Revisions to the Investment Services Rules.

The IFRD Package came into force on the 26th June 2021 and introduced a number of significant changes to the prudential that governs MiFID Investment Firms. The new prudential regime applies to all MiFID II firms and therefore captures all investment firms that carry out activities which include; transmission of orders in relation to financial instruments, execution of client orders, dealing on own account, portfolio management, providing investment advice, underwriting financial instruments, and operating trading facilities.

As part of its ongoing work to transpose the IFRD Package, the MFSA has recently issued the revised Investment Services Rules for Investment Services Providers. Part A: The Application Process (the “Rulebook”). In light of the aforementioned, on the 8th October 2021, the MFSA issued a circular aimed at providing a high-level explanation of the amendments to the Rulebook.

References made to the Rulebook should now be construed as references made to the updated Rulebook that was issued along with the circular issued on the 8th October 2021. Nevertheless, the MFSA has opted to retain the previous Rulebook on its website ad interim for ease of reference.

The main revisions to the Rulebook are outlined below.

Changes to the Rulebook

Section 4: Classification of Investment Service Licence Holders

The Authority has removed all wording referring to the local nomenclature ‘Categories’. Following the amendments to this section of the Rulebook, Investment Services Licence Holders (“ISLHs”) will now be classified according to Licence Type; namely, Investment Firm, AIF Manager, De Minimis AIFM, UCITS Management Company, Depositary, or Depositary Lite. This section was further amended so as to include the licensable activities that each Licence Type may provide.

Section 7: Fees

The application fees stipulated in the new Rulebook will remain the same as in the previous one. However, the reference to the category of licence has been replaced with the equivalent definition of what licensable activities, the respective Licence Holder is authorised to provide.

Section 10: Capital Requirements

The IFRD package imposes a minimum initial capital requirement for each of the Classes (1,2 and 3). The current local regulatory framework applies minimum capital requirements according to the category of Licence. Section 10 of the Rulebook has now been revised to remove reference to the categories and implement new minimum initial capital requirements imposed by the IFRD Package for Investment Firms. In this regards, the minimum capital requirements for ISLHs which are not licensed as Investment Firms will not change.

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