Use Of CySec How CySec Works For Regulation

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Use Of CySec: How CySec Works For Regulation

Binary Option has become so much popular in last few years.

The industry has become one of the priorities for the trader who wants to invest independently by his own.

No industry really goes smoothly without any obstacle, so is the case for binary option trading market.

You will get to know about some scam related to binary option trading now and then.

To be aware from this scam, we highly suggest our readers to read our articles on binary option guides regularly.

Choose a Regulated Broker

Binary Options is considered as the grey area in financial industry by some of the countries.

But some countries recognized binary options trading as a strong financial area and approved their contribution in economy.

Some countries see them as economy gadget, some consider them as gaming.

It is in charge for regulating binary options in Cyprus and EU.

Benefits of choosing regulated broker are many; one of the main reasons is traders get protection from scamming loosing usually.

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Binary options trading require all regulated brokers to follow some rules and regulation, violating any rule can bring bad consequence for brokers.

We like that, regulated brokers work under constant observation.

This criterion of work allows traders to contact the supervisory board in charge for the brokers.

What to Do Before Filing a Complaint with CySEC?

We evidenced that sometimes regulated brokers get also penalized for practicing scamming.

To be secured from any unwanted problem, we highly suggest our readers to trade with the brokers who are on our best binary option broker list.

Most of time traders face problem with brokers while withdrawing the money.

That’s the point when most of the traders get to know that the brokers they are trading with are a scammer.

We encountered that while withdrawing money; traders don’t get any reply from brokers or customer care.

Sometimes brokers also ask for additional fund without showing any valid reason, which is also a sort of scamming.

Unauthorized bonus, unofficial depositing using trader’s credit card and cold calling are also considered as scamming.

If any trader faces this sort of problem, he is suggested to contact with regulatory body or supervisory board first, unless sharing this information online or in forum can give brokers chance to change their setting.

Dropping a complaint with CySEC

CySEC will always tell you to contact the broker first.

If the broker co-operates you, inform them that you know your rights here.

After dealing with broker, CIF (Cyprus Investment Firm) will give you a specific reference number, which is very much important because all the procedures will be needed this number.

Reference number will contain all information like; your name, e-mail, all information of trading.

After submitting a complaint brokers are obligated to response within 5 days and also get 60 days to resolve the problem.

CySEC does not investigate individual complaints, but is a regulatory body or supervisory board that supervises all brokers and it takes all complaints into consideration.

Sometimes traders on binary options forums complain that CySEC works slowly to answer their complaints, but we suggest traders to hold patience.

Sometimes traders are not happy with the response they get from brokers.

If traders are not satisfied with brokers, the next place they have to go is Financial Ombudsman .

It’s a mediator who works between trader and broker.

There are some procedures to deal with Financial Ombudsman.

Trader has to contact with Ombudsman within 4 months after CIF’s final decision.

After all those things, if nothing gets sorted out we suggest traders to go to court, which is so much rare.

CySEC – Cyprus Securities and Exchange Commission

A substantial number of retail forex and binary options brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). In fact, you will actually find more regulated forex brokers in Cyprus than any other jurisdiction. However, what precisely is CySEC? What regulations are imposed on licensed, registered brokers and how efficient is the regulatory agency? This article will answer all of the above, while also covering CySEC’s history, criticisms and key announcements.

What is CySEC?

CySEC is the financial regulatory agency of Cyprus. When Cyprus became an EU member state in 2004, all regulations, processes and operations of CySEC had to comply with the European MiFID financial harmonisation law.

Purpose & Responsibilities

As the official website details, CySEC’s main aims and responsibilities are as follows:

  • Effective monitoring and supervision of the local stock exchange and related companies and brokers.
  • To distribute licenses allowing for investment and brokerage firms to operate in the stock, forex and CFD market.
  • Effectively collating all necessary information on regulated forex companies and other brokers lists.
  • To understand the meaning and advanced trading benefits of new products, such as the cryptocurrency Bitcoin and other virtual currencies.
  • To accurately review and amend when necessary new forex regulations, license certificates and investment advice.
  • Undertaking training to tackle money laundering and other threats to regulatory systems.
  • To inspect the list of regulated brokers and companies, including checking they are meeting reporting requirements and operating a fair remuneration policy.
  • To ask questions and impose sanctions on any registered companies that breach regulations.

