CySEC has removed the supervisory basis on which Cyprus investment firms could retain bank interest on client funds with customers’ express consent. Circular C801, issued on 29 September 2026, withdrew the earlier guidance immediately and required firms to review their arrangements without delay.[1]
The old circular, issued exactly 17 years earlier, permitted firms to use that interest for their own account if clients had expressly agreed in advance. It also required controls restricting retention to authorised amounts and records identifying the clients and their consent. That approach made the agreement and its supporting records central to the broker’s entitlement.[2]
The European Commission’s answer published in ESMA’s Q&A explains the change in interpretation. MiFID II’s requirement to safeguard clients’ rights over their money, and its prohibition on using client funds for the firm’s own account, extend to interest generated when that cash is deposited with a credit institution. The Commission says the investment firm should not retain that interest.[3]
For a brokerage that treated the interest as revenue, the commercial consequence is a change in the treatment of income from client balances. Operationally, applying that interpretation means connecting bank interest receipts with the client-money records and the accounting treatment. Changing a consent clause alone would leave the underlying cash flows unresolved.[3]
CySEC expects firms to document their assessment, consider clients’ rights and put adequate measures in place. Senior management must oversee implementation; compliance officers and internal and external auditors are to consider the matter in their reviews and reporting. The regulator may request information through its supervisory work.[1]
The immediate implementation question is therefore concrete: how will the firm account for interest actually earned on safeguarded client cash? The Commission’s answer concerns that earned interest; it provides no advertised customer deposit rate or calculation of an individual account’s return.[3]
Sources & further reading
- Circular C801: ESMA’s Q&A regarding the interests earned from client funds deposited at a credit institution Cyprus Securities and Exchange Commission · 29 Sep 2026 · Accessed 20 Oct 2026
- Circular ΕΓ144-2009-07: Interest derived from bank account of clients’ funds Cyprus Securities and Exchange Commission · 29 Sep 2009 · Accessed 20 Oct 2026
- Q&A 2785: Interest accrued on clients’ funds European Commission, published by ESMA · 21 Sep 2026 · Accessed 20 Oct 2026