Scope:
- Cyprus Investment Firms (CIFs)
Summary:
CySEC issued Circular C801 to inform Cyprus Investment Firms (CIFs) that ESMA published Q&A 2785 (21 September 2026) confirming that under Article 16(9) of MiFID II, investment firms are NOT permitted to retain interest earned on client funds deposited with credit institutions. The European Commission clarified that the obligation not to use client funds for the firm’s own account includes not retaining any interest accrued on those funds. In light of the publication of the ESMA Q&A, CySEC has withdrawn Circular ΕΓ144-2009-07 with immediate effect as it no longer reflects CySEC’s supervisory expectations.
Implications:
Affected CIFs should:
- Review without delay all arrangements relating to interest generated on client funds held at credit institutions.
- Cease retaining any interest accrued on client funds deposited with credit institutions – ensure such interest is passed on to clients.
- Ensure clients’ rights and interests have been duly considered in any revised arrangements.
- Adjust internal accounting systems, terms of business, and safeguarding policies to ensure interest is not recorded under the CIF’s own revenues.
- Document the assessment performed and measures implemented to evidence compliance.
- Senior management to oversee implementation and ensure timely completion as CySEC plans to audit CIFs to ensure full compliance.
- Compliance officers and internal/external auditors to incorporate this into reviews and reflect findings in reports to CySEC.
Should you need assistance with implementing the necessary actions and complying with C801 please feel free to contact us.