CySEC Brokers

History

CySEC is a public corporate body that sprung to life in 2001 from the Cyprus Securities and Exchange Commission Law of 2001. As a result of Cyprus becoming one of the EU members, all registered brokers and licensed companies were given access to European markets.

However, the EU registration and transition weren’t without problems. The move had a significant impact on the tax haven regulatory framework that CySEC has previously adopted.

By the time May 4th, 2020 had rolled around, the board made an announcement that it was changing the classification of binary options so they counted as financial instruments. All platforms operating in Cyprus had to adhere to the new binary options regulations in 30 days. These new rules included providing consumers with clear information about products and a requirement to “operate in a way that is fair to clients”.

This was a significant move for two reasons. Firstly, the majority of platforms are found in Cyprus. Secondly, CySEC became the first regulatory body to recognise and regulate binary options as financial instruments.

Structure

A board consisting of five members, including two full-time employees, a chairman and vice-chairman run CySEC. On top of that, a non-voting board member represents the Central Bank of Cyprus.

CySEC also has links to the government. The Council of Ministers decides on the board of directors after receiving proposals from the Minister of Finance.

Regulation & Processing

Regulation

When you take CySEC vs FCA or CFTC you realise the former is constantly having to adjust regulations to try and keep up with significant growth rates and more reputable regulatory agencies.

In fact, during 2020, CySEC was under attack in the news from traders and industry commentators who thought more stringent regulations were necessary to monitor high-risk investment firms. In particular, there was an argument fines for binary options brokers were too low.

Processing

Because they were the first to regulate binary options, a huge number of brokers hold CySEC licenses so they can operate within the Eurozone. However, many believe verification and processing times could be much quicker.

It’s also worth noting many brokerage websites claim “Binary Options are the simplest way to trade the market. They have been available since 2008, and became regulated in Europe by CySEC in May 2020”. However, this does not necessarily mean that a particular broker is regulated by CySEC. So traders should search for the 5 Digit CySEC License Number and then verify the license on the CySEC website.

Broker Guidelines

CySEC has distributed guidelines and regulations on a whole range of trading activities. This includes bonus circulars, new guidelines for cryptocurrencies, such as bitcoin and directives for money laundering.

But with so many regulations, let’s touch on a couple of important examples that a regulated forex company must adhere to:

  • A minimum of two people must be in charge of the administration of an investment firm, while also in the appropriate register.
  • Brokers with licenses must notify CySEC before extending their services. Therefore, it is in the best interest of forex brokers to detail all the investment services it plans to offer at the outset.

In addition to the above, CySEC can also set minimum capital requirements, bonus qualifications and leverage limits. Furthermore, brokers must meet regulations around indemnity insurance and ensure access to investor compensation funds.

Note if a broker fails to meet license requirements, their offices can swiftly receive notifications of fines or even the removal of their license.

Criticisms

Those with contacts in the industry or follow relevant news announcements will have seen there are certain criticisms of CySEC. These include:

  • As a result of hazy definitions and inaction, a number of licensed brokers and investment services have escaped infringements with minor warnings.
  • Despite having the law to fall back on, CySEC compliance officers hand out relatively small non-compliance fines.
  • When there is a potential break of regulations, CySEC is too slow to respond. For example, an investigation into IronFX only began after considerable consumer complaints and media attention.
  • There is a distinct lack of direct communication for individuals searching to make a complaint. Unfortunately, unlike the NFA, any complaints have to be made directly to your broker. This puts you at risk of late and inadequate responses. The only other alternative is going to a financial ombudsman, which can also mean extensive waiting times. CySEC’s unwillingness to resolve direct complaints attracts criticism from a range of other regulatory bodies.

CySEC Responses

It’s worth noting CySEC have taken action to address some of these issues. In fact, they have pursued greater transparency around listed brokers and tougher fines. Furthermore, they have taken more action to suspend and revoke licenses.

In addition, a 2020 circular said: “the name of the regulated entities, or the use of words within their name, should reflect the work/activities they are engaged in, for purposes of not misleading the investors”. Also, to tackle consumer complaints, they have brought in a new structure.

It’s also worth pointing out that despite criticism, CySEC can be in pro-active. For example, new legislation in France was brought in to prevent digital advertising of high-risk investment products. CySEC were then quick to bring out a circular informing companies they would need to adhere to these new regulations when advertising to French clients.

Final Thoughts

CySEC still has much to do to be as reputable as the FCA in the UK and the CFTC in the USA. However, they remain a popular body and continue to grow as a result of low barriers to entry and less stringent regulations.

