CySEC recently published a report on the compliance of regulated entities such as FX and CFD brokers. The report illustrated various discrepancies on how these entities were complying with the provided guidelines.
According to a report published by the Cyprus Securities and Exchange Commission (CySEC), discrepancies were uncovered in regulated entities, including FX and CFD brokers. The compliance review also illustrated that some entities had enforced several good practices. According to the report, entities operating under the Cyprus Investment Firm (CIF) license did not reveal the full extent of risk associated with different investment options.
The Areas of Concern
According to Article 22 of the CySEC laws, regulated entities needed to understand their risks using the appropriate strategies to assess and determine the risk level. However, the report showed several areas of discrepancies to regulated entities complying with this act. While some entities considered the severity of risk, several regulated entities did not specify the extent of their clients’ risk. Identifying risks was done vaguely, and the impact was not specified.
Besides, some entities did not reveal the risk associated with each type of financial instrument. The regulator also affirmed that several entities did not submit regular written reports regarding risk assessment and compliance. The CySEC uses regular reporting data to correct any discrepancies in compliance promptly.
Despite these compliance issues, the SEC noted that these agencies also upheld some excellent practices. Regular formal meetings were held quarterly by senior management, and minutes for the same were well preserved. Corporate governance and regular training of staff were also being conducted regularly.
The Chairwoman of the CySEC, Demetra Kalogerou, stated that the regulated entities needed to consider the issues raised in the report. The entities needed to assess their compliance policies and arrangements, identify weaknesses and take the necessary action. She further added that the CySEC would continue assessing compliance, and further action may be taken on companies that do not follow the stipulated guidelines.
Cyprus is a hub for financial services. The area does not have a strict entry barrier, making it attractive to many FX and CFD brokerage companies. After Uk’s Brexit, most firms moved their operations to Cyprus to serve the entire European region. However, the easy market entry also means that the CySEC has to install strict measures and guidelines to govern these firms’ operations. The regulator is stretching its reach to oversee the operations of all regulated entities. Over the years, CySEC has also given warnings and penalties to firms that had severe compliance issues.