Tied Agent Rules in EU. A brief analysis
To start with, if we take a look at the legal framework of tied agent companies will be subject to the provisions of the Investment Services Law (IS) as well as the relevant Codes of Conduct for Investment Firm’s and the Persons Employed by them.
A tied agent means, for the purposes of the IF law, “a person established in a Member State, who is acting under the full and unconditional responsibility of only one IF of a Member State, on whose behalf it acts, (i) promotes investment or/and ancillary services; (ii) attracts clients or prospective clients (iii) receives and transmits client orders in respect of investment services or financial instruments; (iv) places financial instruments and/or (v) provides advice to clients or prospective clients in respect of those financial instruments or services”.
An IF, or a credit institution, which decides to employ a tied agent, remains fully and unconditionally responsible for any action or omission on the part of the tied agent when acting on its behalf.
The CySEC maintains a registry of tied agents who are registered and who are either:
Established in the Republic, and act on behalf of a CIF or a credit institution that has been authorized in the Republic;
Established in the Republic, and act on behalf of an IF or a credit institution that has been authorized in another Member State;
Established in another Member State, and act on behalf of a CIF or credit institution that has been authorized in the Republic, but the Member State in which the tied agents are established does not allow the appointment of tied agents.
A CIF may only appoint as tied agents persons who are registered in the public registers or the respective public registers of other member states.
Please, take into consideration that there is no other categorization of tied agents in accordance with the IS Law.
With regards to notifications every time a CIF appoints or dismisses a tied agent, it is obliged immediately to notify CySEC, as well as when it becomes aware of changes in the details of the tied agent that are entered in the public register. In addition, a CIF have to notify to CySEC a table with the details of its tied agents.
There has to be mentioned that a tied agent registered in the public registers, has the obligation to notify immediately at the Commission every change, with regards to his details that are entered in the said public register.
A tied agent will only be registered by the CySEC, if:
is of sufficiently good repute;
Possesses appropriate general, commercial and professional knowledge so as to be able to accurately communicate all relevant information regarding the proposed service or financial instrument. Where the tied agent is a legal person, it has to employ at least one natural person who fulfills the above conditions.
In case of, a tied agent being a legal person, it has to employ at least one natural person that fulfills the above stated conditions.
In relation to introducing brokers, they are also considered as tied agents. In the same way as a “tied agent”, the introducing broker has to be authorized by the CySEC and registered in the public registry of tied agents. Regardless of the fact, that the introducing broker is not located in Cyprus, he or she will still be deemed to be providing investment services.
A CIF that appoints tied agents have to take adequate measures in order to avoid any negative impact that the activities of tied agent which are outside the scope of the IS Law could have on the activities carried out by the tied agent on behalf of the CIF.