Remember before you sign up with a brokerage, always check the firm is one of the approved brokers using their registration number and the official CySEC website.

CySEC: An Overview of the Cyprus Securities and Exchange Commission

The Cyprus Securities and Exchange Commission better known as CySEC, is the financial regulatory body of Cyprus.

It was established in accordance with section 5 of the Securities and Exchange Commission (Establishment and Responsibilities) Law of 2001, as a public legal entity. The operation of the CySEC is governed by the Laws regulating the Structure, Responsibilities, Powers, Organization of the Cyprus Securities and Exchange Commission and Other Related Matters (Law 73(I)/2009).

Structure

The CySEC is administered by a five-member Board, consisting of Chairwoman and Vice-Chairman, who provide their services on a full and exclusive employment basis, and three additional non-executive members.

All CySEC’s Board members are appointed by the Council of Ministers, following a proposal of the Minister of Finance. The service for all the members is renewable every five years.

CySEC is the independent public supervisory Authority, responsible for the supervision of the investment services market, transactions in transferable securities carried out in the Republic of Cyprus and the collective investment and asset management sector. It also supervises the firms, offering administrative services, hence it has various roles and contains the following departments:

  • Strategy and international relations
  • Issuers
  • Authorizations
  • Supervision
  • AML-CFT Anti Money Laundering – Counter Financing Terrorism
  • Market surveillance and investigations
  • Legal
  • Administration and personnel
  • Information technology and operations
  • Risk and statistics department
  • Internal audit

Vision and mission

The vision of the CySEC is to establish the Cyprus securities market as one of the safest, most reliable and attractive destinations for investment, hence a significant number of overseas retail forex brokers and binary options brokers, have obtained registration from CySEC.

The mission of the CySEC is to exercise effective supervision, to ensure investor protection and the healthy development of the securities market.

Responsibilities

The CySEC is the independent public supervisory Authority responsible for the supervision of the investment services market, transactions in transferable securities carried out in the Republic of Cyprus and the collective investment and asset management sector. It also supervises the firms offering administrative services, which do not fall under the supervision of the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Cyprus Bar Association. As an EU Member State, CySEC’s financial regulations and operations comply with the European MiFID financial harmonization requirements.

The main duties and responsibilities of the CySEC are set out in Article 25, Part IV of Law 73(I)/2009 and may be summarized as follows:

  • To examine applications and grant operating licenses to entities under its supervision, as well as to suspend and revoke the said licenses;
  • To supervise and regulate the operation of the Cyprus Stock Exchange(CSE) and of other organised markets in the Republic, and the transactions carried out in these markets;
  • To supervise and regulate the agencies under its supervision, in order to ensure their compliance with the laws governing their operation;
  • To carry out all necessary investigations in view of the exercise of its duties under the law as well as on behalf of other foreign competent Authorities;
  • To request and collect information, which is necessary or conducive to the exercise of its duties under the law and to demand by written request, the provision of information from any natural or legal person or organisation, deemed to be in a position to provide the required information;
  • To impose the administrative and disciplinary sanctions provided by the law;
  • To require the termination of practices, which are contrary to the securities market laws;
  • To apply to a competent court for the issue of an order for detention, or charge or freezing or prevention of alienation or transaction, involving assets;
  • To issue regulatory Directives and Decisions;
  • To cooperate and exchange data and information with other public Authorities in the Republic, competent foreign supervisory Authorities and other organisations.

The CySEC is responsible for the supervision of operations and ensuring the compliance with the relevant legislation of the following entities:

  • Cyprus Investment Firms (CIFs)
  • Cyprus branches of Investment Firms (IFs) of other EU Member States
  • Tied Agents of CIFs
  • Undertakings for Collective Investment in Transferable Securities (UCITS)
  • UCITS (Undertakings for Collective Investment in Transferable Securities) Management Companies
  • UCITS Agents
  • Cyprus branches of UCITS Management Companies of other EU member-states
  • Administrative Services Companies – Trustee and Fiduciary Service Providers
  • Variable Capital Investment Companies (VCIC)
  • Alternative Investment Fund Managers (AIFMs)
  • Regulated Markets (RM)
  • Central Counterparty Clearing House (CCPs) of over-the-counter (OTC) derivatives
  • Trade depositories of over-the-counter (OTC) derivatives
  • Alternative Investment Funds (AIFs)
  • In addition to the above responsibilities, the CySEC has also been entrusted with powers and duties under the following laws:

    • The Public Offer and Prospectus Law of 2005
    • The Insider Dealing and Market Manipulation (Market Abuse) Law of 2005
    • The Public Takeover Bids Law of 2007
    • The Transparency Requirements (Transferable Securities Admitted to Trading on a Regulated Market) Law of 2007

    Authorization and licensing

    The provision of investment services and/or the performance of investment activities as a regular occupation or business is a subject to prior authorisation by CySEC in accordance with Chapter I of Law 87(I)/2020 – For the Provision of Investment Services, the Exercise of Investment Activities, the Operation of the Regulated Markets.

