The Cyprus Securities and Exchange Commission (CySEC), in its ongoing commitment to transparency and regulatory clarity, has issued Circular C591 on the 3rd of August 2023. This circular aims to provide Cyprus Investment Firms (CIFs) with detailed guidance on the appointment of Alternate Directors to attend meetings of the Board of Directors, in accordance with the Investment Services and Activities and Regulated Markets Law of 2017.
Background and Purpose
The primary objective of Circular C591 is to outline the conditions and procedures under which a member of the Board of Directors of a CIF may designate an Alternate Director to represent them in Board meetings. This circular underlines the significance of adherence to the provisions of sections 9 and 10 of the Investment Services and Activities and Regulated Markets Law of 2017.
Key Points from the Circular
Conditions for Alternate Director Appointment:
- The CIF’s Memorandum of Association must explicitly allow for the appointment of an Alternate Director.
- The designated Alternate Director must currently hold a position on the CIF’s Board of Directors.
- Alternate Director appointments are valid for a specific, single Board meeting.
- Prior to the meeting, the CIF is required to notify CySEC about the appointment of an Alternate Director. This notification should be submitted at least one day before the scheduled Board Meeting and subsequent to formal notice being issued to all Board Members regarding the meeting.
Required Information in the Notification:
- The notification to CySEC must be in writing and include the following details:
- CIF’s identification information.
- Details of the Director appointing the Alternate Director.
- Information about the designated Alternate Director.
- Date of the upcoming Board of Directors meeting.
- Reasons behind the appointment of an Alternate Director.
- A copy of the CIF’s Memorandum of Association allowing Alternate Director appointments.
- Letter of appointment for the Alternate Director, issued by the appointing Board Member.
- Consent statement from the appointed Alternate Director.
Submission Process and Additional Notes:
The CIF is not required to pay any fee for filing the notification regarding an Alternate Director appointment.
As the appointed Alternate Director is an existing Board Member, this appointment does not lead to a change as specified in section 9(15) of the Law.
CySEC will update its records upon receiving the notification and will evaluate the provided information during supervisory inspections to ensure compliance with sections 9(3) and 10(1)(a) of the Law.
Repeated or continuous appointments of an Alternate Director by the same CIF Board Member do not align with the intent of section 9(3) of the Law.
It is essential for Board Members to uphold effective management and commit adequate time to CIF responsibilities, as defined by sections 10(1)(a) and 9(3) of the Law. Hence, Alternate Director appointments should not be made inappropriately or in violation of CIF’s obligations under the Law.
Conclusion
CySEC’s Circular C591 provides CIFs with clear guidelines on the appointment of Alternate Directors for Board meetings, ensuring compliance with relevant laws and regulations. By outlining the conditions, required information, and submission process, the circular offers a structured framework for CIFs to follow when designating Alternate Directors. It is crucial for CIFs and their Board Members to understand and implement these guidelines effectively to uphold transparency, accountability, and proper governance within their organizations.
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