Is your Cyprus financial advisor MiFID-compliant?

From November 1 of this year all financial advisors and asset managers in Cyprus will have to abide by the new MiFID (Markets in Financial Instruments Directive).

The MiFID is an important part of the EU’s strategy to create a single market in financial services by 2010. Not only does it include rules about the qualifications and conduct of financial services professionals, it also has strict rules about how the business is organised.

Anyone working in these areas who is not MiFID-compliant is working outside the law, which means that you, as their client, might not be protected by the law either.

The Chairman of the Cyprus Securities and Exchange Commission, George Charalambous, highlighted some of the most important features of MiFID.

“Providers of investment services are regulated to act honestly, fairly and professionally in accordance with the best interests of their clients and comply with principles set out in article 19 of MiFID,” he said. 

“These principles address issues such as the information that the investment firms should provide to their clients and the information that an investment firm should obtain regarding the client’s knowledge and experience in the investment field. 

“The investment firms shall also warn their clients if a product or service is not appropriate to their clients and endeavour to obtain best execution of their clients’ orders.”

The directive covers all financial service firms working in a wide range of areas, including investment advice, the reception and transmission of orders (such as the classic UK independent financial advisor), execution of orders (such as brokers), trading on own account (such as investment banks and brokers), portfolio management (such as asset managers), multilateral trading facilities and underwriting or placing of financial instruments.

The directive also covers all the assets you can think of: from straightforward shares, bonds and collective investment schemes to the more complex derivatives that have lately hit the news in the wake of the US subprime mortgage crisis.

Being MiFID-compliant means being regulated by the following Cyprus-based regulators: the Cyprus Securities and Exchange Commission, the Central Bank of Cyprus, the regulator for Co-operative institutions or another competent authority in the European Union.

So to protect yourself, ask your financial service provider who is its regulator and double check it against the list of firms licensed to offer financial services in Cyprus held on the regulators websites.

In Cyprus, these are http://www.cysec.gov.cy, http://www.centralbank.gov.cy and http://www.cssda.gov.cy.