Theocharides: Cyprus' investment services sector is continuously growing

Discussing the Cyprus Securities and Exchange Commission’s 2025-2027 budget with the House Finance Committee, CySEC Chairman Dr George Theocharides noted the investment services sector’s continuous growth at a steady pace and despite the difficult economic environment.

As he told MPs on 27 January, in the last five years the number of supervised entities recorded an increase of 11.8%.

According to Theocharides, at the end of 2024 the number of entities supervised by the CySEC stood at 834, while 60 new applications of various types are under examination for licensing. A fact which, as he emphasised, demonstrates that Cyprus continues to accumulate substantial advantages as an investment destination.

George Theocharides also stated that CySEC is continuing its intensive supervisory control in the context of adequate and effective protection of the investing public.

In the last three years, as he said, administrative sanctions of €7.9 million have been imposed, of which €6.3 million were on CIF-regulated entities for violations of applicable legislation.

He further indicated that in addition to financial penalties, CySEC also takes other measures, including the rejection of applications for a CIF license, suspension of licenses until measures are taken to address weaknesses or omissions, as well as revocation of the CIF operating license.

The Chairman of CySEC emphasised that the approval of CySEC's budgets and its reinforcement with additional staff is considered absolutely necessary in order for it to adequately respond to the enormous volume of work it is called upon to carry out in terms of the adequate supervision of licensed entities.

"To ensure," he noted, "the credibility of the market, which is a basic condition for attracting new investments and by extension the further development of the economy and strengthening Cyprus's position as an international financial center."

As George Theocharides stated, it is essential that CySEC continue to have all the appropriate powers at its disposal and be further strengthened with the necessary resources, both in human resources and in specialised systems, in order to be able to successfully respond to the important role it is called upon to play as a supervisory authority.

His full statement, translated from the original Greek, can be seen below:

"Good morning,

I would like to thank you for the invitation and for your continued recognition and support of the work of the Cyprus Securities and Exchange Commission (CySEC) through the approval of its budgets.

Before addressing the CySEC budget, allow me to provide a brief overview of the economic environment and the capital markets sector.

Increasing regulatory and institutional requirements, digital transformation, and sustainable investments will continue to be key factors influencing capital markets and investment funds in 2025, both in Cyprus and across Europe. Additionally, international economic conditions and geopolitical risks will pose significant challenges to the markets.

Despite the challenging economic environment, the investment services sector in Cyprus continues to grow at a steady pace, providing vital support to the broader Cypriot economy.

At CySEC, we remain committed to the responsible and sustainable development of the capital market and the investment sector, underpinned by effective supervision to ensure investor protection.

Sector Overview

Over the past five years, the number of regulated entities has increased by 11.8%. By the end of 2024, the total number of entities under CySEC's supervision stood at 834, with 60 new applications for various types of licenses currently under review. This reflects Cyprus’ continued appeal as an investment destination.

Moreover, the recent implementation of the European Regulation on Markets in Crypto-Assets (MiCA) has already attracted interest from several companies seeking relevant licenses from CySEC.

Prudential Supervision and Sustainability

In 2025, the digital transformation of the financial sector in Cyprus and the EU is expected to continue, with artificial intelligence playing a central role in this process. Digitalization and new financial technologies (fintech) present opportunities for innovation and growth. Cyprus has the potential to further establish itself as a fintech hub, attracting skilled professionals in technology and innovation.

CySEC invests in prudential supervision, leveraging specialized systems that enable us to keep pace with the sector’s rapid digitalization, closely monitoring supervised entities to ensure full compliance with legal and regulatory obligations for investor protection. CySEC is also focusing on automating its processes through the implementation of specialized systems.

The full implementation of the Digital Operational Resilience Act (DORA) in January sets uniform requirements for the security of network and information systems supporting the business operations of financial entities. Like other regulators in Europe, we are intensively preparing for its implementation and collecting data from supervised entities on cybersecurity matters.

Supervisory Controls

To ensure adequate and effective investor protection, CySEC continues to intensify its supervisory inspections. Over the past three years, administrative fines totaling €7.9 million have been imposed, with €6.3 million specifically targeting investment firms (CIFs) for regulatory violations. It is important to note that all fines are deposited into the Republic of Cyprus’ Consolidated Fund, and the primary objective is compliance rather than financial penalties.

Beyond fines, CySEC takes additional measures such as rejecting license applications, suspending licenses until deficiencies are addressed, and even revoking licenses where necessary. Furthermore, we guide supervised entities in implementing corrective measures to enhance their internal processes and ensure full compliance with their regulatory obligations.

In parallel, CySEC prioritizes financial literacy, conducting numerous initiatives to raise awareness and educate investors through dedicated sections on our website and engagement on social media platforms.

Regulatory Developments

CySEC actively monitors and participates in decision-making processes at the European level. Several new significant European directives and regulations are currently under development and are expected to strengthen the supervisory framework for investment services, with implementation anticipated between 2025 and early 2026. Key developments include changes to AIFMD II, ESAP, FIDA, the Retail Investment Strategy, and the AI Act.

Budget

Regarding CySEC’s 2025 budget, total expenditures are projected at approximately €17.5 million, primarily allocated to personnel costs and technological upgrades, as previously mentioned. I would like to publicly express my gratitude to the government, particularly the Minister of Finance, and all parliamentary parties for their support in approving CySEC's budgets and for reinforcing our resources with additional personnel. This support is crucial to effectively managing the significant workload involved in supervising licensed entities and ensuring market reliability—an essential condition for attracting new investments and furthering economic growth, strengthening Cyprus’ position as an international financial center.

These efforts align with recommendations from international organizations such as MoneyVal and ESMA, aimed at creating more resilient markets and fostering a healthy financial environment that enhances investor protection across Europe.

At CySEC, we place great emphasis on continuous training for our staff through specialized seminars, as well as on investor education through initiatives such as collaboration with local institutions, public lectures, and the dissemination of educational materials in schools and universities.

Total revenues are estimated at €15.5 million, including state funding. A significant revenue increase is expected from 2026 onwards due to the gradual implementation of CySEC's new fee policy, which will be introduced at the end of the current year.

Furthermore, CySEC continues efforts to increase revenues through other means, such as expanding certification examinations and introducing new legislative frameworks to regulate additional categories of supervised entities.

Conclusion

In conclusion, the increasingly complex and detailed EU regulations that have recently come into force—or are soon to be introduced—place significant supervisory responsibilities on CySEC at both national and European levels. The workload required to ensure market integrity and investor trust, which are critical for attracting new investments and sustaining economic growth, is substantial.

Given these factors, it is imperative for CySEC to maintain its full regulatory powers and be further strengthened with the necessary resources—both human and technological—to effectively fulfill its critical supervisory role.

Our goal is for CySEC to act proactively in mitigating potential risks, ensuring the smooth functioning of the market, and reinforcing investor confidence while supporting the sustainable development of the sector.

Let me know if you need any further modifications or additions."

(Source: InBusinessNews)