1. Undertakings for Collective Investment in Transferable Securities (UCITS)

Overview

• Description: UCITS are a type of investment fund regulated at the European Union level. They are designed to be a safe and easily understandable investment product.
• Regulation: Governed by the EU UCITS Directive, ensuring high levels of investor protection.
• Characteristics:
  • Can be marketed to retail investors across the EU.
  • Must comply with strict diversification, liquidity, and eligible asset rules.
  • Subject to stringent regulatory oversight.

UCITS Framework in Cyprus

1. Regulatory Compliance:
   • EU Directives: Cyprus implements UCITS regulations in line with EU directives, ensuring consistency with EU-wide standards for collective investment schemes.
   • Cyprus Securities and Exchange Commission (CySEC): CySEC is the competent authority in Cyprus responsible for regulating and supervising UCITS funds.
2. Fund Structure and Operations:
   • Legal Framework: UCITS funds in Cyprus are structured as open-ended investment funds, providing daily liquidity to investors.
   • Management Company: Each UCITS fund must appoint a management company responsible for fund management and compliance with regulatory requirements.
3. Investment Scope and Restrictions:
   • Investment Assets: UCITS funds in Cyprus can invest in transferable securities, money market instruments, units in other collective investment schemes, and certain derivatives.
   • Diversification Requirements: Funds must adhere to diversification rules to spread risk across different issuers and assets, promoting risk management.
4. Investor Protection:
   • Depositary Requirement: UCITS funds in Cyprus must appoint a depositary (typically a bank) to safeguard assets and protect investors' interests.
   • Disclosure and Transparency: Funds are required to provide regular and comprehensive disclosure to investors, including financial statements, NAV calculation, and risk management practices.
5. Cross-Border Distribution:
   • Passporting Rights: Once authorized by CySEC, UCITS funds in Cyprus can be marketed and sold throughout the EU under passporting rights, streamlining cross-border distribution.
6. Regulatory Oversight:
   • CySEC Supervision: CySEC monitors UCITS funds to ensure compliance with UCITS directives, investor protection standards, and transparency requirements.

Advantages for Cyprus-based UCITS Funds:

• Market Access: Cyprus-based UCITS funds benefit from EU-wide market access, facilitating distribution and access to a broader investor base across the EU member states.
• Investor Confidence: Adherence to EU standards enhances investor confidence in terms of regulatory oversight, transparency, and investor protection.
• Operational Efficiency: UCITS funds in Cyprus operate under a well-established regulatory framework, ensuring operational efficiency and compliance with EU directives.