CYPRUS Law and Practice Contributed by: Thanasis Korfiotis, Loizos Papacharalambous, Eleni Korfiotis and Georgia Charalambous, Koushos Korfiotis Papacharalambous LLC
4.5 Activities of Rating Agencies The securitisation activities of rating agencies are not regulated under the Securitisation Law (as defined in 1.3 Applicable Laws and Regula- tions ). 4.6 Treatment of Securitisation in Financial Entities The CBC (as defined in 4.1 Specific Disclosure Laws or Regulations ) has the power to impose administrative sanctions and/or fines on banks that do not comply with their obligations regard - ing disclosure of exposures to securitisation positions (Business of Credit Institutions Law, Section 41D(1)(ib) and Article 449 of Regulation (EU) 557/2013). 4.7 Use of Derivatives As noted in 3.9 Derivatives , the use of deriva- tives in Cyprus is not customary, and no specific rules apply. 4.8 Investor Protection The Securitisation Law (as defined in 1.3 Appli- cable Laws and Regulations ) includes several tools for the protection of investors, particularly the following. • An SPE (as defined in 6.1 Insolvency Laws ), prior to the commencement of its operation as a securitisation vehicle, shall be authorised by the CBC (as defined in 4.1 Specific Dis - closure Laws or Regulations). To grant said authorisation, the CBC shall be satisfied that: (a) the memorandum of association or other constituting documents of the SPE shall provide that the activities of the SPE are limited to those reasonably required for conducting transactions intended or required to effect the securitisation and other related or ancillary activities; (b) the management body of the SPE shall
be made up of persons who have good character and good repute and who are not members of the management body of the originator; (c) the servicer of the SPE is an entity that performs the servicing functions of the underlying securitisation assets, includ - ing those set out in the following, and can only be one of the regulated entities that are entitled to act as authorised servicers under the Securitisation Law in relation to (i) the segregation of assets and cash flows arising from the securitised expo - sures of an SSPE, so that they are clearly identified; (ii) the management of all cash inflows and outflows for each underlying exposure of a securitisation and the keep - ing of adequately detailed records; (iii) en - suring that the securitised exposures and any funds arising from – or in connection with – the securitised exposures held by the servicer for the account of the SSPE are held in a trust in favour of the SPE and shall not be available for any other creditor of the servicer; (iii) the collection and management of information related to the situation of the credit agreements, the borrower and the securitised expo - sures; (iv) providing information services to investors; (v) the management of the financial instruments of the securitisation; and (vi) the provision of information on the underlying exposures in order to update the central credit register (Artemis Credit Bureau). • The (internal and external) auditor of an SSPE is required to immediately notify the CBC of any decision or event concerning the man - agement of the SSPE that may, as he or she has become aware of during his or her audit: (a) constitute a breach of important legisla - tive or regulatory provisions that put into
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