Combining Investment Services in a CIFSalvus Team
In Section A, Annex I, of MiFID II there are 9 investment services. When applying for an investment firm license under MiFID, through CySEC (i.e. for a Cyprus Investment Firm license) or another national competent authority, it will be necessary to clearly indicate
- how the organization will work in offering these investment services and
- who would be the responsible person for each investment service,
as part of the submitted application documents.
In the interest of both, optimizing the human resources cost as well as the company’s operations, together with our clients, we frequently undertake the exercise of exploring which, and if, investment services can be combined. By combining investment services, it means to have one person responsible for more than one investment service.
So, can investment services be combined?
Yes, it is possible to combine investment services under one person employed in an investment firm. The professional experience and overall background of the employee should support this intention, nevertheless even then an investment firm may not be able to do this.
So, when can an investment firm combine investment services?
Assuming the investment firm employs, or will employ, a person with the right profile to assume the responsibility of more than one investment services, there are two elements that can support this intention:
- The investment firm’s business plan and offering. What exactly the investment firm will be offering and how, as clearly documented in the submitted business plan, is a key consideration for the regulator to approve the combining of investment services. The business plan should demonstrate with clarity that in complying with all other requirements, combining those investment services it is logical and operationally achievable.
- The investment firm’s size and complexity. In simple terms, the smaller the investment firm size and the more straightforward its plan, then the more likely it is for the regulator to approve the investment services combination.
However, having the right employees and supporting the intention of combining investment services through the investment firm’s business plan, size, and complexity, may not be enough for the regulator’s approval. The final test lies in the actual investment services we intend to combine.
So, which investment services can be combined?
There is no exhaustive list and the only rule here is:
- in addition, and following from the above, there is no conflict in any way by the same person being the responsible person for these services.
A common case of which investment services can be combined, could be seen in the combination of Reception and Transmission of Orders and Execution of Orders:
- an investment firm is providing the investment service of Reception and Transmission of Orders, if they are both receiving and transmitting orders. This would be the case if they transmit an order to subscribe or redeem units in a collective investment undertaking e. investment fund, after receiving the order from a client. In this case, the firm is merely a facilitator. Were they also conclude the deal or transaction on behalf of the client, this would constitute executing and the Execution of Orders investment service would be required to be in place. The case of combining these two investment services under one person, would make sense since there are synergies in this combination, and no conflict. Again, the firm’s business plan, size and complexity of the firm would be part of the equation from the regulator’s perspective.
What do you think would be the best case? Combining Investment Advice with Placing of financial instruments? Or Placing of financial instruments with Dealing on Own Account?
The team at SALVUS frequently provides all possible optimization options through investment services combinations and other organizational modifications. Always in compliance with the regulation and always after approval by the regulator.
SALVUS offers the full range of services required to support Cyprus Investment Firms, before, during and after the granting of the CIF authorization. As we deal in Licensing, Compliance and Internal Audit, our services beyond the CIF License application, include Activation support, ongoing Compliance Officer support, and Internal Audit Services among others.
We as SALVUS remain committed to add value by diligently monitoring our clients’ CIF applications throughout the application process and after its authorization. We work to warrant that all the relevant items, capital, personnel and structure are optimized to the full extent.
Talk to us. Do not hesitate to contact us if you require further information. We will be glad to support you in finding an appropriate solution or answering your questions.
The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.