Circular C513 (“the Circular”) dated 19/05/2022 regarding CIF’s on-going monitoring of their prudential requirements under Regulation (EU) 2019/2033 (Investment Firms Regulation ‘IFR’).
In light of the Prudential Supervision of Investment Firms Law of 2021 (the “Law”), CySEC wishes to remind all Cyprus Investment Firms (the ‘CIFs’) of the necessary steps they must take when they no longer meet their own funds requirements and/or concentration limits, as well as their obligation to have sound administrative and accounting procedures and robust internal control mechanisms.
The key takeaways from CySEC’s C513 circular can be found below:
- Class 2 and Class 3 CIFs should notify CySEC as soon as they become aware that their own funds fall below their own funds requirement, pursuant to Article 11(4) of Regulation (EU) 2019/2033 (‘IFR’).
- Class 2 CIFs should notify CySEC without delay when they exceed the concentration limits of Article 37 of IFR, as required by article 38 of IFR.
- All CIFs should have sound administrative and accounting procedures to enable them to monitor their own funds, own funds requirements, concentration limits and all other obligations pursuant to Article 35 (1) of the IFR and Section 20(1)(c) of the Prudential Supervision of Investment Firms Law of 2021 (the ‘L.165(I)/2021’).
- A number of CIFs that have not met the own funds requirements and concentration limits in accordance to Articles 11 and 37 of the IFR, have notified CySEC through the normal submission of the Prudential Forms 165-01 or 165-02, which takes place 40 days following the reporting reference date.
CySEC expectations:
- Implement sound administration and accounting procedures and adequate internal control mechanisms, appropriate and proportionate to the nature, scale and complexity of the risks inherent in the business model and the activities of the CIF, which will enable them to monitor on an on-going basis all their prudential requirements accordingly.
- Notify CySEC without undue delay, and in any case prior to the normal submission of the Prudential Forms 165-01/165-02, when they no longer meet the requirements of Articles 11 and 37 of IFR.
This notification to CySEC must be done through the submission of the Prudential Forms 165-01 or 165-02 (depending on CIF’s categorisation), via TRS, under exceptional reporting as explained in the Practical Guide for the submission of the Prudential forms under IFR/IFD.
- Verify that their internal control framework (i.e., compliance, risk management and internal audit functions, where established) ensures compliance with laws, regulations and supervisory requirements at all times.
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