Cyprus Investment Funds Administrators Law: A New Era for Transparency and Growth

With the approval of the Investment Funds Administrators Law, L.101(I)/2025 (the “Law”), by the House of Representatives on 29 May 2025, Cyprus has taken a significant step forward in developing its financial regulatory framework. This landmark legislation, which has been in force since its publication in the Official Gazette of Cyprus on 18 June 2025, marks a transformation in how fund administration is governed and supervised in Cyprus.

What Does the Law Introduce?

Until now, the operations of investment fund administrators were not directly regulated by a dedicated legal framework. Instead, they were indirectly covered by regulations for fund managers. The Law establishes a clear, tailor-made regime specifically for fund administrator companies, aligning Cyprus with other leading EU and foreign jurisdictions.

What are the key features of the Law?

Licensing and Supervision: A formal licensing process under the supervision of the Cyprus Securities and Exchange Commission (“CySEC”) is introduced. Each fund administrator company must:

1. Maintain €50,000 of minimum own funds (or €125,000 if providing additional services);
2. Hold professional indemnity insurance;
3. Base its registered and central offices in Cyprus;
4. Have a properly structured board and internal controls; and
5. Meet ongoing compliance, governance, and reporting requirements.

Scope of Services: The Law outlines the key services to be undertaken by fund administrators such as maintaining investor registries, calculating net asset value (NAV), processing investor orders, and other core back-office functions for both UCITS and AIFs. While these services were already defined under existing Cypriot legislation (i.e. UCITS Law – L.78(Ι)/2012, AIFM Law – L.56/2013) and corresponding European directives (i.e. Directive 2009/65/EC and Directive 2011/61/EU), the Law formalises and consolidates them within a dedicated regulatory framework specific to fund administrators in Cyprus.

Compliance: The Law imposes clear rules by which the investment fund administrators are to ensure full compliance with anti-money laundering and other legal obligations.

Investor Protection and Transparency: The Law strengthens trust in the sector through specific safeguards:

1. Conflict of interest rules require investment fund administration companies to prevent and disclose situations that could harm investor interests.
2. Annual reports must be submitted to CySEC, including data on services provided to each fund, helping ensure transparency and regulatory oversight.
3. Governance and internal controls are mandatory, including board-level oversight of risk, compliance, and decision-making.
4. Transaction safeguards require matching and verification of all investor-related money movements.
5. Disclosure obligations apply when conflicts of interest cannot be fully managed internally.
6. Enforcement measures, including penalties and sanctions by CySEC, ensure that these rules are respected.

What is the impact on the investment funds sector

The introduction of this Law marks a shift toward a more structured and accountable environment for fund administration in Cyprus. By clearly setting out the responsibilities and requirements for administrator companies, the framework supports a more dependable operating landscape, which benefits both service providers and the broader investment community.

These changes also reinforce Cyprus’s appeal as a reputable hub for investment fund services. With a framework that now reflects international regulatory standards, the jurisdiction is expected to attract increased interest from global asset managers and service firms looking for a stable and transparent base of operations.

Looking Ahead

The adoption of the Law reflects Cyprus’s commitment to regulatory modernisation and investor confidence. Beyond addressing current market gaps, it establishes a solid foundation for future growth and cross-border cooperation in the fund services sector. Cyprus is now better equipped to compete globally while maintaining strong oversight and investor safeguards.