by Andria PapageorgiouCySEC’s Circular C680: New ESG Compliance Requirements for Cyprus Investment Firms
The Cyprus Securities and Exchange Commission (CySEC) has issued Circular C680, introducing the Common Supervisory Approach (CSA) for 2024-25, focusing on the integration of sustainability factors into suitability assessments and product governance processes. This aligns with the 2022 amendments to MiFID II Delegated Acts, reinforcing the growing importance of Environmental, Social, and Governance (ESG) considerations in investment services.
Key Compliance Requirements for Cyprus Investment Firms (CIFs)
Under the CSA, CySEC will assess how CIFs integrate sustainability into their investment advice and portfolio management services. The focus areas include:
- Collecting Client ESG Preferences: Firms must gather and document clients’ sustainability preferences during the suitability assessment.
- Understanding ESG Investment Products: Establishing procedures to assess, categorize, and match investment products with ESG factors.
- Ensuring Suitability Compliance: Ensuring that investment recommendations align with clients’ sustainability preferences, potentially applying a portfolio approach where necessary.
- Target Market ESG Assessment: Defining sustainability-related objectives when assessing investment products for a target market definition.
CySEC will conduct on-site inspections and desk-based reviews on selected CIFs from August 2, 2022, to December 31, 2024, to evaluate compliance with these sustainability requirements.
How Andria Papageorgiu Law Firm Can Assist
Navigating the evolving MiFID II sustainability requirements can be complex. Andria Papageorgiou Law Firm is well-positioned to assist Cyprus Investment Firms in ensuring full compliance with the ESG-related obligations outlined in Circular C680.
Our services include:
✔ Regulatory Gap Analysis: Assessing your firm’s current policies and procedures against the new sustainability requirements.
✔ Policy & Documentation Review: Assisting with drafting and updating suitability assessment frameworks and ESG investment policies.
✔ Compliance Training: Providing tailored training sessions for investment professionals on ESG compliance under MiFID II.
✔ Regulatory Filings & Audit Support: Assisting with preparing for CySEC inspections and ensuring robust documentation to withstand regulatory scrutiny.
For further details, refer to the CySEC’s Circular here.
In case you have any questions, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouCySEC Publishes Consultation Paper on Fees under DORA
The Cyprus Securities and Exchange Commission (CySEC) has issued Consultation Paper CP-01-2025, outlining the proposed fees for entities falling under the Digital Operational Resilience Act (DORA). This move aligns with the Regulation (EU) 2022/2554, which aims to establish a harmonized framework for digital operational resilience across the financial sector in the European Union.
A. Scope of the Consultation
The paper is open for feedback from market participants and investors until March 7, 2025. It specifically concerns financial entities regulated by CySEC, including:
- Cyprus Investment Firms (CIFs)
- Crypto-Asset Service Providers (CASPs)
- Central Securities Depositories
- Central Counterparties
- Trading Venues
- Alternative Investment Fund Managers (AIFMs)
- Management Companies
- Crowdfunding Service Providers
B. Key Proposals on Fees
CySEC proposes an annual ICT Oversight Fee, depending on the entity’s classification under DORA:
| Entity Type | Annual ICT Oversight Fee |
|---|---|
| Microenterprises (fewer than 10 employees, revenue < €2M) | €3,000 |
| Small Enterprises (10–50 employees, revenue €2M–€10M) | €6,000 |
| Medium-Sized Enterprises (50–250 employees, revenue ≤ €50M) | €10,000 |
| Larger Entities (above medium-sized threshold) | €20,000 |
Additionally, financial entities required to undergo a Threat-Led Penetration Test (TLPT) will face an additional TLPT assessment fee of €50,000 per test.
C. Implementation and Compliance
Entities must self-categorize based on their latest audited financial statements and submit their classification to CySEC between September 1-15 each year. The applicable fee must be paid by November 30 annually, with the first payments due in 2025.
D. Consultation Questions
CySEC invites stakeholders to provide input on:
- Whether they agree with the proposed annual ICT Oversight Fee.
- Whether they agree with the TLPT assessment fee.
Responses should be concise and submitted in a Word document via email to [email protected], following the format:
“CP-01-2025 – [Name of Organization or Individual]”.
The Consultation Paper on DORA fees marks an important step in Cyprus’ regulatory alignment with EU financial resilience standards. Market participants are encouraged to review the proposals and submit feedback before the March 7 deadline.
For further details, refer to the full Consultation Paper here.
In case you have any questions, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouThe Regulatory Landscape of Proprietary Trading
Proprietary trading, commonly known as “prop trading,” is an integral part of financial markets. By trading with their own capital for direct profit, proprietary trading firms provide liquidity, facilitate market efficiency, and help price discovery. However, this lucrative and dynamic field operates in a complex regulatory environment that demands careful navigation.
