Withdrawal of Circular EΓ144-2009-07 and requirements for CIFs regarding interest on client funds

TO : Cyprus Investment Firms
FROM : Cyprus Securities and Exchange Commission DATE : 29 September 2026 CIRCULAR NO.: C801 SUBJECT : ESMA’s Q&A regarding the interests earned from client funds deposited at a credit institution

1. The Cyprus Securities and Exchange Commission ("CySEC") wishes to draw the attention
   of Cyprus Investment Firms ("CIFs") to the publication by ESMA of Q&A ‘ESMA_QA_2785’ (“the ESMA Q&A”), under the topic of ‘Safeguarding of Client Assets’, concerning the treatment of interest earned on client funds deposited with credit institutions.
2. More specifically, the question, published on 23 February 2026, asks whether MiFID II
   permits investment firms to earn interest on client funds deposited in a savings account with a credit institution. According to the answer published by ESMA on 21 September 2026, the European Commission responded as follows:
   “No. In order to protect an investor’s rights in respect of funds entrusted to a firm, Article 16 (9) of Directive 2014/65/EU of the European Parliament and of the Council (MiFID II) stipulates that an investment firm holding client funds shall make adequate arrangements to safeguard the rights of clients and prevent the investment firm’s use of client funds for its own account. The investment firms’ obligation under Article 16 (9) of MiFID II not to use clients’ funds for its own account includes the obligation for the investment firms not to retain any interest accrued from those funds (deposited in an account with a credit institution).”
3. In light of the publication of the ESMA Q&A, Circular ‘ΕΓ144-2009-07’ is hereby withdrawn
   with immediate effect. Accordingly, the position set out therein no longer reflects CySEC's supervisory expectations and should not be relied upon by CIFs.
4. CySEC expects CIFs to review without delay their arrangements relating to interest
   generated on client funds held with credit institutions and to take all necessary steps to ensure compliance with Article 17(9) of Law 87(I)/2017 and the ESMA Q&A. In this regard, CIFs should be able to demonstrate that their arrangements have been appropriately assessed and documented, that clients' rights and interests have been duly considered,