Launching a Temporary Permission Regime
POLICY STATEMENTS: PS-02-2020: Policy Statement on Launching a Temporary Permission Regime
The Cyprus Securities and Exchange Commission (the ‘CYSEC’ or the ‘Regulator’), with the latest publication of PS-02-2020 (the ‘Policy Statement’) notifies its decisions regarding the launching of a Temporary Permission Regime for the provision of investment services to professional clients and eligible counterparties based in Cyprus, by UK Investment Firms.
WHO THIS CONCERNS
The Policy Statement concerns UK Firms:
Which currently qualify as investment firms, within the meaning of MiFID II;
Whose home Member State, within the meaning of the Law 87(I)22017 was the United Kingdom;
Which are currently and until the expiration of the Withdrawal Period have availed of the freedom to provide services;
Which they provide investment services to professional clients and to eligible counterparties based in Cyprus (see Liquidity Providers or CIFs that have trading arrangements with UK firms)
Which will qualify as Third-Country Firms, after 31 December 2020, i.e. after the expiration of the Transitional Period.
INTENDED ACTION AND NEXT STEPS
The following two issues have been identified as possible obstacles for UK Firms towards a smooth transitioning from the pass-porting regime of MiFID II to the national regime of the Directive:
The absence in the Directive of the possibility for former MiFID Firms and subsequently Third Country Firms, such as UK Firms after 31 December 2020, to provide Investment Services to eligible counterparties and professional clients, only by means of remote provision of services without having a Branch in Cyprus for the smooth phasing out of their operations; and
The difficulty to distinguish, given the applicable pass-porting regime, which are the UK firms that were providing investment services in Cyprus based on the reverse solicitation exemption and which ones had acted bases on the ‘MiFID Passport’ notification procedure (i.e. on a solicited basis).
Bearing in mind the fact that UK Firms will be Third Country Firms after the 31st of December 2020, CySEC has amended the Directive DI-87-04 to enable the smooth phasing out of contracts established on a solicited basis.
The said provisions will allow UK Firms, after having become Third Country Firms to provide Investment Services in Cyprus without having a branch in Cyprus, under observance of a notification procedure; provided that such Services will be offered only to professional clients and/or eligible counterparties, within the meaning of the CIF Law up until the 31st of December 2021, unless a relevant decision is taken by the EU Commission in the meantime as to the existence of an equivalence (or not) pursuant to Article 46(2)(a) of MiFIR.
From 1st January 2022, UK firms who provided investments services on the basis of the Temporary Permission Regime and who wish to continue soliciting Professional Clients and Eligible Counterparties based in Cyprus, they will need to establish at least a Branch.
If you have questions do not hesitate to contact us.
Written by Angeliki Georgiou, Independent Legal Consultant