A. Understanding Proprietary Trading
In proprietary trading, firms trade stocks, bonds, currencies, commodities, or derivatives using their own funds rather than clients’ capital. This allows firms to capitalize on their market expertise and innovative strategies, potentially earning significant returns. However, these operations are highly technical and come with inherent risks, necessitating strong internal controls and compliance frameworks.
B. Key Regulatory Challenges
1. Classification as an Investment Firm
Regulators in various jurisdictions often classify proprietary trading firms as investment firms, making them subject to licensing requirements and obligations under directives like MiFID II in the European Union. These rules encompass prudential standards, investor protection, and reporting obligations, even if the firm does not manage client funds.
2. Market Abuse and Transparency Requirements
With their potential to influence market prices, prop trading firms are under scrutiny for market abuse risks such as insider trading or manipulation. Compliance with transparency and reporting rules is critical to avoid hefty penalties.
3. Capital Adequacy and Risk Management
Regulators require prop trading firms to maintain sufficient capital reserves to mitigate risks. The implementation of risk management frameworks and stress-testing mechanisms is essential to comply with these requirements.
4. Taxation and Cross-Border Operations
Operating across multiple jurisdictions introduces tax complexities, requiring firms to align with both local and international tax obligations. Understanding withholding taxes, transfer pricing, and VAT implications is vital.
5. Technology and Cybersecurity Risks
The reliance on sophisticated trading algorithms and IT systems exposes proprietary trading firms to cybersecurity threats. Regulatory bodies increasingly demand robust safeguards to protect sensitive data and ensure operational continuity.
C. Proposed Solutions for Proprietary Trading Firms
1. Robust Compliance Frameworks
Implementing a well-designed compliance framework is essential to monitor and adhere to licensing, reporting, and operational requirements. Regular training for staff and appointing a dedicated compliance officer can streamline adherence.
2. Proactive Risk Management
Firms should employ dynamic risk management strategies, including stress testing, scenario analysis, and maintaining adequate capital buffers to safeguard against market volatility.
3. Technology Upgrades and Cybersecurity Measures
Staying ahead of regulatory expectations requires ongoing investment in technology and cybersecurity. This includes encryption, multi-factor authentication, and real-time monitoring to mitigate operational risks.
4. Legal Opinions and Regulatory Advice
Before entering new markets or launching innovative strategies, proprietary trading firms should seek legal opinions to ensure full compliance with applicable laws. Engaging experienced legal advisors can also clarify ambiguities in cross-border operations.
D. The Future of Proprietary Trading
As financial markets evolve, proprietary trading firms must adapt to shifting regulatory expectations. Emerging trends, such as artificial intelligence and machine learning in trading algorithms, will likely attract further regulatory focus. To remain competitive, firms must balance innovation with compliance, ensuring they operate within the law while maintaining a technological edge.
E. How We Can Assist
Our law firm specializes in assisting proprietary trading firms with navigating the complex regulatory landscape. From providing legal opinions to advising on compliance frameworks, risk management, and licensing, we offer tailored solutions to ensure your business thrives in a competitive and highly regulated market.
In case you have any questions, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouCyprus Online Gambling Licenses
Cyprus has established a structured regulatory framework for online gambling, primarily governed by the Betting Law of 2012. The National Betting Authority (NBA) oversees the licensing and regulation of betting activities within the country.
Types of Gambling Licenses in Cyprus
Cyprus offers two main classes of gambling licenses:
- Class A License: This license permits land-based betting services, excluding horse racing. It applies to physical betting establishments where customers can place bets in person.
- Class B License: This license is designated for online betting operators, allowing the provision of online sports betting services. Notably, it does not cover online casino games, slot machines, or lotteries, as these forms of online gambling are currently prohibited in Cyprus.
Key Requirements for Obtaining a Class B License
To secure a Class B online betting license in Cyprus, applicants must meet several stringent criteria:
- Corporate Presence: The applicant company must be registered in Cyprus. If the company is established abroad, it must form a partnership with a Cypriot company whose primary activity is related to betting.
- Financial Stability: Applicants are required to demonstrate sufficient financial resources, including a minimum paid-up capital of €500,000, to ensure the ability to pay players’ winnings and maintain operational stability.
- Bank Guarantee: A bank guarantee of €550,000, issued by a bank in Cyprus or another EU member state, must be provided. This guarantee should be valid for six months beyond the license issuance date and serves as a financial safeguard for player winnings and other obligations.
- Technical Infrastructure: Operators must establish a backup server located in Cyprus, connected to the NBA’s computerized systems to facilitate real-time transaction processing and monitoring of betting activities. Additionally, the official website of the gambling operation must use a .com.cy domain, indicating its registration and operation within Cyprus.
- Compliance with Regulations: Applicants must adhere to all NBA regulations, including implementing robust control and accounting systems, and comply with Anti-Money Laundering (AML) legislation to ensure a secure and fair betting environment.
