Cyprus: Investment Services And Activities And Regulated Markets Law 144 (1) 2007 (MIFID) In Cyprus - Update

Last Updated: 11 November 2011
Article by Yiannos Georgiades

As of November 2007, Cyprus has been fully compliant with the Markets in (Financial Instruments Directive), known as MIFID. The legislation was passed on 25 November 2007 and published in the Cyprus Gazette on 26 November 2007. The new law replaces the Investment Firm Law of 2002.

The European Union is aiming, via MIFID, to facilitate the integration of Europe's financial markets.

All of the enterprises that are involved with the provision and performance of investment services, activities and the operation of regulated markets must be licensed by the Cyprus Securities and Exchange Commission.

According to section 4(2) of the new law 144(1)2007, which came into force on 1 November 2007, the persons who are entitled to provide investment services are (a) Cyprus investment companies authorised to operate under S. 6 (2) of the law, (b) investment companies of member states according to section 77(1) and S.80(1) (c) Third County investment companies under S.78(1) and banks under S.118 and co-ops.

The authorities which are authorised to regulate the operation of the investment companies under the provisions of this law are the Central Bank, the authority for the supervision and development of co-op societies and the Cyprus Securities and Exchange Commission.

Under the law, no-one is entitled to receive payment for services unless they have a licence to provide investment services and if they do so without one, this amounts to a criminal offence.

The criminal court has the jurisdiction to stay the activities of any person who is charged for any offence under the provisions of this law.

If he finds the accused guilty of an offence under the law, the judge can not only punish him with a fine and by imposing imprisonment, but he can also order him not to provide any investment services regulated by the law for a 5-year period.

Terms such as "investment services", "investment activities", "regulated market", "stock exchange", financial services, "stock broking services", broker or any other similar words in any language may not be used by anyone unless he is licensed according to the provisions of this law.

Under section 6(5) of the law, the licence to operate investment companies is valid in all member states, either through a branch or by simply providing services or activities in any of the member states.

According to the new law, the company is entitled to provide the services indicated in their licence and in order to avoid changing their memorandum and articles of association every time they want to expand their services, they are required to include in their memorandum and articles of association a clause providing that the company will provide the investment services specified in their memorandum of incorporation.


The requirements for granting licence for an investment company to operate may be summarised as follows:

1. Initial share capital

(a) In cases of reception, transmission, execution, portfolio management and investment advice 200,000

(b) For reception, transmission, investment advice without handling any clients' funds/instruments 80,000 or 40,000 and professional indemnity insurance with coverage in all member state countries for at least 1,000,000 for each loss and a total of 1,500,000 annually for all losses due to negligence

(c) for own account, underwriting and operation of Multilateral Trading Facilities MTF 1,000,000

(d) reception, transmission, investment advice without handling client funds/instruments and insurance intermediary 40,000 or 20,000 and professional indemnity insurance with coverage for all member states for at least 500,000 for each loss and 750,000 for all losses for each year.

2. In the memorandum of association, it must be mentioned that the company is operating as an investment company and provides the services provided in their licence, which was granted to them by the Commission.

3. The people who direct the company must have the required good standards of integrity and experience and the company must be managed by at least 2 such people.

4. The names of the shareholders or the ultimate beneficial owners must be disclosed and the shares they hold in the company. If the shareholders are not considered suitable, the Commission may refuse authorisation.

5. The persons employed by the company must have such integrity, good repute, skills, knowledge and expertise so that they can carry out their duties properly.

6. The company's head offices must be located in Cyprus.

7. The company must be a member of the investor compensation fund.

According to the law, the Commission will not arrange authorisation if according to the laws, regulations or administrative provisions of a third country, the effective exercise of the supervisory functions of the Commission are prevented.


Many of the provisions of the law aim to protect the customers' best interests by imposing organisational requirements. The organisational requirements may be summarised as follows:

The company must have certain policies and procedures to facilitate compliance with the legislation, rules for personal transactions, measures for protecting clients from any conflict of interest, to maintain continuous and regular performance of services, activities, outsourcing of functions, services, activities to third parties in such a way that it will not influence the internal control and efficiency of the investment company when complying with their obligations, maintaining proper governance with transparency.

Use of efficient administrative accounting procedures and internal audit mechanisms, risk management procedures and arrangements for information processing systems, good recording of services and activities, prevention of money laundering (separate directive will be issued), policies, arrangements for the safeguarding of ownership/interests and prevention of the use of clients' instruments/funds.

There are some additional requirements in cases of Multilateral Trading Facilities (MTF). The company must also use in this case the rules and procedures for trading and criteria for the execution of orders and for determining the instruments, provision of publicly available information and access to such information, rules governing access to the MTF and provide information to users for their responsibilities for the settlement of transactions and maintain procedures to facilitate the settlement of transactions:

The investment company must have an internal procedure's manual which includes all of the policies, procedures, regulations and mechanisms and the employees must acknowledge its existence and be aware of its context.

The procedures and mechanisms to be implemented must be proportionate to the nature and complexity of the business activities of each investment company.

The Commission is entitled to issue a separate directive concerning what they consider necessary in order to clarify, specify or add things.


According to S21(1), enterprises which are interested in applying for a permit must file an application using the prescribed forms from the Commission.

The Commission decides upon the style and the context of the forms and the kind of information to be supplied by interested parties. The Commission is always entitled to request additional information.

The application will not be examined unless there is written confirmation that the company has funds for the requested share capital and that they are willing to freeze them at the Commission's request.

The application must be signed by the directors of the company.

Under S.22, the Commission must decide on the outcome of the application within 6 months of the moment the application is completed. It is considered to be complete if it contains all of the information provided by article 21.

If the applicant does not receive an answer within 6 months, he can proceed with recourse to the Supreme Court against the Commission under article 146 of the Constitution.


The licence may be terminated by the Commission or stayed under the circumstances outlined in S.24 of the law.

The licence automatically ceases to apply in cases where the investment company does not start using its licence at all within 12 months of the time when the licence was issued when the investment company expressly decides to stop having the licence if the investment company does not provide any investment services and/or has not exercised any investment activities for a period of 6 months

Under S. 25 and 26 of the law, the Commission is entitled to either wholly or partially revoke or stay the investment company's licence if it finds out that it has acquired the licence under false pretences, through misrepresentation or by using any other improper means;

If they do not comply with the conditions of their licence and the provisions of the law and the directives;

They are in serious breach and or continuous breach of their operational requirements and obligations provided by the law and the directives;

The stay is provided by any other Cyprus law which is relevant and applies to a particular investment company.

Since the coming into force of the new law, the Commission has already passed 2 directives 144-2007-01 and 144-2007-01.

The first one concerns the licensing and operation of the investment company and the other, the rules of ethics. The Commission has also prepared another directive which provides for the format and context of the application forms which need to be filled in by the applicants.


The new law and the directives afford better protection to the interests of clients of providers of investment services. It will improve transparency since under the law, the investment institutions are obliged to provide their clients with more information with regard to their transactions, activities and their product as well as warning them about various risks that the products that they offer might entail.

The law covers all financial firms which offer investment advice, the receipt and transmission of orders, the execution of orders, trading on their own account, portfolio management, multilateral trading facilities and the underwriting or placing of financial institutions.

To read an earlier version of this article please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions