Cyprus financial regulator CySEC has issued a new circular, warning CIF licensed entities in the country (mainly Retail FX and CFD brokers) that they should not be taking clients from Russia, unless properly licensed in that country.
The Bank of Russia introduced licensing for Retail FX brokers in 2016, and has handed out just a handful (eight in total) of those Russia FX licenses since, mainly to locally based brokers and the Retail FX arms of larger Russian financial institutions. However, quite a number of foreign based brokers have continued to take on (and even target) Russian traders, from abroad.
It looks like the Bank of Russia is stepping up its oversight of the sector, coordinating with foreign regulators (such as CySEC), enlisting their help in keeping foreign brokers out of the country. There probably isn’t, however, much that Russian authorities can do about offshore unlicensed brokers taking on Russian clients.
The full text of CySEC’s circular on the matter follows:
TO: Cyprus Investment Firms (‘CIFs’)
FROM: Cyprus Securities and Exchange Commission
DATE: June 1, 2018
CIRCULAR NO: C269
SUBJECT : Requirements of the Central Bank of the Russian Federation (the ‘CBR’) regarding the provision of investment services and/or the performance of investment activities in the territory of Russia
The Cyprus Securities and Exchange Commission (the ‘CySEC’) hereby draws the attention of the Cyprus Investment Firms (the ‘CIFs’), which intend to provide investment and ancillary services and/or perform investment activities in the territory of Russia, to CBR’s regulatory rules regarding the persons that are allowed to provide such services. More specifically:
1. Pursuant to Article 51, Section 6.1 of the Federal Law, No. 39-FZ, of 22 April 1996 on Securities Market, foreign entities, their representatives and branches are not authorised to provide and/or perform activities of non-credit financial organisations, inter alia activity of professional securities market participants, as well as provide services of foreign entities in financial markets to unlimited number of persons on the territory of the Russian Federation or disseminate information regarding the said entities and/or their activity among unlimited number of persons on the territory of the Russian Federation.
2. Therefore, CIFs must prevent and retain from actions related to misconduct, inter alia from actions aimed at concluding, in the territory of the Russian Federation, agreements/contracts for the provision of investment services and/or the performance of investment activities.
3. CIFs may visit CBR’s website to read more information on the aforementioned provisions.
CySEC herewith advises CIFs to consult with their legal consultants regarding the necessary actions/measures required to ensure compliance with CBR’s new regulatory requirements and reiterates the duty of CIFs to fully comply with the provisions laid down in this Circular.
Chairman of the Cyprus Securities and Exchange Commission