    Once authorization is granted, the CySEC registers all Cyprus Investment Firms (CIFs) in a register, which is publicly accessible and contains information on the services and/or activities, for which the CIF is authorized. The Commission updates the register and notifies every authorization to the European Securities and Market Authorities (ESMA).

    The CIF authorisation is valid for the entire European Union and allows a CIF to provide the services or perform the activities, for which it has been authorized throughout the European Union, either through the right of establishment, including through a branch, or through the freedom to provide services.

    Furthermore, the CySEC will grant a license only if all capital requirements are in accordance with Regulation (EU) No. 575/2020, having regard to the nature of the investment service or investment activity, are met.

    A CIF, which does not deal in any financial instruments for its own account or underwrites, issues of financial instruments on a firm commitment basis, but which holds client money or securities, and which offers one or more of the following services, shall have initial capital of EUR125 000:

    • the reception and transmission of investors’ orders for financial instruments;
    • the execution of investors’ orders for financial instruments;
    • the management of individual portfolios of investments in financial instruments;
    • Investment Advice

    A CIF, which intends to offer all of the below services, shall be required at all times to maintain initial capital of not less than EUR730 000:

    • Reception and Transmission of Orders
    • Execution of Orders on Clients` Behalf
    • Portfolio Management
    • Investment Advice
    • Underwriting and placing of financial instruments on a firm commitment basis
    • Dealing on Own Account
    • Operation of Multilateral Trading Facility (MTF)
    • Operation of Organized Trading Facility (OTF)

    Certifications and training

    All individuals who are employed by a CIFs, must possess sufficient knowledge, skills and experience to perform their duties.

    In accordance with Article 92 of Law 87(I)/2020 a CIF’s employee involved in the provision of investment services or the carrying out of investment activities, must be certified and registered in the public register of certified persons, after passing the relevant exams (basic and advanced). They must also fulfil the requirements of R.A.D 22 of 2020 – Directive regarding the certification of persons and certification registers, which specify the minimum academic and professional qualifications, which they should hold. According to the Directive the CySEC prepares and makes public on its website a table of all Successful Candidates.

    Persons registered in the Public Register are obligated to renew their registration and therefore attend continuous professional training (CPT) and seminars, on topics that fall within the relevant legislation, which applies to them and which relates directly to the duties, which they will undertake as part of their certification.

    To this end CySEC organize seminars and training for Continued Professional Training (CPT), which are addressed primarily to the persons registered in the public register (certified persons), in order to maintain their certifications and registration in the Public Register.

    International Affairs

    The CySEC actively participates in the European and International affairs, through the:

    • Conclusion of bilateral and multilateral agreements in the form of memoranda of understanding (MOU) with Competent Foreign Supervisory Authorities,
    • Participation in committees and groups of the European Securities and Market Authority (ESMA),
    • Participation in the European Systemic Risk Board (ESRB)
    • Participation in the International Organization of Securities Commissions (IOSCO)
    • Participation in national working groups, which participate in the working groups of the Council of the European Union.

    The international cooperation is an essential to the CySEC’s work, in view of the increasing globalization component of financial markets, together with the increasing number and complexity of the supervised entities with cross-border activities.

    Social Responsibility

    The CySEC, recognizing the positive contribution of Corporate Social Responsibility (CSR) to society, has adopted as part of its long-term strategy, various actions for contributing to society and implements several initiatives related to social responsibility.

    Conclusion

    The role, duties and responsibilities given to CySEC are of great importance to the whole Cypriot economy and thus CySEC is very strict, precise and pay high attention to detail. Companies which are under its supervision often find it hard to keep up with the pace of the fast-changing regulations and the stringent demands of the regulator.

    Nevertheless, the ultimate responsibility of CySEC is to safeguard the interests of the investors, hence the primary commitment is to them.

    Please visit our FS Advisory pages for more information.

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