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Cyprus: Proposal To Fine Investment Companies On Excessive Liquid Funds Gets Thumbs Down

Lorys Charambolous, Tax-news.com, Cyprus

08 February 2001

In a recent House Finance Committee meeting, Cyprus MP Prodomos Prodomou (DISY) whipped up a small whirlwind of controversy with his proposal to implement a fine of up to CYP 10,000 on Approved Investment companies when they allow their liquid funds go over the 20 per cent limit.

However, neither the government nor the majority of members of the House Finance Committee has warmed to the idea. The Finance Ministry is now expected to come up with alternative proposals after disagreeing with Prodomou's plans, saying that it feels that the fine is excessive and could be damaging in future relations with the investment companies. In fact, during the debate, questions were raised over whether or not the legislation enforcing the 20 per cent limit should be overturned.

Prodromou had a large amount of input to the impending Investment Companies Bill and he is insistent that the law can only be properly enforced with the threat of stiff penalties - not on companies as such, but on board members and appointed fund managers.

Chairman of the Cypriot Brokers Association, Christodoulos Ellinas, and Pieris Theodorou, chairman of the Listed Companies are both in favour of the abolition of the 20 per cent limit and have spoken out against Prodromou's proposal by arguing that a fund manager should be able to manage his portfolio without government intervention. If the provision is included in the Investment Companies Bill, they warned, it is likely to be contested in the courts.

The House Finance Committee has put any further talks on investment company penalties on hold until the Finance Ministry comes up with proposals of its own.

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