CySEC Overturns Multi-million Fines on Bank of Cyprus Execs

The Cyprus Securities and Exchange Commission (CySEC) announced today (Monday) that the Administrative Court has annulled a series of fines imposed on former executives of the Bank of Cyprus Public Company Ltd in 2014. The court's decision was based on a breach of impartiality during the original decision-making process.

On June 14 and May 21, 2024, the court overturned the administrative fines against 13 former officials of the Bank of Cyprus. These fines were initially imposed following an investigation into the bank's Greek Government Bonds (GGB) investments. The penalties, dated April 28, 2014, were associated with alleged violations of transparency requirements and public offer regulations.

The Administrative Court found that these decisions were “without basis” due to a previous ruling by the Supreme Constitutional Court. In Appeal No. 99/2022, the Supreme Constitutional Court determined that CySEC's 2014 decision was compromised by “a breach of the objective aspect of the principle of impartiality.” This breach occurred because the Chairman of CySEC participated in the decision-making process.

The annulment affects prominent figures in Cyprus' financial sector, nullifying the penalties imposed on 13 individuals. A decade ago, CySEC had issued fines ranging from €80,000 to €350,000, collectively amounting to a multi-million-euro financial penalty package.

According to the court's decision, “An amount of €1,500 plus VAT shall be awarded in favor of the applicants and against the defendant in each action.” This marks a significant financial and reputational relief for the affected individuals.

The Bank of Cyprus, a financial services company founded in 1899 and headquartered in Strovolos, is distinct from the country's leading monetary institution, the Central Bank of Cyprus. In 2017, CySEC imposed another fine on the Bank of Cyprus, its former CFO, and ten directors, totaling over €595,000 for accounting disclosure failures and other infractions. These fines followed CySEC's investigation into violations by the firm, its board members, and its former CFO due to negligence.

Recently, CySEC has been active with new initiatives. Last week, CySEC launched its Regulatory Sandbox, which is now open for applications from entities involved in FinTech and RegTech in Cyprus. This initiative aims to foster innovation in the financial sector by providing a controlled environment for testing new technologies.

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In addition, in July, CySEC announced the launch of a thematic review concerning managing uninvested funds by Cyprus Investment Firms (CIFs) on behalf of clients. This review, known as 'the Exercise,' aims to evaluate how CIFs handle these funds, including the payment of interest or returns.

In June, the regulator launched a consultation to gather market views on proposed fees and reporting requirements under the Markets in Crypto-Assets Regulation (MiCA). This initiative invites stakeholders to provide their opinions and influence the future framework, with responses due by July 17, 2024.

The annulment of the fines by the Administrative Court represents a significant development in Cyprus' financial regulatory landscape, highlighting the importance of impartiality in regulatory decisions. This decision impacts the individuals involved and sets a precedent for future regulatory actions in the country.