On 18 October 2012, the Cyprus Parliament approved five amending bills in the form of a legislative package, in an effort to achieve further compliance with EU Directive 2010/78 on the powers of the European Supervisory Authorities (the so called “omnibus directive’), 2003/71 (on the prospectus to be published when securities are offered to the public or admitted to trading) and 2004/109 (on the transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market). The amendments, in general, aim at further harmonisation of the domestic legislation with the EU acquis regulating the powers of the European Supervisory Authorities, namely the European Central Bank (ECB), the European Systemic Risk Council (ESRC) and the European Securities and Markets Authority (ESMA). The package also provides for further exchange of information between the relevant competent authorities of EU member states. In particular, the approved legislation introduces amendments to the following laws:
• The Settlement Finality in Payment Systems and Securities Settlement Systems Law, Law 8(I)/2003 as amended;
• The Public Offer and Prospectus Law, Law 114(I)/2005 as amended (the “Prospectus Law”);
• The Investment Services and Activities and Regulated Market Law, Law 144(I)/2007 as amended (the “Investment Firms Law”);
• The Transparency Requirements (Securities admitted to Trading on a regulated Market) Law, Law 190(I)/2007 as amended (the “Transparency Law”); and
• The Insider Dealing and Market Manipulation (Market Abuse) Law, Law 116(I)/2005 as amended (the “Market Abuse Law”).
Under the new amendments of the Settlement Finality in Payment Systems and Securities Settlement Systems Law, the Central Bank of Cyprus shall provide the European Central Bank, the competent authorities of other EU member states, the European Systemic Risk Council (“ESRC”) and the European Securities and Markets Authority (“ESMA”) with information regarding the issuance of a liquidation Order against a participant in a system notified as a designated one under the provisions of the basic Settlement Finality Law, 8(I)/2003, as well as information on the approval of a voluntary liquidation resolution. Furthermore, the Central Bank of Cyprus shall notify the designated systems and the system operators to the European Securities and Markets Authority and it shall also provide any other information deemed necessary by ESMA for the purposes of the said Law.
The new amendments of the Investment Firms Law provide for the cooperation between the Cyprus Securities and Exchange Commission (“CYSEC”), the competent supervisory authorities of other EU member states ESMA and ESRC. In this framework, information on granting authorisation to an investment firm or withdrawal of such an authorisation or any other information deemed necessary under the law, EU Regulation 1095/2010 and EU Directive 2010/78, shall be exchanged between the aforementioned authorities. CYSEC shall also maintain and update a public record of registered, licensed Cyprus Investment Firms. Furthermore, in cases where a competent authority of another EU member state rejects or delays to process within a reasonable time frame a request for information, investigation or inspection submitted by the CYSEC, the latter may notify the ESMA.
The new amendments of the Market Abuse Law also give the right to ESMA to insert and make public on the public record of investment firms maintained by CYSEC, the details of any administrative or criminal sanction imposed on a Cypriot Investment Firm for a violation of the Market Abuse Law.
Following the amendment of the Prospectus Law, new Section 14(1A) gives the power to CYSEC to request the publication of a supplement to a prospectus previously approved by CYSEC, if significant new factors, material mistakes or inaccuracies come to light after approval of the said prospectus. Pursuant to new Section 26(8), the Commission may also transfer the approval of a prospectus to the competent authority of another EU Member State, subject to prior notification to ESMA and the consent of the competent authority of that Member State.
CYSEC must also notify ESMA of the approval of the prospectus and any supplement thereto at the same time as that approval is notified to the issuer, the offeror or the person asking for admission to trading on a regulated market, as the case may be. Additionally ESMA now has access to the special record maintained by CYSEC where all approved prospectuses and supplements to prospectuses are maintained.
Also, new Section 32 provides that the Cyprus Securities and Exchange Commission shall publish on its website the list of prospectuses approved, including, if applicable, a hyperlink to the prospectus published on the website of the competent authority of another EU member state, or on the website of the issuer, or on the website of the regulated market. The published list shall be kept up-to-date and each item shall remain on the website for a period of at least 12 months.
The new amendments to the Transparency Law, inter alia, now give the right to CYSEC to impose sanctions on companies, whose securities listed in a regulated market and are supervised by CYSEC as the Home Member State, for failure to comply with CYSEC’s instructions relating to corrections or additions to periodic financial information made public such companies. The new sanctions include:
(i) suspension of trading of the issuer’s securities up to 10 days;
(ii) prohibition of trading of the issuer’s securities;
(iii) administrative fine up to Euro 170,000 and in the event of a repeated offence up to Euro 340,000;
(iv) administrative fine up to Euro 1,000 for every day that the violation continues to exist.