CySEC license for binary options brokers

Financial regulator CySEC

The Cyprus Securities and Exchange Commission, abbreviated as CySEC, acts as the financial regulator in Cyprus. Due to the fact that Cyprus is a member of the European Union, the Commission is included in the European regulation mechanism MIFID. All companies, both local and foreign, registered in Cyprus and regulated by CySEC regulations can operate in any European market. Brokerage firms operating in the binary options market and Forex are seeking to obtain a CySEC license because here the method of obtaining a license is easier, without the strict requirements that other European financial regulators subject applicants to.

CySEC carries out licensing of investment companies (in particular binary options brokers), controls their activities after receiving a license, and supervises the activities of brokerage companies and brokers. Licensing is carried out by local and foreign companies operating in the European Union, covering 28 states. Organizations that have received a license are required to adhere to the rules and conditions stipulated in the Commission's regulations. For minor violations, CySEC may impose fines of €1,000 or more. In case of repeated gross violations of the rules, the Commission reserves the right to deprive the company of the issued license and suspend its activities for an indefinite period.

File a complaint against a broker

History of CySEC

The year of registration of CySEC is considered to be 2001. This public corporate body was established under Section 5 of the Cyprus Securities Commission. The direction of CySEC's activities is to tighten control and regulate the activities of all companies operating in the field of exchange services. Over time, the Commission's activities shifted to the licensing and supervision of local brokerage companies.

After Cyprus was admitted to the EU, in 2004, the Commission joined the European MIFID. From this moment on, all companies registered in Cyprus and licensed by CySEC were able to begin operating throughout the European Union. In addition, foreign companies gained access to licensing in CySEC, which allowed a significantly larger number of organizations to obtain permission to operate in the binary options market and Forex. The Commission takes an active part in summits held in Europe, the topic of which is the regulation of the activities of exchanges. After a short time, CySEC has become a prestigious organization acting as a guarantor in the legal regulation of exchange relations.

Regulatory Authority Structure

CySEC is headed by a five-member board of directors. They make decisions by unanimous consent or by voting. The sixth member is the Governor of the Central Bank of Cyprus, who sits on the board but does not have the right to vote. He may attend meetings or express his opinion in discussions of any issue. The Minister of Finance of Cyprus reviews candidates and decides to present candidates to the Council of Ministers who are capable of taking the place at the head of the regulatory body. This is the final authority that makes a verdict on each candidate. The term of service on the council is five years. If the Government of Cyprus considers it necessary to extend the service life, this is reflected in a special resolution. The Chairman of the Board of Directors, together with the Deputy, work every day, full working week.

The Commission has eight regulatory organizations, each of which deals with a narrow area, limited by the scope of specialization. In addition to issuing licenses, monitoring operations on the stock exchange, and performing supervisory functions over the activities of securities issuers, there is a department responsible for conducting internal audit of CySEC. His work is aimed solely at improving the work of the Commission, increasing the efficiency of regulatory processes, control and risk management , and providing independent opinions on financial issues. The head office is located in Nicosia, the capital of Cyprus. Information about the full composition of the commission is open and published on the official CySEC website.

Entities controlled by the Commission:

• Exchanges of any profile: futures, currency, commodity, stock and others;
• Stocks and bods market;
• Investment financial companies licensed by CySEC;
• Dealing centers (intermediaries between the trader and the foreign exchange market) and brokers;
• Organizations and companies whose activity is the provision of consulting services in the field of finance;
• Clearing centers working with non-cash payments;
• Well-known exchange companies that have been operating in the market for a long time.

Regulatory and legal basis for the activities of CySEC

Like any organization, the Commission develops its activities and makes decisions, having a regulatory and legal basis:

• Securities and Exchange Act in force in Cyprus;
• Law on Insider Activities and Market Manipulation (Market Making), 2005;
• Law on Acquisition of Whole Share Capital by Public Auction, 2007;
• Law on Transparency Requirements for Securities Traded on Regulated Markets, 2007;
• Norms, requirements and laws related to activities in the investment and exchange spheres.

