Which entities must join and contribute to the ICF?

• Cyprus Investment Firms (CIFs),
• Branches of Investment Firms (Ifs) of Member States may voluntarily participate,
• Branches of a third-country Investment Firm,
• Alternative Investment Fund Managers (AIFMs) and Undertakings for Collective Investment in Transferable (UCITs) management companies, which offer investment services and ancillary services, such as the provision of portfolio management services and ancillary investment advisory services, and custody.

What are the obligations and contributions of the ICF members?

A. Initial contribution fees: The applicant members of the ICF are obliged to pay their initial contribution upon their registration to the ICF,

1. €2.000 per investment service, plus
2. €35.000 for the safekeeping ancillary service.

When?

Once requested by CySEC: upon receiving the Commission’s written direction on the final steps for authorization, and before the provision of investment services.

* It is worth mentioning that.

1. the initial contribution (excluding the costs of the transaction) is returned to the applicant only if the application is rejected by CySEC in light of new information.
2. Members registered after the upgraded Directive DI87-07, will not be entitled to receive back their initial contribution If they choose to renounce their license – read more in an earlier article for the upgraded legal framework of the Investor Compensation Fund.
3. The contributions paid to the ICF are not an asset of the members, and these funds shall not be calculated as Tier 1 asset in the Capital Adequacy Ratios – read more in an earlier article for accurate and compliance reporting of the ICF in CAR.

B. Annual contribution fees:

• 5‰ of clients’ eligible funds and financial instruments with a discount of 80%, when all deadlines are met, the auditors’ opinion was “Unmodified Opinion” and there are no uncorrected misstatements.
• 6‰ of clients’ eligible funds and financial instruments, when all deadlines are met, the auditors’ opinion was “Unmodified Opinion” and there are misstatements that have not been corrected.
• €130.000 or 1% of clients’ eligible funds and financial instruments (whichever amount is the highest), when the audited statements of eligible funds and financial instruments accompanied by the external auditor’s opinion are not submitted on time or when the auditors’ opinion is not “Unmodified Opinion”.

Read here more about the requirements on the External Auditor’s opinion.

C. Additional annual contribution fee

• €700 for members who hold eligible funds and clients’ financial instruments,
• €100 for members who do not hold eligible funds and clients’ financial instruments.

A temporary and additional contribution is allowed to be announced by the new directive and in cases where the ICF has additional operational expenses.

D. Extraordinary contribution covers material excessive claims. As per the Directive DI87-07, the ICF members must keep an independently audited and client-segregated minimum cash buffer of 3‰ of their clients’ eligible funds and financial instruments as of the previous year.

Additionally, the members of the ICF are obliged to submit the confirmation Form 87-07-05 signed by the Board of Directions and the internal auditor, which attests to the fulfilment of the obligation, within 15th – 20th of May each year.

Find here the CIFs Regulatory Reporting Obligations Calendar, 2021.

* It is worth mentioning that members of the ICF that do NOT hold Client funds or client’s financial instruments are only exempted from the annual and the extraordinary contributions.

From which other sources can the CySEC ICF derive funds?

• income from the ICF investment operations
• donations and other voluntary causes
• unclaimed customer funds
• funds transferred to the ICF under the procedure for suspension and withdrawal of operating license, which become the ICF’s resources after three years from the date of their transfer.

What is the amount of compensation to covered clients and how this is calculated?

The compensation amount is equal to the minimum between €20,000 or 90% of the cumulative covered claims of the investor, and this is calculated as per

1. the valuation of the amount of capital or value,
2. the financial instruments that belong to the covered client,
3. the funds or instruments the ICF member is unable to repay.

Is the member allowed to contribute to ICF with Client Funds?

The ICF member can pay the ICF with Client funds, only IF the ICF member

1. held the amount for at least six years from the date the last transaction took place, including deposits and withdrawals,
2. took all reasonable steps to identify the customer and reimburse the amount,
3. commits to return the client funds in case the client (or his legal heir) claims the funds at any time in the future.

What is the ICF members’ regulatory obligations calendar?

Month	Investment Compensation Fund Obligations Deadlines	Deadline
May	The audited statements of eligible funds and financial instruments.	10th of May
May	Confirmation form 87-07-05	15th - 20th of May
June	Annual contribution fee shall be notified in writing to the members of the ICF.	10th June
July	Annual contribution fee must be made to the ICF if a discount can be granted.	10th of July
August	Annual contribution fee must be made to the ICF.	10th of August
TBA	Additional annual contribution	TBA

If you are interested to know more about CySEC regulated entities reporting obligations or simply require assistance or have questions on any of the items in the Regulatory Reporting Obligations Calendar 2021, please contact us at info@salvusfunds.com.

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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.