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Cyprus’s financial regulator has warned investment firms against using call centres based outside the European Union in a further bid to clean up its financial services sector.
There has been criticism of some Cyprus-based retail trading firms, which include “contract for differences” and binary options providers, for outsourcing sales teams overseas and allowing call centre staff to pressurise clients.
A circular by the Cyprus Securities and Exchange Commission released today mandates the firms it regulates to ensure their staff have appropriate knowledge and competence.
Therefore, customer services “should be provided internally, either from the head office of the [company] or from its branch situated in the Republic [of Cyprus] or in another [EU] Member State”.
A spokesperson for CySEC said:
Aggressive sales techniques deployed by certain firms providing online trading instruments are proven to harm investors and damage consumer confidence in the industry as a whole. Firms under our supervision must communicate with their clients in a fair and honest manner, in compliance with the regulation we have in place to protect investors.
This cannot be guaranteed if sales and marketing functions are outsourced to a third party country outside of the European Union where service providers are not bound by the MiFID regime.
If companies are found to have failed to comply, the regulator may choose to impose fines or suspend or withdraw company licences. In a recent crackdown on rule-breaking investment firms, CySEC has fined firms a total of €2.9m since November 2015, a record for the regulator.
It is unclear how many firms would be affected by the ruling, which would come into force in May this year.
CySEC’s ruling preempts the implementation of European Securities and Marketing Authorities guidelines, published in December, which will come into force in January 2018.