Classification of investment companies in Cyprus

IFD and IFR introduced a new system designed to classify investment firms. This system is based on the activities of such companies, on their size, systemic importance in the overall structure and group partnerships. Therefore, the capital adequacy requirements of CIF will be based on the class of the investment company. The following four categories stand out here.

Class 1A of investment companies in Cyprus.

Investment firm of class 1A in Cyprus is regarded as a systemically important company and will conduct transactions upon request for authorization as a credit institution. The company has the appropriate authority to provide the following investment services:

• Working transactions with a public account.
• Underwriting of financial instruments and placement of such instruments with firm commitments.
• A company in this category plays the following roles.
• Insurance company.
• Organization of collective investment.
• Dealer company for emission quotas and commodities.

The firm meets all of the parameters below:

• The assets held by the company are equal to or more than 30 billion euros, or;
• The assets held by the company are less than 30 billion euros, while the company is part of a group that holds the consolidated assets of all companies in this group. Individually, these companies have total assets of at least 30 billion euros, and are providers of the above services, and these services are either more than 30 billion euros, or;
• The assets held by the company are less than 30 billion euros, while the company is part of a group that holds the consolidated assets of all enterprises in this group, and these companies are providers of the above services, and these services are equal to or more than 30 billion euros.

Class 1B.

An investment entity belonging to this category will remain Cyprus investment entity. This company has the authority to offer the following investment services:

• Working transactions with a public account.
• Underwriting of financial instruments and placement of such instruments with firm commitments.

A company in this category plays the following roles:

• Insurance company.
• Organization of collective investment.
• Dealer company for emission allowances and goods.

The firm meets all of the parameters below:

• The assets held by the company are equal to or exceed 15 billion euros, or;
• The assets held by the company are equal to less than 15 billion euros, while the company is part of a group that holds the consolidated assets of all companies in this group. Individually, these companies have total assets of at least 15 billion euros, and are providers of the above services, and these services are equal to or more than 15 billion euros.

Class 2.

Cyprus investment firms in class 2 category do not meet the requirements for Class 1 or Class 3 firms. Most of the entities that are generally classified under this category are so-called:

• “STP CIF”, where clients’ funds are held;
• “Market Maker CIF” that does not meet the criteria for Class 1.

Class 3.

Investment companies in this category are commonly referred to as “CIF Portfolio Management or Investment Advisor”. They do not hold customer funds. Such a firm qualifies as a small and unrelated investment entity if it meets each of the criteria below:

• The company does not comply with keeping clients’ money; carries out operations for the protection or management of assets; market risks associated with clearing guarantees or positions; etc,
• Assets managed by the company are less than 1.2 billion euros,
• Orders received from customers and processed by the company are less than EUR 100 million per day, which applies to cash transactions. For derivatives, this amount is equal to 1 billion euros per day.
• The total amount of gross income for the annual period received from the activities of the investment firm and the provision of investment services is less than 30 million euros.
• The off-balance sheet and book value of the investment firm is less than EUR 100 million.

If you have any questions regarding Cyprus classification of investment companies please do not hesitate to contact our team.

For details: Julia.z@eternitylaw.com / Telegram @juliazhil

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