Cyprus MPs Voice Discontent Over Stock Exchange Regulations

Lorys Charambolous, Tax-news.com, Cyprus

14 March 2001

At a meeting of Cyprus's House Finance Committee earlier this week, DISY MP Prodromos Prodromou called for the abolition of a newly implemented regulation which demands that all shares and stocks must be pre-paid by investors before stockbrokers can complete the transaction.

Director of the Cyprus Stock Exchange (CSE), Nontas Metaxas, said he agreed with Preodromou. He described this particular provision of the law as restrictive and said the problem of credibility could easily be dealt with if stockbrokers actually adhered to the credit limits imposed on them. Stockbrokers have been known to exceed their net funds and guarantees by up to two or three times.

Prior to the new regulation, investors were allowed to obtain securities on credit and Andis Tryfonides, general director of the Finance Ministry, argued that if investors reverted to this practice and they failed to pay brokerages, the brokerages then would be unable to pay the Stock Exchange. Consequently, he said, this would result in disaster with far-reaching consequences.

Futher worries were raised at the meeting concerning the taxation of the CSE's profits. The finance minister, Takis Clerides, said the software used by the CSE does not provide precise data on the date when a share was sold so it is unclear as to who owned shares and when they owned them and how to tax them. Therefore, argued Clerides, it was virtually impossible to introduce a system of tax incentives for long-term investors.

In addition, many members at the House Finance committee meeting also complained about a provision in the Investment Companies Act concerning the imposition of fines on investment companies that do not conform with the minimum investment requirements. DISY MPs Prodromou, Syllouris and Christoforou said investment companies should be fined up to CYP£10,000 a day for every day they violated this provision of the law and it was agreed that this proposal will be put before parliament.

However, the House Finance Committee has agreed that the resolution of the issues concerning the CSE will be postponed until after the May parliamentary elections. The government has made it clear that it has no current plans to change any items of concern at the moment although it will implement amendments to CSE regulations, as recommended by Demetris Tsimbanoulis' recently published report on the Exchange, in the summer period.

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