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Guidance to AIFMs from CySEC regarding the notification for the establishment of a RAIF in Cyprus

7 November 2018

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The Cyprus Securities and Exchange Commission (‘CySEC’) has issued a new circular titled “C285 – External Managers of RAIFs – Registration of RAIFs in the relevant CySEC Register” (the ‘Circular’) on 2 November 2018 in the exercise of it’s regulatory and oversight activities of Alternative Investment Funds (‘AIF’) and Registered Alternative Investment Funds (‘RAIF’) in Cyprus.

The Circular came into place to further explain the Directive DI124-01 regarding the “Registration of RAIFs in, and deletion from, the RAIF Register” (the ‘Directive’) and clarifies that for CySEC to register a RAIF, along with application 124-00-01 the following documents and details must be included:

  • Certificate of registration of the RAIF, in accordance with the relevant legal status of the RAIF (MF, VCC, FCC, LP).
  • Information regarding the investment strategy, including the type of alternative investments that the RAIF will perform. In addition, the strategy of the external manager regarding leverage, the risk profile and other characteristics of the external manager.
  • The constitutional documents, rules and assorted documents of the RAIF.
  • Information on the arrangements made regarding the appointment of the RAIF custodian.
  • Information memorandum of the RAIF.
  • The license of the external manager of the RAIF.
  • Confirmations from the external auditors and legal counsels of the RAIF.
  • Confirmation of who the representative is for promotion of the application for registering the RAIF in the RAIF Register.

In respects to RAIFs taking the form of an investment company or a partnership, they should first be registered with the Registrar of Companies and, within one month from their registration with the Department of the Registrar of Companies, submit the application in accordance with the Circular and the Directive. For mutual funds, they should be submitted in accordance with the Circular and the Directive within one month from the constitution of their rules.

Within one month from receipt of the required information in accordance with the Circular and the Directive, CySEC will proceed to register the RAIF in the RAIF Register having assessed, to its satisfaction, that the external manager can manage the RAIF.

CySEC goes on to clarify that due to the nature of the RAIF registration process, applicants must check and be satisfied that the constitutional documents, rules and various documents of the RAIF are in full conformity with the provisions of the law relating to organisations for Alternative Investment Law of 2018 (124(1)/2018) (‘AIF Law’). Although a RAIF is registered in the RAIF Register, it does not then mean that the constitutional documents, rules and assorted documents have been approved by CySEC. If constitutional documents, rules and assorted documents are submitted to CySEC without the necessary legal provisions or which include unfitting information, CySEC may not proceed to register the RAIF in the relevant Register of RAIFs.

The Circular includes a provision relating to the checks and supervision conducted by the Department of the Registrar of Companies in Cyprus. It specifies that such checks are only limited to the provisions of the Companies Law and or the Partnership Law as the case may be.

As guidance towards the Circular’s readers CySEC clarifies that, with the exception of a few select provisions which are specified in the AIF Law all provision and relate to AIFs, are also applicable to RAIFs and that the constitutional documents, rules and assorted documents should take this into account. The Circular includes certain basic provision of the AIF Law which must be taken into account when drafting the constitutional documents, rules and assorted documents of a RAIF:

  • The rules or the constitutional document of the RAIF must provide that the RAIF is subject to the provisions of Part VIII of the AIF Law; guidance may be found in Article 134(1)(c) of the AIF Law.
  • The name of the RAIF must specify the legal type which it takes (MF, VCC, FCC, LP) as well as “Registered Alternative Investment Fund” or “RAIF”; guidance may be found in Article 4(2)(a)-(c) and 134(3)(b) of the AIF Law.
  • Provisions relating to RAIF umbrella funds; guidance may be found in Article 9 and 134(5) of the AIF Law.
  • Provision relating to RAIF; guidance may be found in Article 7 of the AIF Law.
  • Matters relating to custodians of the RAIF; guidance may be found in Article 28(1) and 34(1)(d) of the AIF Law.
  • Matters relating to the issue and redemption of units; guidance may be found in Chapter 7, Part II of the AIF Law.
  • Matters relating to mutual funds; guidance may be found in Section 1, Chapter 8, Part II of the AIF Law.
  • Matters relating to investment companies; guidance may be found in Section 2, Chapter 8, Part II of the AIF Law.
  • Matters relating to partnerships; guidance may be found in Section 3, Chapter 8, Part II of the AIF Law.
  • Matters relating to mergers; guidance may be found in Article 87 and article 141, Part II of the AIF Law.
  • Matters relating to units; guidance may be found in Article 137of the AIF Law.

The clarification and instructions the Circular entails are a welcomed addition for the registration of RAIFs in Cyprus. Although CySEC has not registered any RAIFs in the Register of RAIFs in Cyprus until the date of this publication, it’s positive that CySEC, as well as businesses, are aligned and that in the coming month we should start seeing the first RAIFs being registered and commencing operations.

For any further information or clarifications regarding AIFs or RAIFs in Cyprus, please contact Harris Sharpe.

 

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