Just over a week ago the Ministerial Council approved a new regulation under which investors acquiring securities must pay in advance for any transaction before it takes place. According to a report submitted to parliament, many investors in Cyprus place purchase orders without actually paying for them beforehand and then place an order to sell, sometimes during the same trading session, thus generating gains without actually using any capital. Obviously, when share prices plummet - something to which the Cypriot investing community has become accustomed in recent months - it can leave investors refusing or even unable to cover the cost of their pruchases. Investors refusing to pay brokers creates liquidity problems and the prospect of a complete financial collapse is untenable for the Cyprus authorities.

To guard against such an event, the government has called upon stockbrokers to refuse orders from clients until they have the cash upfront. According to the government, the same should apply when investors want to sell their securities, whereby stockbrokers must not realise sales without first obtaining the share certificates or any documents pertaining to the securities to be sold.

In addition to the abovementioned safeguard, a new bill was submitted to parliament last week concerning a change in the status of the Securities and Exchange Commission (SEC). The bill gives supplementary powers to the SEC and makes it more but not completely autonomous. According to the Cyprus government, the rejuvenated SEC will maintain its existing powers but will also be responsible for the overall supervision of the capital market and all securities transactions carried out in Cyprus.

Furthermore, it will have the power to examine, propose and take measures to limit sudden share price fluctuations. If the bill passes into law, the new-look SEC will amongst other things be able to impose fines on the Cyprus Stock Exchange and its members, take disciplinary measures against stockbrokers and investment consultants, grant or recall the licences of stockbrokers, brokerages or investment consultancies and approve share issues.