Application Process and Fees
The process to obtain a Class B license involves several steps:
- Company Registration: Establish a company in Cyprus or form a partnership with a Cypriot company engaged in betting activities.
- Bank Account: Open a corporate bank account in Cyprus to manage all financial transactions related to the gambling operation.
- Application Submission: Submit a comprehensive application to the NBA, including business and financial plans, proof of initial capital, and the required bank guarantee.
- Technical Setup: Ensure the technical infrastructure meets NBA requirements, including setting up the backup server and securing the appropriate domain.
The licensing fees are structured as follows:
- €30,000 for a one-year license
- €45,000 for a two-year license
Taxation
Licensed operators are subject to a combined tax rate of 13% on net gaming revenue, which includes:
- 10% gaming tax
- 3% contribution to the NBA, further allocated as 2% to Cyprus Sports Federations and 1% to gambling addiction programs.
Andria Papageorgiou Law Firm
Our law firm specializes in assisting operators with navigating the complexities of obtaining an online gambling license in Cyprus. From company incorporation to preparing and submitting the license application, we ensure compliance with all legal and regulatory requirements set by the National Betting Authority.
In case you have any questions, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouNavigating Cyprus Corporate Law: Key Insights for Entrepreneurs
Setting up and running a business in Cyprus offers numerous advantages, from the island’s strategic location to its business-friendly tax regime. However, entrepreneurs must also navigate the complexities of Cyprus corporate law to ensure compliance and long-term success.
Below, we highlight key insights that every entrepreneur should know when venturing into the Cypriot business landscape.
1. Choosing the Right Business Structure
The choice of legal structure is critical, as it determines the legal and tax obligations of your business. Common structures include:
- Private Limited Company (Ltd): The most popular structure for small and medium-sized enterprises due to its limited liability.
- Public Limited Company (PLC): Suitable for larger businesses seeking to list on a stock exchange.
- Partnerships: Either general or limited, suitable for businesses with multiple partners.
- Branches or Subsidiaries: For foreign companies seeking a presence in Cyprus.
Each structure has distinct requirements, so selecting the right one depends on your business’s size, goals, and future plans.
2. Company Registration Process
Incorporating a company in Cyprus is a straightforward process but requires attention to detail:
- Name Approval: Submit the proposed name to the Department of the Registrar of Companies for approval.
- Memorandum and Articles of Association: Draft and file these documents to outline the company’s objectives and operational rules.
- Registered Address: Every company must have a physical registered office in Cyprus.
- Directors and Shareholders: At least one director and shareholder are required, and they can be individuals or entities.
- Company Secretary: Mandatory under Cyprus law to maintain statutory records and ensure compliance.
- Minimum Share Capital: No minimum share capital is required for private companies, but it must align with the company’s operational needs.
3. Tax Advantages and Compliance
Cyprus boasts one of the most attractive tax regimes in Europe:
- Corporate Tax Rate: A flat 12.5%, one of the lowest in the EU.
- Double Tax Treaties: Cyprus has treaties with over 60 countries, reducing tax liabilities on cross-border transactions.
- VAT Registration: Businesses with annual turnover exceeding €15,600 must register for VAT.
Compliance with tax and reporting obligations is crucial to avoid penalties. Annual audits by a licensed auditor are mandatory for all companies.
4. Directors’ Duties and Liabilities
Directors play a vital role in ensuring the company’s compliance with Cyprus law. Their responsibilities include:
- Acting in the company’s best interest.
- Ensuring accurate financial reporting.
- Avoiding conflicts of interest.
Failure to fulfill these duties can result in personal liability for directors.
5. Employment Law Considerations
Entrepreneurs must adhere to employment laws to ensure a fair and compliant workplace:
- Employment Contracts: Must comply with Cypriot labor laws, including minimum wage regulations.
- Social Insurance Contributions: Employers must contribute to employees’ social insurance funds.
- Termination Laws: Strict rules govern termination of employment, requiring valid reasons and notice periods.
6. Intellectual Property (IP) Protection
Cyprus offers robust IP protection, essential for safeguarding your brand, products, and ideas. The IP Box regime also provides tax benefits for income derived from qualifying IP assets, making Cyprus an attractive destination for businesses with innovative assets.
7. Andria Papageorgiou Law Firm
Navigating Cyprus corporate law requires careful planning and attention to detail. While the regulatory framework is business-friendly, understanding your obligations and leveraging the island’s advantages is key to success.
Our law firm, with over a decade of experience in Cyprus regulatory and corporate law, is here to support you every step of the way. From company formation and compliance to complex legal matters, we provide tailored solutions to meet your unique needs. Let us help you unlock the full potential of doing business in Cyprus with expert guidance and unwavering dedication to your success.
In case you have any questions, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.