CySEC Enhances Oversight on Risky Firms with Complex Products

CySEC Intensifies Oversight on CIFs’ Cross-Border Activities

The Cyprus Securities and Exchange Commission (CySEC) has announced a stringent approach to monitoring the cross-border activities of Cypriot Investment Firms (CIFs), particularly those dealing with complex financial products. The increased scrutiny is part of CySEC’s supervisory priorities for 2024, which were detailed in a recent press release.

With a spotlight on Contract for Differences (CFDs), CySEC is ramping up supervision of high and medium high-risk firms, with a focus on their operations beyond Cyprus. George Theocharides, Chair of CySEC, underscored the necessity for regulated entities to have robust governance structures and effective compliance measures. He issued a stark warning: “Regulated entities that do not have adequate governance structure and effective control functions around compliance, internal audit and risk management will not survive in the current regulatory environment.”

The regulatory authority is advocating for a compliance-oriented culture among management and key function holders, aiming to proactively mitigate adverse events. CIFs are being urged to reassess their policies and internal controls to ensure they meet regulatory standards.

CySEC’s supervisory agenda for the year extends to various domains such as professional conduct rules, client onboarding, marketing communications, and adherence to sustainability requirements. There is also a particular emphasis on enhanced oversight of asset managers, ensuring they comply with sustainability risks and reporting obligations as per the Alternative Investment Fund Managers Directive (AIFMD).

As the financial landscape evolves, CySEC is preparing for new regulatory frameworks like the Markets in Crypto-Assets Regulation (MiCA) and the Digital Operational Resilience Act (DORA). Theocharides highlighted the importance of leveraging technology to strengthen business resilience and regulatory compliance amidst changing market conditions.

The supervisory priorities set by CySEC are informed by an in-depth evaluation of market trends, EU regulatory developments, and guidelines from the European Securities and Markets Authority (ESMA).

financial products
CySEC aims to enhance transparency and ensure fairness in the distribution of complex financial products by enforcing stricter compliance checks, increasing educational efforts for consumers, and mandating clearer risk disclosures by firms.

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