Cyprus recently introduced a law which aims to modernise its investment fund legislative regime and allows for the establishment of a new type of investment vehicle: the registered alternative investment fund (RAIF). The RAIF is a hybrid legal creature that combines the elements of authorised and regulated funds without extensive bureaucracy or, more importantly, the need for an operating authorisation from the Cyprus Securities and Exchange Commission.
The European Securities and Markets Authority recently published a practical guide which provides an overview of each EU member state's national rules for the major holdings notification regime provided under the EU Transparency Directive. The guide clarifies certain key obligations and deadlines which apply under the Cyprus legislation that implemented the EU Transparency Directive and the Transparency Requirements Law.
The government recently enacted the Market Abuse Law (102(I)/2016), which implemented the EU Market Abuse Regulation (596/2016). A provision of the regulation which has generated much discussion relates to persons discharging managerial responsibilities and the obligations of persons closely associated with them regarding transactions conducted on their own account concerning the issuer's shares, debt instruments, derivatives or other linked financial instruments.
Cypriot companies are frequently used in cross-border structures, whereby their securities are listed on a regulated market of another member state. In this regard, Cypriot issuers and holders of securities in cross-border listing structures must consider the often overlooked notification requirements under the EU Transparency Directive.
The European Union recently scaled back sanctions regarding Iran, marking the country's return to international capital markets. Investment in Iran through Cyprus-based companies and institutions offers international investors unparalleled benefits over other models of foreign direct investment. These include the Cyprus-Iran bilateral investment treaty, the Cyprus-Iran double tax treaty and Cyprus alternative investment funds.
EU Directive 2013/50/EC, which amends the EU Transparency Directive, has introduced a number of key changes regarding transparency requirements that will help Cypriot issuers to streamline their reporting requirements and obligations. The clarifications regarding depositary receipts and how an issuer determines its home member state offer issuers a greater level of certainty and flexibility.
The Cyprus Securities and Exchange Commission recently issued a circular clarifying when a Cyprus investment firm (CIF) qualifies as a significant CIF. By setting easily recognisable limits in the form of thresholds, the circular clarifies the applicable legislation for CIFs to assess whether they qualify as significant CIFs and makes it easier to identify whether they are compliant with the law.
There are many opportunities and benefits for the use and establishment of fund administrators based in Cyprus. Regulation is provided for under separate yet interweaving regimes based on the EU Alternative Investments Fund Managers (AIFM) Directive. The flexibility and cost-effectiveness of the AIFM Law 2013 and the AIF Law 2014 have turned Cyprus into a thriving jurisdiction for fund administration.
Investment funds in Cyprus are supervised by a common regulator and can be marketed across the European Union on a passport basis. The passport for undertakings for collective investment in transferable securities is a tool for fund promoters that intend to target retail investors, while the passport for alternative investment funds is used by fund promoters that intend to solicit professional investors.
The marketing and distribution of undertakings for collective investment in transferable securities (UCITS) in different EU member states is governed by the national laws of the host member state. The Cypriot legal framework provides for a broad definition of 'marketing', allowing for only limited exceptions from the notification procedure and from compliance with local marketing and distribution rules.
Last year's banking crisis raised the issue of whether and to what extent Cypriot financial services legislation can effectively protect the local asset management industry against a bank's insolvency. The reason for raising this issue is that cash and financial instruments belonging to investment funds and individual clients of asset managers continue to be entrusted to banks for safekeeping.
The Alternative Investment Fund Managers (AIFM) Law imposes three regulatory duties on all Cypriot AIFMs. They must identify themselves as AIFMs, calculate the total assets under management in all alternative investment fund portfolios managed by the Cypriot AIFM as principal manager and, depending on the result of such calculation, register with or seek authorisation from the Cyprus Securities and Exchange Commission.
A recent seminar on the transposition into law of the EU Alternative Investment Fund Managers Directive in Cyprus noted that the new rules will affect the content of relevant agreements and influence services provided by Cypriot banks, fund administrators and asset managers, among others. A number of considerations have emerged following the interaction of the new rules with the Cypriot funds and financial services regime.
Cyprus recently transposed into law the EU Alternative Investment Fund Managers (AIFM) Directive by introducing the AIFM Law. The main provisions of the law that apply to managers of alternative investment funds falling within the scope of the law relate to the authorisation, operating conditions and organisational requirements of a Cypriot AIFM, depositary provisions and cross-border management and marketing.
Cyprus offers prospective investors two distinct structures of legal entities for the establishment of investment funds - international collective investment schemes, for the collective investment of funds to its unit holders, and open-ended undertakings for collective investments in transferable securities, for the collective investment of publicly collected capital in transferable securities.
The Cyprus Stock Exchange recently adopted Regulative Decision 326/2009, which governs the Emerging Companies Market. The Emerging Companies Market is a new financial market in Cyprus which is considered to be unregulated and does not come under the mandatory provisions applicable to regulated markets. The new market increases investment sectors and opportunities for investors.
The object of an international collective investment scheme (ICIS) is the collective investment of funds. The units issued by an ICIS can be redeemed or repurchased at the option of the unit holder directly out of the scheme's assets. Cypriot ICISs are governed by well-defined legal provisions which accord with relevant EU laws and regulations. They are flexible and well-regulated vehicles that also enjoy considerable tax advantages.