The European Securities and Markets Authority (ESMA ) has pointed out perceived deficiencies by the Cyprus Securities and Exchange Commission (CySEC) in the supervision of cross-border investments in the European Union.
CySEC’s Effort Is “Too Little Or Too Slow”
According to ESMA, the intervention by CySEC is too little or too late when it comes to dealing with aggressive marketing behavior in the region. Cyprus has always been an attractive business environment for Russian entities. However, the country has been attracting other investment and foreign exchange companies from other regions lately. ESMA’s statement is coming after reviewing cross-border activities from investments firms in Cyprus, Luxembourg, Germany, the Netherlands, Malta, and the Czech Republic.
However, following conclusions from the review, it was discovered that a large number of Cypriot-based companies are posing high investment risks. ESMA noted that the companies are frequently promoting services involving speculative products using aggressive marketing behaviors. As a result, the investors are more vulnerable and have been exposed to very high risks in the market.
CySEC’s Supervision Is Inadequate
The European Commission recommended some measures that will enable authorities to supervise and enforce the bloc’s securities rules. This will be the first time ESMA will be taking such a step with a national regulator.
ESMA says CySEC has not done enough in addressing the risks created by the cross-border services provided by Cyprus firms. According to ESMA, the Cyprus regulator is using an inadequate approach to its supervision due to its lack of staff and other issues.
CySEC, while responding to the recommendation, noted that it has taken important steps to address the situation. The regulator added that it has increased its staff by 28% and intensified efforts to supervise cross-border firms over the last 18 months. CySEC also stated that the review covers only two years to August 2021. As a result, it doesn’t reflect on the changes the company has carried out from the last date the review was updated.