The regulator has clarified that upon receiving any client funds, place those funds into one or more accounts opened with any of the following entities. Furthermore, the title of the clients’ account must sufficiently distinguish that account from any account used to hold funds belonging to the CIF.
- central bank
- credit institution as defined in article 2(1) of the Business of Credit Institutions Law
- bank authorized in a third country
- qualifying money market fund
In choosing a corporate banking relationship, CySEC advises CIF firms to consider a range of factors, including:
- the capital of the bank;
- the number of client funds placed, as a proportion of the bank’s capital and deposits;
- the credit rating of the bank (if available); and
- to the extent that the information is available, the level of risk in the investment and
- loan activities are undertaken by the bank and its affiliated companies
CySEC has also provided a set of requirements for instances where the CIF, if prevented from reasonably satisfying such a request and in such cases, is required to notify the entity with whom the clients’ account is opened, that they are obliged to keep clients’ funds separate from their own funds. This communication should be kept in the CIFs’ records and be available for review by CySEC. Furthermore, the investment firm must demonstrate to CySEC that it had no other alternative but to conduct such business, given the risk to clients’ funds in the event of the entity’s insolvency.