CySEC Reminds Firms to Report Subsidiaries
The Cyprus Securities & Exchange Commission, a vigilant regulated, has reminded all its licensed firms that they must report all details about subsidiaries operating worldwide. This reminder was sent out through a server-wide message on the morning of Friday, July 12, 2019. Due to the overwhelming number of brokerages relocating their businesses to foreign nations, this reminder was necessary from CySEC.
The information that licensed firms must provide includes the name of the subsidiary and the geographic location of its headquarters. CySEC also requires that licensed firms’ detail what the new subsidiary business ventures, the expected turnover for the subsidiary, how many employees will be working for them, the expected profits and the yearly losses. This is required for tax purposes in Cyprus. Any licensed brokerage that doesn’t comply with CySEC’s request will receive an internal investigation, which could result in licenses being terminated by the regulator.
The Categories
In the report, which is due in a few months, brokerages will have to list owned-companies into three categories. These categories include Branches, Direct Subsidiaries and Relevant Entities. The relevant entities category applies to any other financial-related companies owned by the licensed brokerage. Representative officers with CySEC will confirm all the information provided by these brokers.
Offshore Branches
Foreign brokerages have dramatically risen in the last twelve months. This is because the European Securities and Markets Authority created new product intervention measures that caused for a 30:1 Leverage Cap on products relating to contracts-for-difference. Since then, the Cyprus Securities & Exchange Commission has fought with licensed brokerages daily to ensure they don’t move business operations to a foreign nation.
All the efforts implemented by CySEC in the last twelve months haven’t gone unnoticed. There have been multiple brokerages that have remained in the jurisdiction of Cyprus. However, the same brokerages have also opened offshore-entities. In the eyes of CySEC, this shows a lack of faith in the market and a blatant disregard for the guidelines implemented through finance regulation.
The ESMA is giving control back to national regulators in the coming weeks, which means that CySEC will be able to alter the product intervention measures. A standard leverage cap of 50:1 or higher could be implemented shortly. If this is the case, CySEC will see trading volumes rise dramatically and return to a sustainable level.
CySEC Foreign Nations
Multiple CySEC foreign nations allow for higher leverage caps. South America, Nigeria and Australia are the three most notable. Australia is the best example of how firms are leaving the European Union & diversifying their services through another nation. By doing so, they can appeal to clients with better cryptocurrency pairings and significantly higher leverages.
The move to foreign nations has seen a dramatic shift in how brokerages battle against one another. The days of aggressive tactics are gone, with universal products and services being maintained through multiple exchanges.
CySEC will have a lot of work to do if there to convince brokers to return full operations into Cyprus. The new marketspaces, higher leverages, increased pairings and new cryptocurrencies regularly available have made these foreign nations a gold mine for European Brokerages.
