Although investment firms in Cyprus have taken steps to comply with the best execution of obligations, a recent sample review by the Cyprus Securities and Exchange Commission has uncovered areas of concern.
This is what a circular sent out last week by the Commission said, also requesting all CIFs to consider whether they comply with their best execution obligations and, where appropriate, take corrective measures.
A total of 11 CIFs were reviewed through on-site visits at their premises, while additional information requests had followed.
Key weaknesses identified by CySEC concerned cases where there was little evidence in the CIFs’ analysis to support that clients enjoyed lower costs e.g. transaction fees, spreads and various other financing costs and charges that may be applied. This practice was, of course, to the benefit of the firms.
In addition, the majority of investment firms reviewed were not using software. And some were not keeping the relevant customer register while others did not have adequate audit procedures. Moreover, some investment firms did not adopt the proper compliance checking procedure especially in the case of transactions.
However, the Commission’s review identified good examples of practices as well. For example, some CIFs had a robust scoring system for monitoring their liquidity providers. In some other firms, sophisticated technology was deployed to ensure the fairness of the price proposed to clients. These solutions were developed in-house by firms which invest heavily in IT.
CySEC head Demetra Kalogirou told a press conference in March that Cyprus can become a safe and reliable investment destination. And that “this can only be achieved through the exercise of effective supervision so as to ensure the protection of investors and the healthy development of the country’s capital market.”
That is why the Commission will continue to work intensively towards that goal, focusing on strengthening the supervisory and regulatory framework through the establishment of good corporate governance, transparency and a culture of ethics, she also said.
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