Malta based Investment Services including MiFID companies and AIFMs are regulated in Malta by the Investment Services Act (“Act”) (Cap. 370 of the Laws of Malta). The Act outlines the requirements for the establishment of such entities and makes it illegal for any person to provide an investment service in or from Malta unless in possession of a valid investment services licence.
Our services give you the possibility of obtaining a valid licence under which investment services can be offered in Malta and throughout the European Union.
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Investment Services Rules
The Investment Services Rules lay down additional requirements and conditions in relation to activities of licence holders. This includes but is not limited to the conduct of business, relations with customers, the public and other parties, the responsibility towards the Malta Financial Services Authority (“MFSA” or “Authority”), reporting requirements, financial resources, capital adequacy and any other related requirements.
The MFSA, is the single regulator responsible for regulation and supervision of Investment Services Providers, Collective Investment Schemes, Custodians as well as the different types of Regulated Markets.
Every licence is subject to Standard Licence Conditions (SLCs) – which are described in full in the Investment Services Rules for Investment Services Providers. However, the SLCs are not exhaustive and may be supplemented by the MFSA in certain circumstances. The objective of the SLCs is to require the licence holder to act honestly, fairly and with due skill, care, diligence and integrity in the best interests of the customer and to protect the investors or clients of the licence holder.
Fit and Proper Assessment
The ‘fit and proper’ assessment is the MFSA’s means for raising public confidence in the integrity of the financial services system and a key element of an effective supervisory regime. The ’fit and proper’ test is one which an applicant for a licence and the persons involved therein are to satisfy on an ongoing basis.
The carrying out of proper due diligence procedures is a fundamental first step which the Authority undertakes in order to determine whether a licence is to be granted or if a person is to be approved to hold a controlled function within a licenced entity.
In assessing fitness and properness, the MFSA assesses (amongst other things):
- Conflicts of interest and independence of mind; and
- Time commitment.
MiFID Licensing and Authorisation
The provision of MiFID services, referred to as Investment Services, in or from Malta is a licensable activity, requiring the attainment of an Investment Services Licence in terms of the Act and subsequent regulations which transpose EU Directives such as MiFID and AIFMD. The First Schedule to the Act lists the following services which require the need of a licence:
- Reception and transmission of orders;
- Execution of orders on behalf of other persons;
- Dealing on own account;
- Management of third-party assets;
- Trustee, custodian or nominee services;
- Investment advice in the form of personal recommendations (excluding recommendations issued exclusively through distribution channels or to the public);
- Underwriting of instruments and, or placing of instruments on a firm commitment basis;
- Placing of instruments without a firm commitment basis;
- Operation of a multilateral trading facility, bringing together multiple third parties buying and selling interests instruments, resulting in a contract.
It is important to note that no person shall provide a licensable activity in and from Malta without having the appropriate authorisation by the MFSA.
An Investment Services Licence is issued only if the MFSA is satisfied that the applicant is a ‘fit and proper’ person to provide the investment service(s) concerned, and that the applicant will comply with and observe any Investment Services Rules and Regulations made under the Act as applicable to the licence holder. The concept of ‘fit and proper’ is a fundamental regulatory concept. This is a rigorous test which requires senior staff, both at licensing stage and on an on-going basis thereafter, to demonstrate solvency, competence and integrity in all their dealings.
EU Passporting Rights
Being a Member of the European Union, Malta transposes EU Directives and adopts EU Regulations within the financial services sector. Through these Directives and Regulations, an applicant establishing itself in Malta, can make use of similar regulatory requirements as found in the other EU Member States.
Via the harmonisation of laws, rules & regulations, financial businesses that are established in Malta or any other EU jurisdiction can, by means of a process known as ‘passporting’, provide their services in other European jurisdictions without incurring additional regulatory fees or bureaucratic burdens. Such passporting rights can be used to either offer a licensed service on a cross-border basis or to set up a branch in the chosen territories.