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Maltese financial services: regulation, standards, direction. Malta. The Regulatory Framework. Legislation & Regulation. The legislative and tax framework is in line with main EU directives It is securely placed and is supported by the two major Maltese political parties

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Maltese financial services regulation standards direction

Maltese financial services:

regulation, standards, direction


Malta

Malta

The Regulatory Framework


Legislation regulation

Legislation & Regulation

  • The legislative and tax framework is in line with main EU directives

  • It is securely placed and is supported by the two major Maltese political parties

  • Malta maintains high regulatory and anti-money laundering standards

  • This has led to the strong development of the Maltese financial services sector


Financial services legislation

Financial Services Legislation

Primary Legislation

  • Malta Financial Services Authority Act

  • Banking Act

  • Financial Institutions Act

  • Insurance Brokers and other Intermediaries Act

  • Insurance Business Act

  • Investment Services Act

  • Trustees and Trusts Act

  • Special Funds Act


Financial services legislation1

Financial Services Legislation

Secondary Legislation

  • Companies (includes Limited Partnerships) Act

  • Financial Markets Act

  • Netting upon Insolvency Act

  • Securitisation Act


Financial services legislation2

Financial Services Legislation

Supporting Legislation

  • Insider Dealing and Market Abuse Offences Act

  • Professional Secrecy Act

  • Prevention of Money Laundering Act


Prevention of money laundering act

Prevention of Money Laundering Act

  • Establishes the Financial Intelligence Analysis Unit

  • Two types of persons who can commit money laundering offences:

    • (a) Person carrying on relevant financial business

      • Banks

      • Licensed collective investment schemes

      • Life assurance companies

      • Persons carrying on investment business under the Investment Services Act

      • Stockbrokers

    • (b) Accessories


Prevention of money laundering act1

Prevention ofMoney Laundering Act

  • Money laundering regulations:

    • Identification procedures

    • Internal reporting procedures

    • Record keeping procedures

    • Staff training procedures

  • Relationship between nominee company professionals and bank:

    • Evidence of identification

    • Declaration

    • Notification of change of circumstances


International evaluation

International Evaluation

  • FATF – Financial Action Task Force (1999)

  • OECD – Organisation for Economic

    Co-operation and Development (2000)

  • Council of Europe Money Laundering Committee (2001)

  • EU Peer Review (2002)

  • International Monetary Fund – full FSAP (2003)


International evaluation1

International Evaluation

  • “Malta embraces international tax standards for transparency and exchange of information and has joined OECD member countries in committing to eliminate harmful tax practices.”

    (OECD Official News Release, June 2000)

  • “ a comprehensive and robust legal framework and a particularly well-regulated financial sector”

    (Report of the Council of Europe Money-laundering Committee, April 2003)

  • “Malta’s financial system appears to be healthy and well supervised …. Malta has a comprehensive legal framework and strongly adheres to most of the international standards and codes…. The authorities have undertaken major efforts in strengthening the supervisory framework”

    (International Monetary Fund, Financial System Stability Assessment (FSSA), September 2003)


The regulatory authority

The Regulatory Authority

MFSA

MALTA FINANCIAL SERVICESAUTHORITY

(http://www.mfsa.com.mt)


Objectives of the mfsa

Objectives of the MFSA

  • to regulate, monitor and supervise financial services in Malta;

  • to promote the general interests and legitimate expectations of consumers of financial services, and to promote fair competition practices and consumer choice;

  • to monitor and keep under review trading and business practices relating to the supply of financial products to private and non-private investors, and to provide relevant information and guidelines to the public;

  • to monitor the working and enforcement of laws that directly or indirectly affect the financial services consumer in Malta, and to undertake or commission any study, research or investigation which may deem necessary in this regard;


Objectives of the mfsa1

Objectives of the MFSA

  • to advise the Government generally on the formulation of policies in the field of financial services, and to make recommendations to Government as to any action which in the opinion of the Authority it would be expedient to take in relation to matters in respect of which the Authority has such duties;

  • to investigate allegations of practices and activities detrimental to investors, and generally to keep under review trading practices relating to the provision of financial services and to seek to identify and to take measures to suppress and prevent any practices or transactions which may be unfair, harmful or otherwise detrimental to consumers of financial services;

  • to perform such other functions or duties as may be assigned to it under this Act or any other law.


Mfsa structure

MFSA - Structure

MFSA

Legal and

Intl Affairs

Unit

Board of Governors

Chairman

Co-ordination Committee

President

Supervisory Council

Board of Management

and Resources

Director-General

Chief Operations Officer


Functions board of governors

Functions – Board of Governors

  • Board of Governors composed of seven members including the Chairman. Chairman and Governors appointed for a period of up to five years and their appointment may be renewed for further periods of up to five years;

  • Board of Governors sets policy;

  • The Legal and International Affairs Unit acts as Secretary to the Board of Governors.


Supervisory council

Supervisory Council

Responsible for licensing, monitoring and supervising all activities related to financial services


Board of management resources

Board of Management & Resources

Ensures the regular day to day

management of the Authority


Co ordination committee

Co-ordination Committee

Co-ordinates the application of policies approved by the Board of Governors. Serves as a channel of communication between the Board of Governors and the other organs of the Authority;

President

Chairman - Board of Governors

Co-ordination

Committee

Director-General - Supervisory Council

Chief Operations Officer - Board of Development and Resources


Growth of employees at the mfsa

Growth of employees at the MFSA

130 people are currently working at MFSA


Qualified staff

Qualified Staff


External relations

MFSA

MALTA FINANCIAL SERVICESAUTHORITY

External Relations

Co-operation with other

Authorities and Agencies


Relations with cbm

MFSA

MALTA FINANCIAL SERVICESAUTHORITY

Relations with CBM

Entity Scope of Agreement:

CBM Exchange of Information in the fields of financial

services

CBM Payment and Securities settlement systems

CBM = Central Bank of Malta


Relationships with international organisations

Relationships with International Organisations

Entity Scope of Agreement:

CESR The MFSA forms part of the CESR Multilateral MoU as from 1st May 2004

The MFSA is from 1st May 2004 also a member of CEIOPS and CEBS.

