Cyprus Mutual Fund Law Comes Into Operation

by Lorys Charalambous, Tax-News.com, Cyprus

19 March 2003

The Mutual Fund Law came into operation on the Monday allowing both native and foreign firms to offer mutual funds to Cypriot residents.

Cypriot Securities and Exchange Commission (SEC) chairman Marios Clerides told the Financial Mirror that the law will be further amended in August of this year to bring it into line with EU harmonisation rules which come into force in February next year.

However, as a result of the slump in the banking sector internationally as well as in Cyprus, the SEC expects few applications from native banking and financial institutions. A minimum start-up capital of CYP 1 million will further hold back Cypriot applications.

Most of the applications are expected to come from foreign-based firms offering mutual funds to Cypriot residents. The new rules require a company to deposit its prospectus with the SEC which will then investigate whether the fund is regulated by an approved body. This process is significantly accelerated if the fund is regulated by a body within the EU.

It has been decided by the SEC that prospectuses can be written in English, though rules will require that a potential purchaser of the fund has a sufficient enough grasp of the language to understand the implications of buying into the fund.

The major objective of the new law is to provide transparency in the market place. All funds will have to publicise their bid/offer rates and make clear commissions and costs in their promotional literature.

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