CySEC

CySEC takes new initiatives to protect investors

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The Cyprus Securities and Exchange Commission (CySEC) is strengthening its regulatory role with the aim to further ensure investors protection.

The country’s top securities watchdog’s crackdown on bad practices comes as some financial firms continue client solicitation and aggressive marketing practices.

At a press conference on Feb.1, CySEC pointed out that in 2021 fines totalling over €1.34m were applied, with the vast majority relating to fines and settlements for Cyprus Investment Firms (CIFs)- which provide investment services in complex financial instruments- that violated the law governing the provision of investment services, known as MiFID II.

Over the past two years, CySEC has imposed over €4.53m in fines, €3m of which were imposed on CIFs. A total of €31m fines have been imposed over the past nine years. In 2021, CySEC suspended the operating license of 6 CIFs, revoked the operating license of 4 CIFs and called more than 70 supervised entities to take specific actions within a specific timeframe to remediate weaknesses and/or omissions that were identified during the supervisory checks.

The Market Surveillance and Investigations Department investigated a number of cases in relation to the violation of the current legislation by issuers, CIFs and ASPs proceeding with 4 entry – investigations and completed 41 investigations. At the end of the year, there were an additional 30 ongoing investigations. Four cases were sent to the Attorney-General of the Republic who will determine whether any criminal offences were committed by the companies or natural persons.

According to a statement “through the adoption of additional tools and the implementation of strategies that enhance its efficiency and effectiveness, CySEC aims to strengthen its ability to identify bad practices in a timely fashion, working proactively to prevent their implementation.”

CySEC’s enhanced supervisory approach includes:

-The use of new technology to monitor and supervise the marketing and social media activities
of regulated entities. CySEC has acquired a specialised system for monitoring supervised
entities’ online marketing activities/materials. This tool will enhance CySEC’s ability to collect,
analyse and monitor the marketing communications of CIFs.

-Expanding CySEC’s supervisory team to increase the level and frequency of supervision. A
total of 32 new staff members have joined CySEC since October 2021, of whom 15 have
supervisory duties.

-Adoption of of Big Data management systems . CySEC is responding to the need to manage
Big Data with RegTech systems that use Artificial Intelligence and Cloud Computing. These
solutions will enable CySEC to quickly screen data from a large and varied volume of trading
activity in order to automatically detect risks and irregularities at an earlier stage and, thus
take proactive action against them.

-Enterprise Risk Management Framework (‘ERM-F’). Currently in progress, the ERM-F supports effective risk management as a continuous and evolving procedure and enables CySEC to approach and assess risks which derive from older, current and future activities.

-New legislation: The ongoing modernisation of the regulatory framework of the securities market remains very high on CySEC’s list of priorities. New legislative developments are expected to take place in 2022.