CySEC Complaints Handling Procedure

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CySEC Complaints Handling Procedure

In the aftermath of its recent decisions to fine several financial services firms under its jurisdiction, the Cyprus Securities and Exchange Commission (CySEC), which is the regulator of financial markets in Cyprus, a popular hub for forex and binary options brokers, appears to be determined to monitor the conduct of CIFs more closely and decisively.

With this framework, it has addressed a circular to all investment firms licensed by it, in order to remind them about the obligations they have and which emanate from paragraph 13 of Directive DI144-2007-01 of 2012 for the authorisation and operating conditions of CIFs, regarding the handling of clients’ complaints.

Since a plethora of brokers are licensed in Cyprus, these instructions are important to them in terms of compliance with the regulator’s expectations, especially since CySEC is showing an increasing tendency to be stricter with CIFs on all matters, but especially on client protection. Moreover, knowing how CIFs are expected to handle client complaints is important for all traders holding accounts with such firms, since it helps them know what to expect when submitting a specific complaint to their broker.
Thus, to enlighten all affected stakeholders from both sides of the market, the content of CySEC’s circular is as follows:

A. General Obligations

1. CIFs are required to establish, implement and maintain effective and transparent procedures for the reasonable and prompt handling of complaints or grievances received from clients, and to keep a record of each complaint or grievance and the measures taken for the complaint’s resolution [paragraph 13(2) of the Directive].

2. CIFs are requested to fully implement the provisions of paragraph 13 of the Directive.

B. Maintaining internal register

3. For the purposes of compliance with paragraph 13(5) of the Directive where a CIF must register the complaints it receives as soon as possible, in an internal register with an appropriate manner, as well as for easy reference and retrieval, the CySEC expects CIF to apply the following:

i. Upon receiving the complaint, the CIF must register the complaint directly to an internal register, giving it a unique reference number.

The unique reference number must be consisted of ten digits:

the first two digits are the code of the CIF regarding the Transaction Reporting System – TRS, the following four digits define the year, and the last four digits denote the number of each complaint serial number (e.g. for 2015 – AA20150001, AA20150002, for 2016 – AA20160001, AA20160002).

ii. The unique reference number is communicated to the complainant.

iii. The CIF informs the complainant that he should use the said reference number in all future contact with the CIF, the Financial Ombudsman and/or the CySEC regarding the specific complaint.

C. Informing the complainant
4. The CIF confirms, within five days, the receiving of the complaint to the complainant [paragraph 13(8)(a) of the Directive].

5. The CIF investigates the complaint [paragraph 13(9)(a) of the Directive] and reply, within two months, to the complainant about the outcome/decision [paragraph 13(9)(c) of the Directive]. It is provided that, during the investigation of the complaint, the CIF informs the complainant of the handling process of his/hers complaint [paragraph 13(8)(d) of the Directive].
In the event that the CIF is unable to respond within two months, it informs the complainant of the reasons for the delay and indicates the period of time within it is possible to complete the investigation. This period of time cannot exceed three months from the submission of the complaint [paragraph 13(9)(c) of the Directive].

D. Submission of information to the CySEC

6. Every month, the CIF provides to the CySEC information regarding the complaints it receives and how these are being handled [paragraph 13(6) of the Directive].

In particular, the CIF completes every month (reporting month) the form ΧΧ_yyyymmdd_T144-002-01 (excel file, the ‘Form’) of Annex 1 and sends it to the CySEC within five days after the reporting month. The ‘Form’ is sent in electronic form via the TRS. All relevant details for completing and sending the ‘Form’ are referred to in Annex 2.

7. In case where the CIF did not receive any complaint within the reporting month, it has no obligation to send the ‘Form’.

8. In the event where the CIF has resolved and/or revised a complaint which was referred to the CySEC in a previous submission of the above mentioned ‘Form’, the CIF must complete all the fields of the ‘Form’ and select the ‘U’ from the column Record Type.

E. Reporting reference date for submitting information to the CySEC

9. The reporting reference date for submitting information to the CySEC is the 31st January 2016. Hence, CIFs must submit the related ‘Form’ for January, 2016, by the 5th February, 2016.”

It is evident that CySEC will be breathing closer down the necks of CIFs in the future, putting in place procedures to more effectively regulate the market and protect investors. This may be an indirect admittance of the fact that supervision was not as strict as it should have been in the past, but it is definitely good news for the clients of all CIFs who will know be able to demand to receive clear information about how their complaints are being handled.

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