operation of FX companies.
Especially after the recent changes in EU directives and regulations non-EU regulated forex companies can no longer operate in the EU and/ or the euro as a currency.
So, nowadays there is a big trend of setting up regulated forex companies in Cyprus and Malta that in addition have very favorable tax and regulatory regimes coupled with very low operating cost levels and considerable financial services, legal, tax and accounting expertise and infrastructure.
Minimum Capital Requirements (CIF in general)
In February 2014 there was an amendment of Law N.193(I)/2014 Article 10 (Law of the Investment Services and Activities and Regulated Markets), whereby the initial capital requirements of CIFs has been reduced significantly in order to attract further investments in Cyprus.
Hence the initial capital requirements were configured as below:
• A CIF that provides one or more of the following investment services and holds clients' money or/and client’s financial instruments, must have an initial capital of at least one hundred twenty five thousand euro (€125.000):
(a) The reception and transmission of orders in relation to financial instruments;
(b) the execution of orders on behalf of clients;
(c) portfolio management;
(d) provision of investment advice;
• A CIF that provides the investment services stated in subsection (a) or/and (d) above, and does not hold clients' money or/and clients’ financial instruments, and which for that reason may not at any time place themselves in debt with their clients, may have an initial capital of:
(a) At least fifty thousand euro (€50.000);
(b) at least forty thousand euro (€40.000) and professional indemnity insurance covering all member states or some other comparable guarantee against liability arising from professional negligence, that it enters into with an insurance undertaking, representing an amount of at least one million euro (€1.000.000), per claim, and in aggregate at least one million five hundred thousand euro (€1.500.000) per year for all claims.
• A CIF that provides one or more of the following investment services or/and performs the following investment activities shall have an initial capital of at least seven hundred thirty thousand euro (€730.000):
(a) Dealing on own account;
(b) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
(c) Placing of financial instruments without a firm commitment basis;
(d) Operation of Multilateral Trading Facility.
A Cyprus FX company must have at least one Executive Director, who passes a ‘fit and proper’ requirement test, who is resident in Cyprus. This means that he must have an investment/financial background, has a respected reputation in business circles and has a clean criminal record.
The requirement for Cyprus residency is to enable Cysec to correspond and liaise with him especially in as regards reporting as well as for clarifications and spot checks.
Furthermore, the company must have a General Manager, who is non-executive, and has no requirement to be resident in Cyprus. The requirement is that he visits Cyprus on a regular basis to oversee the functions of the company. The role of the General Manager is mainly to oversee the Executive Director and the Board of Directors in general.