Main tasks of the Commission

The main directions of the Commission’s work can be divided into several points:

• Review applications for licensing, issue licenses to operate, suspend licenses or revoke existing licenses from controlled companies if violations are detected.
• Supervise the activities of the stock exchange and regulate its activities if necessary, as well as control other markets on the territory of the Republic and operations taking place on them.
• Investigate violations by licensed institutions, make decisions, and impose penalties.
• Collect the necessary information regarding individuals and legal entities, which helps to carry out the legal activities of CySEC.
• Conduct legal proceedings to seize securities, collect payment, suspend, freeze or avoid the alienation of securities or other assets.
• Provide full cooperation to government authorities in supervising foreign and local organizations.
• Develop and implement legal doctrines for the subsequent control and regulation of exchange institutions.
• Timely certification of employees of top-echelon investment institutions.

This is a basic, but incomplete list of areas in which the main activities of the Commission are carried out.

CySEC Broker Licensing Rules

Obtaining a license is a long and difficult process, therefore, you need to carefully collect a package of documents so that there are no returns for revision. It is better to contact professionals who advise applicants on obtaining a license. Basic documents required to successfully complete the licensing process:

• Company charter, guidelines for foreign and domestic policies.
• Documents on state registration of the company and information about managers.
• Business plan.
• The result of the management aptitude test.
• Transparency of financial reports for the past period.

Requirements for an applicant to obtain a license

There are a number of standard requirements put forward by the Commission to complete the licensing process.

• Location of an office center in Cyprus.
• Placement of the authorized capital in the Central Bank, commensurate with the type of activity and services provided.
• Well-functioning internal control mechanism.
• A well-drafted project for the company’s future activities and the opportunity for development.
• Documents confirming the professionalism of employees in accordance with accepted standards.
• Company reports on financial activities, legalization of income, exclusion of fraudulent transactions.

Sanctions applied to violators

For those companies that violate the approved regulations, the Commission applies penalties. Penalties vary in severity and range from a reprimand to revocation of the issued license. Most first penalties are limited to fines of varying amounts, depending on the seriousness of the offenses. Here are some of them.

• If there is no system for recording trading accounts, the fine is 1000 euros.
• When transferring funds to clients with a temporary delay, the fine will be 5,000 euros.
• Failure to comply with the organization's charter is punishable by a fine of 5,000 euros.
• A broker who hides information regarding the level of his professional qualifications is subject to a fine of 5,000 euros.
• There is no recording of transactions on trading assets, a fine of 5,000 euros.
• Late financial reports on the company's activities are punishable by a fine of 5,000 euros.

All these violations cannot be called gross, but the fines that punish the negligence of licensees are quite significant. Especially if several points from the provided list are violated.

Filing a complaint against a binary options broker with CySEC

If a client notices a violation in the activities of a brokerage company in relation to himself, he can send a complaint to CySEC. In addition to the complaint itself, you must provide evidence confirming unlawful actions on the part of the brokerage company. It is best to contact a legal service, whose specialists are familiar with the rules for filing complaints and collecting evidence of this kind. Documents are sent electronically; the message must include the name and trading account number. Within five working days, confirmation is received that the complaint has been accepted for consideration, as well as the time frame for its consideration. The final complete response is sent three months after submission. If the Commission finds the evidence convincing and the fact of illegality is revealed, the lost funds will be fully reimbursed and strict action will be taken against the violator. Sometimes, in special cases, CySEC may initiate proceedings to terminate the activities of a brokerage company.

Conclusion

Although this regulator cannot act as a 100% guarantee that a broker with a license will not turn out to be a fraudster, such a license allows you to be more confident in the honesty of the broker and his goals. Also, in certain cases, it is possible to return lost funds, since the regulator has created a fund for this. It is also always better if the broker has a license, and a license from CySec is not that easy to get, so it could be an indicator that the broker is targeting users.

See also:

TsROFR - binary options brokers license

Binary options broker table

How to choose a binary options broker?