CySEC urges investment firms to set up policies to mitigate FX risks

The Cyprus Securities and Exchange Commission (CySEC) today issued a circular to Cyprus Investment Firms (CIFs) over the need to establish strict controls and monitor foreign exchange risks.

  • The circular reminds all investment firms that the law, particularly Directive DI144-2007-14, obliges them to establish strategies and policies for taking up, managing, monitoring and mitigating the risks the firm is or might be exposed.
  • The watchdog also stresses that such policies should be regularly reviewed.
  • The regulator refers to recent developments in the market to urge the companies to keep an eye on their currency exposures and to take all possible actions to cut potential losses in the event of adverse movements of a currency or a pair of currencies.
  • CySEC is also reminding CIFs that they have the obligation to warn their clients in such cases.

It is obvious that CySEC is reacting to the events stemming from the Swiss National Bank decision to remove the limits on the EUR/CHF rate. January 15, 2015, which is now famous as “Black Thursday”, had a negative effect of EUR 42.5 million on CIFs, a minor hit when compared to the losses suffered by Forex giants in the United States or in the UK.

CySEC is obviously trying to keep tight control over the investment sector, an approach that was underlined in the latest press release, summarizing the results of the work of the watchdog in 2014 and its priorities for 2015.

CySEC chairwoman Demetra Kalogerou elaborated on the investigations and on the resulting penalties for companies supervised by the regulator in 2014. Investigations of cases against such companies have led to administrative fines of €8.2 million in 2014, she said. Some of the investigations continue into 2015, with cases concerning possible misleading statements, evaluation of the data included in the financial statements of previous years as well as practices which could constitute market manipulation.

The CySEC chairwoman reiterated that in 2015 the watchdog will keep beefing up its Supervision Department, in order to ensure that all investment firms in Cyprus comply with the demands of the law.

Educating and informing the public remains amid the priorities for the regulator. One positive move in this direction has already been made via the introduction of the new CySEC website that is more visually attractive, easier to navigate and also offering more information about each investment firm and its services.

You can read the full PR on CySEC’s work in 2014 and on its priorities for 2015 here.


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