CySEC Advanced flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Best execution obligation

MiFID II requires investment firms to take all sufficient steps to obtain the best possible result for clients when executing orders, considering price, cost, speed, likelihood of execution and settlement, size, and nature of order.

Elective professional client

A client who requests professional treatment and meets quantitative criteria (portfolio ≥ €500k or ≥10 trades/quarter over 4 quarters) plus qualitative assessment of expertise and experience, with written consent and warning of lost protections.

Suitability assessment

Required for investment advice and portfolio management, it evaluates client's knowledge, experience, financial situation, and investment objectives to ensure the recommended product or service is suitable for the client.

Inducements under MiFID II

Third-party fees, commissions, or non-monetary benefits must be disclosed, must enhance service quality, and must not impair the firm's duty to act in the client's best interests; independent advisers cannot accept them.

Product governance

Manufacturers must define a target market, conduct scenario analysis, and review products; distributors must ensure products match the target market and provide sales data to manufacturers.

Algorithmic trading controls

Firms must implement pre-trade limits, kill functionality, testing of algorithms, and record keeping; high-frequency trading requires authorisation and notification to CySEC.

UCITS 5/10/40 rule

UCITS may invest up to 10% of NAV in transferable securities of a single issuer, but the total of holdings over 5% cannot exceed 40% of NAV; group issuer limit is 20%.

UCITS eligible assets

Transferable securities on regulated markets, money market instruments, deposits (≤20%), derivatives for hedging, and units of other UCITS/UCIs (≤10% each, ≤20% total).

AIFM capital requirements

Initial capital ≥ €125,000; own funds ≥ 25% of prior year's fixed overheads (or €125k, whichever higher); additional own funds or professional indemnity insurance if AUM exceeds €250m.

Depositary liability

UCITS and AIFs must appoint a single depositary responsible for safekeeping assets, cash monitoring, and oversight; liable for loss of financial instruments unless due to external event beyond reasonable control.

AIFMD leverage thresholds

AIFMs managing AIFs with leverage above €100m (or €500m without leverage) require authorisation; below these thresholds registration and lighter regime apply.

UCITS redemption suspension

UCITS may suspend redemption in exceptional cases where circumstances make it impossible to calculate NAV or dispose of assets fairly; must inform regulators and investors.

Prospectus summary limit

Maximum 7 pages, must include key information on issuer, securities, risks, and offer; liability attaches only if summary is misleading, inaccurate, or inconsistent with other parts of prospectus.

Transparency Directive reporting

Listed issuers must publish annual financial report within 4 months of year-end and half-yearly report within 3 months; interim management statements may be required by national law.

Major holdings notification

Acquisition or disposal of shares/voting rights reaching, exceeding, or falling below 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% thresholds must be notified to issuer and CySEC within 4 trading days.

Inside information delay

Issuers may delay disclosure if it would prejudice legitimate interests, no misleading effect, and confidentiality maintained; must notify CySEC of delay and record reasons.

Mandatory takeover bid

Under Cyprus Takeover Bids Law, a person acquiring control (30% of voting rights) must make a mandatory bid at equitable price to all shareholders; exemptions apply.

Insider list requirements

Issuers must maintain and update insider lists including all persons with access to inside information; provide to CySEC upon request and keep for 5 years.

Prospectus exemption threshold

Prospectus required for public offers of securities ≥ €8m or admission to regulated market; offers below €8m subject to national threshold, and offers < 150 persons per Member State exempt.

Market manipulation

Prohibited conduct under MAR including false/misleading signals, price distortion, abusive squeezes, layering, spoofing, wash trades, and dissemination of false news.

Inside information definition

Precise, non-public information relating to financial instruments or issuers that, if made public, would likely have a significant effect on price; includes order book and commodity derivatives information.

Suspicious transaction report

Obliged entities must report suspicious transactions/activity to MOKAS (Cyprus FIU) without tipping off; records kept for 5 years after end of relationship.

PEP enhanced due diligence

Politically exposed persons require enhanced due diligence: senior management approval, source of wealth/funds verification, and ongoing monitoring; applies to family members and close associates.

PRIIPs KID content

Key Information Document (max 3 pages) must include risk indicator (1-7), performance scenarios, costs (one-off, ongoing, incidental), and comprehension alert for complex products.

PRIIPs cost disclosure

Must show total costs as reduction in yield (RIY) and summary cost indicator; ex-ante costs include entry, exit, management, transaction, and performance fees; ex-post costs reported annually.

Benchmark administrator authorisation

Under BMR, administrators must be authorised/registered, have robust governance and control framework, and comply with IOSCO principles; critical benchmarks subject to enhanced oversight.

Market abuse surveillance

Firms must have surveillance systems to detect and report suspicious orders and transactions (STORs) to CySEC, and maintain records for 5 years.

AML risk-based approach

Obliged entities must apply customer due diligence proportionate to risk, including identification, verification, beneficial ownership, and ongoing monitoring; enhanced for high-risk.

PRIIPs performance scenarios

KID must show at least four scenarios (stress, unfavourable, moderate, favourable) with appropriate narrative and assumptions; must be realistic and not misleading.

Critical benchmark

A benchmark used as reference for financial instruments or contracts with average value ≥ €500bn, or submitted by fewer than three contributors; subject to enhanced oversight and mandatory contribution.

UCITS deposit limit

UCITS may invest up to 20% of NAV in deposits with a single credit institution; group limit applies for deposits with same group.

AIFMD remuneration policy

AIFMs must have remuneration policies consistent with sound risk management, not encouraging excessive risk-taking; ESMA guidelines on sound remuneration apply.