The recently published Consultation Paper published by CySEC outlines the regulator’s enhanced efforts to safeguard clients’ funds held by CIF, or Cyprus Investment Firms.
In the paper, that was published on Monday, CySEC endeavors to oblige CIFs to instantly put received client funds into one or more accounts within a central bank, legit money market fund, third country bank, payment service providers, electronic funds institutions, or any other authorized credit institution(s). It seems that CySEC licensed companies were taking their time with these procedures prior to the introduction of this new policy.
In case brokers (or other CIFs) cannot comply with this new directive, for any reason, they must present a clear reason for not being able to do so. As CySEC states,
“CIFs must demonstrate to CySEC that they have done everything in their powers to obtain separately titled accounts, including using another third party. If a CIF cannot demonstrate to CySEC that it has fully applied the above-mentioned requirements, then CySEC may request from the CIF to segregate an equivalent amount of its own funds in a separately titled account in another jurisdiction where the CIF can comply with the requirement of paragraph 4(1)(e) of Directive,”
The Consultation Paper makes it clear that CIFs have to also audit the banks where the clients’ segregated accounts are stored, at least once per year.
The paper also takes care of the issue of CIF’s clients’ funds been segregated into the same bank used by the CIF for its own capital.
“Where a CIF deposits client funds with a bank or money market fund of the same group as the CIF, then the CIF must limit the funds that are deposited with any such group entity or combination of any such group entities so that the funds do not exceed 20% of all such funds.”