The Cyprus Securities and Exchange Commission (CySEC) has issued Circular C483 on January 18th, 2022, to remind Cyprus Investment Firms (CIFs) of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) revised joint Guidelines on the assessment of the suitability of members of the management body and key function holders (the ‘Guidelines’).
CySEC has adopted the Guidelines by incorporating them into its supervisory practices and regulatory approach. The Guidelines are applicable from 31 December 2021 and have updated and repealed the previous versions of the other relevant Joint Guidelines.
The amendments in the Guidelines, took into consideration the revised Capital Requirements Directive (CRD V) and the Investment Firms Directive (IFD), in particular with regards to money laundering and financing terrorism risks, gender diversity, as well as, the new legislative framework for investment firms adopted in 2019 by the Investment Firms Regulation (IFR).
The purpose of the Guidelines is to specify the requirements regarding the suitability of the members of the management body, in particular, the notions of sufficient time commitment, honesty, integrity and independence of mind of a member of the management body, adequate collective knowledge, skills and experience of the management body and adequate human and financial resources devoted to the induction and training of such members. They further specify that, the notion of diversity shall be taken into account for the selection of members of the management.
The Guidelines also specify elements regarding the suitability of the heads of internal control functions and the Chief Financial Officer (CFO), where they are not part of the management body, including the principle of independence applicable to certain members of the management body in its supervisory function. If a relevant institution’s assessment concludes that a key function holder is not suitable, then the relevant institution should either not appoint the individual or take appropriate measures to ensure the appropriate functioning of this position.
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