Post-Brexit: Cyprus Temporary Permission Regime for UK Investment Firms
In light of the United Kingdom’s (“UK”) exit from the European Union (“EU”) and the expiration of the transitional period which is currently in force until 31 December 2020 (“Transitional Period”), the Cyprus Securities and Exchange Commission (“CySEC”) has announced on 22 December 2020 the introduction of a Temporary Permissions Regime (the “Cyprus TPR”) which applies to investment firms authorized in UK (“UK Firms”) pursuant to the provisions of Title II of MiFID II. Cyprus TPR facilitates smooth post-Brexit transition: (i) to new contracts on a reverse solicitation basis and (ii) for UK firms which wish to continue soliciting Cypriot professional clients and eligible counterparties after 31 December 2021 to establish a physical presence in the Republic of Cyprus.
More specifically, the performance of investment activities or the provision of investment services with or without any ancillary services within the meaning of MiFID II (“MiFID II Services”) to eligible counterparties and to professional clients by third country investment firms throughout the EU without the establishment of a branch is subject to an equivalence decision by the European Commission (“EU Commission”), in relation to the regulatory framework of the third country in which such firm is domiciled and to an ESMA registration (Articles 46(1) and 47 of MiFIR). In the absence of equivalence decision by the EU Commission, and taking into account that the UK will be considered as a third country after the expiration of the Transitional Period, the UK Firms will be required to establish a branch in Cyprus for the provision of MiFID II Services to professional clients and eligible counterparties on a solicited basis.
To this end, CySEC by amending the Directive DI-87-04 has established the Cyprus TRP in order to enable the smooth phasing out of contracts established on a solicited basis and to allow UK Firms, after the Transitional Period to provide MiFID II Services in Cyprus without having a branch in Cyprus, under observance of a notification procedure; provided that such MiFID II Services will be offered only to professional clients and/or eligible counterparties, within the meaning of the CIF Law 87(I)/2017 until 31 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 1 of January 2022, UK firms which provided MiFID II Services on the basis of the Cyprus TRP and which wish to continue soliciting professional clients and eligible counterparties based in Cyprus, will be required to establish at least a branch in Cyprus.
UK Firms wishing to make use of the Cyprus TPR must submit a relevant notification form to CySEC by 31 December 2020.
For more information over this matter, please contact your usual contact in Stelios Americanos & Co LLC or send us an email at email@example.com.