Cyprus: Mutual Funds Legislation To Go Ahead Soon

Lisa Ugur, Tax-news.com, London

28 December 2000

Cyprus is keen to build a presence in the area of mutual funds, and is thus pressing ahead with the appropriate legislation. Just before Christmas, the House Finance Committee decided to adopt the bill on mutual funds, although it has recommended some amendments to the formulation of the legislation. It is hoped that the bill will be submitted before parliament in January 2001, and a transitional period for the implementation of the law has been recommended, which would enable all parties involved to become familiar with the content of the legislation and the legal status governing mutual funds.

Whilst the amendments put forward by the House Finance Committee to not affect the substance of the bill, they concern three important points:

  • The first relates to the independence of the trustee. The House Finance Committee would like to see the addition of a provision that does not allow the same company to act as the manager and trustee of a mutual fund

  • The second point relates to how to ensure that the various interested parties act independently from each other. The Committee has issued instructions to find out how this particular aspect of mutual funds is dealt with in Europe and whether it is controlled through directives or decrees

  • The third point concerns the content of advertising and memoranda by mutual funds. The Committee recommends the adoption of European directives, according to which advertisements should refer the public to an address where they can collect the Memorandum of the Fund, which should also include a copy of the Fund’s Articles of Association and its Charter.

Cyprus has been relatively slow to embrace mutual funds but their introduction has been greeted with much enthusiasm. As the mutual funds business begins to take off in Cyprus, it is expected to help develop local capital markets by enabling investors to spread and lower risk through diversified investment funds.

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