KMG Capital Markets' License Revoked!

The Cyprus Securities and Exchange Commission (CySEC) has taken decisive measures against KMG Capital Markets Ltd by revoking the company's license for managing Open-Ended Undertakings for Collective Investment in Transferable Securities (UCITS). This action marks the second time KMG faces such a penalty, highlighting its consistent inactivity within the UCITS sector.

Recently, CySEC made the critical decision to withdraw KMG Capital Markets Ltd's license to manage UCITS. The license revocation was due to the company's failure to utilize it within 12 months after receiving approval notification.

CySEC's actions align with the regulations specified in sections 121(1)(a) and 150(1)(c) of the Open-Ended Undertakings for Collective Investment Law of 2012. The Commission made this information publicly available on Monday, the 16th of October.

Remarkably, this isn't the first time KMG has encountered trouble for the same reason. A previous revocation occurred on the 14th of December 2021. Despite this setback, the company successfully reapplied for and obtained a new UCITS management license from CySEC. Yet, once again, KMG has failed to engage in any UCITS sector activity by the 23rd of June 2023, leading to another revocation.

Nevertheless, it's noteworthy that KMG Capital Markets still retains its authorization as an Alternative Investment Fund Manager (AIFM), which falls under the purview of section 8 of the Alternative Investment Fund Managers Law, providing a glimmer of hope for the company's operations.

In CySEC's most recent quarterly report, they reported noteworthy developments in Cyprus' Collective Investments sector for Q2 2023. During this quarter, CySEC oversaw 334 Management Companies and Collective Investment Schemes (UCIs), which saw a marginal decrease of 0.30% from the 335 organizations in the first quarter. However, when compared to the same quarter in the previous year, there was a 1.2% increase, indicating a steady upward trend for the sector.

Back in September, the Commission announced its decision to withdraw another license, this time from FXBFI Broker Financial Invest Ltd. A few weeks earlier, they confirmed the removal of Binance Cyprus Ltd from the Register of Service Providers of Crypto-assets.

UCITS are European mutual funds designed to facilitate the sale of pooled investment products across the European Union (EU) under a unified regulatory framework. This structure provides a high level of investor protection and transparency. In contrast, AIFMs manage Alternative Investment Funds (AIFs), encompassing hedge funds, private equity funds, real estate funds, and other unconventional investment vehicles.

UCITS primarily deal with liquid assets like listed equities, bonds, and money market instruments. They typically do not include alternative investments such as real estate or commodities. On the other hand, AIFMs have the flexibility to manage a wide range of asset types, including illiquid and alternative assets like real estate, private equity, and commodities.

While UCITS focus on delivering extensive investor protection through strict regulations, AIFMs offer greater latitude in investment strategies and asset types but are primarily tailored for professional and institutional investors. Both can be marketed across the EU, but they adhere to different regulatory frameworks.