Key Obligations and Practical Guidance

On 09/02/2026 the Cyprus Securities and Exchange Commission (“CySEC”) issued Circular C754, introducing a new regulatory reporting requirement for Cyprus Investment Firms (“CIFs”) following an initiative by the European Securities and Markets Authority (“ESMA”).

The circular requires certain CIFs to complete the ESMA Cross-Border Online Questionnaire, aimed at collecting detailed information on investment services provided to retail clients across the European Economic Area (“EEA”) (including Norway, Iceland and Liechtenstein) under the freedom to provide services regime (passporting of services).

This initiative forms part of ESMA’s broader supervisory effort to improve oversight of cross-border financial services within the EU, particularly where investment services are provided remotely to retail clients in other Member States.

The new reporting obligation represents an important development for Cyprus-licensed firms that operate across Europe and should be carefully reviewed in light of its potential regulatory implications.

Scope of Application

Under Circular C754, the obligation applies to Cyprus Investment Firms authorised by CySEC that provided cross-border investment services during the period 1 January 2025 to 31 December 2025.

The reporting requirement arises where a CIF:

• provided investment services to more than 50 active retail clients in any EU or EEA Member State, and
• did so under the freedom to provide services regime (passporting), without establishing a local branch.

Cyprus-based investment firms providing services only to Cyprus are excluded from the reporting scope. However, firms must submit separate questionnaires for each qualifying Member State where the client threshold is exceeded.

Importantly, the reporting must include only active clients. Clients may be considered inactive only where:

• they have been inactive for at least one year,
• no investment services were provided during that period, and
• no revenue was generated from them.

The ESMA Cross-Border Questionnaire

The ESMA questionnaire is an electronic reporting tool designed to collect data on the nature, scale, and risk profile of cross-border investment services.

The information requested typically includes:

• identification details of the CIF
• host Member States where services were provided
• number and classification of clients
• types of investment services offered under MiFID II
• financial instruments made available to clients
• distribution and marketing channels used
• revenue generated from cross-border activity
• complaints data, including complaints linked to AML/CFT matters

Following submission of the questionnaire, CySEC requires CIFs to separately notify the regulator by email regarding complaints attributable to AML/CFT issues.

The deadline for submission of the questionnaire is 27 March 2026.

A notable feature of the ESMA platform is that submissions cannot be saved or edited after filing. This means that the entire questionnaire must be completed in a single session, and any corrections require a full resubmission.

Regulatory Context

The ESMA data collection exercise reflects increasing regulatory attention at EU level toward the cross-border provision of investment services, particularly where retail investors are involved.

In recent years, European regulators have expressed concerns regarding:

• aggressive marketing of complex financial products
• insufficient investor protection across jurisdictions
• supervisory challenges associated with passporting regimes

The information collected through this exercise will enable regulators to better understand the scale and structure of cross-border investment services provided by CIFs and may influence future supervisory priorities and regulatory policy.

Practical Considerations for Cyprus Investment Firms

While the reporting requirement may appear administrative in nature, it raises several important practical considerations.

First, firms must ensure that client classification and reporting data are accurate, particularly where clients have changed status or where onboarding processes involve multiple jurisdictions.

Second, firms should carefully verify how client residence is determined, as inconsistencies between onboarding records, IP addresses, and documentation may create regulatory questions.

Third, firms should review their marketing and distribution channels, including the use of introducing brokers, affiliates, or tied agents in other Member States, as these may be scrutinised through the data collected.

Finally, CIFs should ensure that complaints registers and AML-related reporting records are properly maintained, given the explicit requirement to report complaints attributable to AML/CFT obligations.

Given the structure of the ESMA platform and the inability to amend submissions once filed, it is advisable for firms to prepare the relevant data internally before accessing the questionnaire.

How AGPLAW Can Assist

AGPLAW regularly advises financial institutions, fintech companies, and regulated investment firms on regulatory compliance, licensing, and supervisory engagement with CySEC and other European regulators.

In relation to the ESMA cross-border reporting exercise, our team can assist with:

• determining whether a CIF falls within the scope of the reporting obligation
• advising and preparing the data required for the ESMA questionnaire
• reviewing client classification and reporting methodology
• advising on cross-border marketing and distribution arrangements
• reviewing and advising on complaints registers and AML-related reporting obligations
• coordinating the submission of the questionnaire and related notifications to CySEC

Beyond the immediate reporting requirement, we also advise clients on MiFID II passporting strategies, regulatory structuring, and cross-border operational compliance, helping ensure that firms remain aligned with evolving European supervisory expectations.

Looking Ahead

The ESMA cross-border reporting exercise should be viewed not merely as a reporting exercise, but as part of a broader regulatory trend toward enhanced supervision of cross-border investment services in the European Union.

Cyprus Investment Firms that actively operate across Europe should therefore consider this development as an opportunity to review their cross-border activities, governance structures, and compliance frameworks.

Proactive preparation and regulatory alignment will be essential as European authorities continue to focus on the transparency and oversight of cross-border financial services.

AGPLAW Financial Services & Regulatory Practice: For further information regarding CySEC Circular C754 or assistance with the ESMA questionnaire, please contact our regulatory team