The International Collective Investment Schemes Law (No. 47(I) of 1999) (“the Law”) came into force in May 1999. The Central Bank of Cyprus (“the Bank”) has been designated under the Law as the competent authority with the responsibility for the recognition, regulation and supervision of ICISs. The Bank is also the supervisory authority for the managers and trustees of ICISs.
Under this Law, the Bank may issue regulations covering investment restrictions, directions and codes of conduct for ICISs, managers and trustees.
The Cyprus Companies Law and the Partnership and Business Names Law, are applicable to ICIS, except for those sections, which are specifically disapplied by the Law. The International Trusts Law is applicable to ICIS to its totality.
Legal form of ICISs An ICIS can take one of the following legal forms:
- International Fixed Capital Company;
- International Variable Capital Company;
(The above two are known as “international investment company”)
- International Unit Trust Scheme;
- International Investment Limited Partnership.
The sole object of an ICIS must be the collective investment of funds of unit-holders. The units issued by an ICIS must be, at the option of unit-holders redeemed or repurchased directly out of the assets of the ICIS (unless provided otherwise by the Law or any other law applicable thereto).
Type of ICIS Upon application to the Bank and having regard to the investment policy and the particular investment objectives of the applicant, an ICIS may be designated as:
- an ICIS marketed to the general public; or
- an ICIS marketed solely to experienced investors; or
- a private international collective investment scheme.
Managers of International Collective Investment Schemes
All ICISs, unless specifically exempted by the Bank or unless they are designated as private international collective investment schemes, must appoint a manager who must be approved by the Bank.
No appointment shall be made to the office of the director of a manager without the prior approval of the Bank.
A manager must have a place of business in the Republic, from where to conduct its business. This requirement will only be waived by the Bank in exceptional cases.
If the manager delegates any of its functions to third parties (delegates), the principles which govern eligibility and conduct of the manager, apply also to such delegates. Further, any person to whom functions or duties have been delegated shall be subject to the provisions of the Law and the administrative acts issued under the Law in performing such functions or duties as if it was a manager.
Trustees of ICIS
All ICISs, unless specifically exempted by the Bank or unless designated as private international collective investment schemes, must appoint a trustee to hold the assets of the scheme.
A trustee must have a place of business in the Republic, from where to conduct its business, unless such requirement is specifically waived by the Bank.
A trustee must act independently of the manager and must always act in the best interest of unit-holders.
Regulations for ICIS, their managers and trustees
Every scheme which is recognised by the Bank as an ICIS will be issued with a certificate of recognition. Conditions may be attached to an ICIS’s recognition, which will vary, depending on the particular investment objectives and policy of each scheme. In addition, conditions may be imposed by the Bank regarding the activities of a manager or trustee of an ICIS.
Publication of annual and half-yearly reports
Every ICIS must prepare an annual and a half yearly report, which must be sent to the Bank and the unit-holders.
The financial accounts of the ICIS must form an integral part of the annual and the half-yearly report.
Auditors of ICISs
Every scheme is required to appoint an auditor who shall audit the information given in the scheme’s annual report in accordance with International Auditing Standards and who shall prepare a relevant report which shall be reproduced in its entirety in the annual report of the scheme.
Additionally, the auditor of a scheme must undertake to report to the Bank annually and in writing whether in his opinion and to the best of his knowledge the scheme has complied with its obligations under the Law or any administrative act issued under the Law.
Keeping of books and records
The ICIS, the manager and trustee must keep proper books of account, so as to clearly indicate all sums of money received and expended. Such proper books of account shall be kept as is necessary to give a true and fair view of the state of the affairs of the ICIS, its manager and trustee and to explain their transactions for the period.
Asset valuation and pricing It is a fundamental principle that the price of units of an ICIS be based on the net asset value of the ICIS which must be determined on a regular basis in accordance with international accounting practices.
An ICIS must sell, redeem or repurchase its units at the request of unit-holders, in accordance with its constitutional documentation. Units may not be issued as partly paid and may not be sold unless the equivalent of the net issue price is paid. Applications for a recognition as an ICIS.
Application for the Recognition of ICIS The application for the recognition as an ICIS is mainly two stage procedure:
Stage 1: Preliminary Views
The first stage is to submit a business plan and the required information to the Bank for a preliminary view. This stage includes extensive consultation with the Bank on client’s behalf.
Stage 2: Final Application Submission
Once the Bank’s preliminary views and comments have been received, then a final application shall be prepared and submitted.