A Game-Changer for Fund Services: Inside Cyprus’ New Fund Administrators Law
The introduction of the Law N. 101(I)/2025 on the ‘Establishment and Operations of Fund Administration Companies for Collective Investment Undertakings ("CIUs”) and related matters’ (“Law”), introduces a structured legal and supervisory regime for fund administrators in Cyprus. This comprehensive legislation is intended to regulate entities that are entrusted with the execution of fund administration functions (ΚΕΔΟΣΕ in Greek, for the purpose of this article “KEDOSE”) for CIUs (UCITS and alternative investment funds).
Key provisions of the Law:
- Scope and applicability
The Law applies to any legal entity performing fund administration functions from or within the Republic upon delegation from the CIU or its External Manager. It excludes entities already governed under the existing sector-specific legislation such as UCITS management companies and Alternative Investment Fund Managers.
- Operating license requirements
Only those companies that have received a license from the Cyprus Securities & Exchange Commission (“CySEC”) are permitted to operate as KEDOSE and effectively provide fund administration services. The license specifies/determines the exact functions permitted and no entity may advertise or promote itself as a fund administrator without such authorization/license.
Pre-approval by CySEC is required for any additional services to be offered by KEDOSE, other the ones disclosed within the Law.
- Organizational and operational requirements
Licensed fund administrators must maintain an appropriate organisational structure, sound corporate governance with internal control systems and compliance frameworks as well as satisfy capital adequacy requirements (EUR50.000 or EUR125.000 if offering the ancillary service of retaining investors’ funds), professional indemnity insurance requirements (0.5% coverage against total assets under administration) and utilize advanced software solutions.
KEDOSE’s must maintain a registered head office in Cyprus and there are additional specific requirements for the members of the Board of Directors (2 executives as a minimum who are residents of the Republic) and senior management personnel.
Delegation of functions
The delegation of the fund administration function(s) to third parties is allowed, with the licensed administrator maintaining the full responsibility. Amongst others, such delegation arrangements must be formalised through written operational memoranda, initial and on-going due diligence and the client’s explicit consent.
- Supervision / Enforcement & Regulatory Reporting Obligations
CySEC is vested with broad supervisory powers, including:
- Maintaining a public registry of licensed KEDOSE;
- Imposing administrative sanctions, revocation of licenses and criminal prosecutions for serious offences; and
- Ongoing oversight through mandatory reporting, auditing and compliance assessments.
On the latter, licensed fund administrators should prepare and submit to CySEC their annual report, not later than six (6) months post the calendar year end. The annual report shall contain amongst others, information on services offered, assets under management (AuM), delegation arrangements (if any) for each individual CIU under administration etc. Furthermore, KEDOSE’ shall also prepare and submit to CySEC their individual audited financial statements, again not later that six (6) months post their financial year end. In addition, KEDOSE’ compliance function, shall prepare and submit to CySEC at least on an annual basis their compliance report.
- Transitional provisions
Existing companies offering fund administration services must conform to the new requirements (i.e. apply for authorisation and become licensed) within two (2) years following the Law’s entry into force.
Concluding, the Law strengthens Cyprus’ regulatory framework for the investment funds sector by formalising the operations and oversight of fund administration entities. It enhances transparency and investor protection and re-defines Cyprus’ position as an attractive jurisdiction for the establishment and administration of investment funds improving the country’s competitiveness and comparing it favourably to other European fund hubs such as Luxembourg and Ireland.
Disclaimers:
The present article contains information obtained or derived solely from the Law and outlines the main but not an exhaustive list of its provisions. There are multiple provisions in need of further clarifications which are expected to be resolved by CySEC with the release of the relevant material for application and/or subsequent consultations. As part of its ongoing support to the country’s fund ecosystem, CIFA stands ready to assist and guide any interested party regarding the new law.
