By Huw Jones
LONDON – Cyprus’ markets regulator was intervening too little or too late in tackling aggressive marketing behaviour by firms on its watch, the European Union’s securities watchdog said in an unprecedented intervention on Thursday.
Cyprus has long been a hub for Russian business but more recently has attracted foreign exchange and investment companies from other parts of the world.
The European Securities and Markets Authority undertook a review of cross-border activities of investment firms in Cyprus, the Czech Republic, Germany, Luxembourg, Malta and the Netherlands.
The review’s conclusions singled out Cyprus, saying that a very large number of Cypriot firms pose a high risk of investor detriment, due to the frequent provision of services involving speculative products, with aggressive marketing behaviour.
ESMA has issued recommendations to CySEC to improve how it authorises, supervises and enforces the bloc’s securities rules, the first time it has taken such a step with a national watchdog in the bloc.
CySEC’s supervisory activities have proven overall insufficient at addressing the risks posed by Cypriot firms’ cross-border services due to an inadequate approach to supervision and a lack of staff, ESMA‘s review said.
“The overall supervisory approach by CySEC is based on interventions which appear too little and/or too late compared to the overall amount and type of cross-border activities carried out by Cypriot firms and to the concerns raised by them,” ESMA said.
In response, CySEC said in the review that it has already taken decisive steps in line with the recommendations, such as intensifying efforts to supervise cross-border firms, and increasing staff by 28% over the last 18 months.
CySEC added on Thursday that the review covers two years to August 2020 and therefore does not fully reflect the significant changes that have taken place since then.