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Cyprus upgraded to National Association of EFAMA

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The National Association of the European Fund and Asset Management Association (EFAMA) has, at its Annual General Meeting held on the 17 June 2016, given formal membership to CIFA after completion of a two year observer status.

CIFA’s upgraded membership comes before the enactment of two material legislative amendments to the Alternative Investment Fund Law (No 131(I)/2014) and the Alternative Investment Fund Managers Law (No. 56(I)/2013) introducing respectively the “Registered Alternative Investment Fund” (Registered AIF) and sub-threshold AIFM or “Mini Manager” regimes. These are expected to be passed into law during the last quarter of 2016 and aim to enhance Cyprus’s legal and regulatory framework for the fund management industry.
 
CIFA President, Mr. Angelos Gregoriades, says: “The transition from a bank-dominated financial system to one with more diverse sources of financing will only be possible if more opportunities for equity funding are created in Europe. There is currently limited legislation and regulation binding the investment and movement of funds under EUR100 million across the EU. The upcoming adaptations to the alternative investment fund framework in Cyprus will allow a smaller but significant flow of funds to be managed more efficiently, bolstered by the legal and administrative advantages an onshore EU jurisdiction already like Cyprus already has in place. Now as a National Association of EFAMA, we look forward to strengthening the right balance between the freedom of operation of the asset manager and the protection of investors.”
 
Currently, all Cyprus vehicles qualifying as AIFs under the AIFM Directive 2011/61/EU (AIFMD) need to be authorised by the Cyprus Securities and Exchanges Commission (CySEC) being the competent regulatory and supervisory authority. With the introduction of the Registered AIF’s regime such funds – while being stamped as an “AIF” by virtue of the law – shall not require authorisation from the CySEC provided they are externally managed by a full scope Cyprus or EU AIFM and are addressed to professional investors and / or well-informed investors. The CySEC shall rely on the regulated status of the AIFM to ensure compliance and indirect supervision of applicable laws and appropriate standards by the fund.
 
The Registered AIF may be organised in any legal form available under Cyprus Law (including an investment company with fixed or variable capital, a limited partnership or a common fund); it can be open or closed-ended, follow any strategy and invest in any type of assets.
 
In addition to the full scope AIFM, the “Mini Manager”, Investment Firms and UCITS management companies may manage Registered AIFs provided such AIFs take the form of a closed-ended limited partnership and invest in illiquid assets.
 
The introduction of a new partnership structure for all categories of AIFs will also give the option for General Partners to elect upon establishment a partnership with a legal personality and thus provide an additional vehicle for the use of fund managers.
 
As it relates to the asset management legal framework, Cyprus has aligned its national regime by closely mirroring the regimes established under the UCITS, AIFM and MiFID Directives.  It has been decided to introduce a licensing requirement and supervision regime for the Cyprus sub-threshold AIFM, termed the “Mini Manager.” Such Mini Managers could manage: (i) all categories of Cyprus authorized AIFs, (ii) Registered AIFs taking the form of a limited partnership and (iii) non Cypriot AIFs (subject to the discretion of such competent authority in the other jurisdiction).
 
The list of key requirements from the Mini Manager which relate to the governance and other organisational requirements is being discussed with the CySEC, the aim being to provide a reasonable and proportionate sub threshold Manager.

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