The Authority continues to participate in other international fora such as Group de Contact, IOSCO and IAIS.


Mous signed with non eu countries

MOUs Signed with non-EU Countries

Entity Scope of Agreement:

Gibraltar FSC Banking, Securities and Insurance (2004)

Guernsey FSC Banking, Investment Services, Insurance and

Fiduciary Services (2004)

Mauritius FSC Securities, Insurance and Pensions (2004)

Isle of Man FSC Banking, Investment Services and

Corporate Services Providers (2004)

BCCD [TR] Banking Supervision (2004)

Exchange of Letters with the Swiss Federal Banking Commission (SFBC)

MOU being negotiated with Bermuda, Jersey


Mous signed with eu countries

MOUs Signed with EU Countries

Entity Scope of Agreement:

CMVM [PT] Securities (2004)

National Bank of Banking (2004)

Slovakia

FSA [UK] Banking, Insurance, Investment Services (2004)

Bafin [DE] Banking, Securities and Insurance (2004)

MOUs being negotiated with Austria, Estonia and Ireland


Consumer protection

MFSA

MALTA FINANCIAL SERVICESAUTHORITY

Consumer Protection

  • The MFSA Act provides for the establishment of a

  • Consumer Complaints Manager.

  • (appointed January, 2002).


Consumer protection1

Consumer Protection

Functions:

  • … to promote the general interests and legitimate expectations of consumers of financial services, and to promote fair competition practices and consumer choice in financial services; ...

  • … to investigate allegations of practices and activities detrimental to consumers of financial services, and generally to keep under review trading practices relating to the provision of financial services and to identify, and take measures to suppress and prevent, any practices which may be unfair, harmful or otherwise detrimental to consumers of financial services ...


Consumer protection2

Consumer Protection

Activities:

  • The Consumer Complaints Office has issued the following Guides:

    Invest Wisely! It’s Your Money!

    Teaching your children how to save and spend

    Top 10 Finance hints for young adults

    6 booklets for the better understanding of insurance

  • A computer based CD, a video and an information website (www.mfsa.com.mt/consumer) have also been developed.


Consumer protection3

Consumer Protection

Office of the Consumer Complaints ManagerFormal Complaints Reviewed


Consumer protection4

Consumer Protection

Protection Schemes:

Investor Compensation Scheme – a rescue fund for private consumers of failed investment intermediaries, which are licensed by the MFSA.

Depositor Compensation Scheme – a rescue fund for private depositors of failed banks or other credit institutions, which are licensed by the MFSA.

Protection and Compensation Fund – a rescue fund for private consumer of failed insurers, which are licensed by the MFSA.


Malta1

Malta

An ideal location for international financial and company services operations


Investment services

Investment Services

Investment Services Act

The Act provides the basis for the regulation of investment services providers (licence holders providing investment advice and management services including stockbroking and acting as trustees and custodians) and collective investment schemes (SICAVs)


Licence holders

Licence Holders

  • Category 1(a & b) - Provide any investment service but do not hold or control clients' money or assets nor deal for their own account or underwrite(excludes fund management companies)

  • Category 2 - Provide any investment service and hold or control clients' money or assets, but do not deal for their own account or underwrite(includesstockbrokers)

  • Category 3 - Provide any investment service, hold and control clients' money or assets and deal for their own account and underwrite

  • Category 4 - Act as trustees or custodians of collective investment schemes


Licensing requirements for p rofessional i nvestor f und s

Licensing Requirements for Professional Investor Funds

  • Need not issue prospectus but offering document will be required

  • Not subject to any restrictions on investment or borrowing powers

  • Authorised investors (assets in excess of $1m)

  • Nominee investor allowed but must be known to manager

  • Custodian need not be in Malta but if manager is also external PIF must appoint a "judicial representative"

  • Licensing in 7 working days


Primary secondary listing

Primary & Secondary Listing

  • Listing document, prospectus or scheme particulars

  • Listing agreement with the Malta Stock Exchange

    $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

  • Primary listing on an exchange acceptable to the MSE

  • Fund satisfies the MSE that it is suitable for listing

  • Produces a certificate of compliance from the exchange where it has a primary listing

  • Submits any documentation previously filed with the exchange where it has a primary listing


Occupational pensions

Occupational Pensions

Special Funds Act

The legislation encourages the development of funded “second pillar” and “third pillar” pension arrangements by companies setting up plans for their own employees and by service providers who would create “packaged” plans for individuals and smaller businesses


A typical structure

A Typical Structure

Employer

promises

services

Scheme

retirement

Employee

benefits

services

fee

Fund

contributions

shares

annual reports, etc.

Scheme

Administrator

Retirement Fund

fee

services

services

fee

Registered Administrator

Asset Manager


Credit and financial institutions

Credit and Financial Institutions

The Banking Act

Provisions consistent with the EU directives covering regulation and prudential supervision; no licence restrictions; minimum paid up capital of Euros 2.0m. Supervision is serious, firm and aligned to the Basle Convention. It is carried out both onsite and offsite using modern and internationally recognised methodology.


Banking directives

Banking Directives

  • Submission of statutory information

  • Publication of audited financial statements

  • Capital Adequacy

  • Credit and Country Risk Provisioning

  • Consolidated Supervision


Credit and financial institutions1

Credit and Financial Institutions

The Financial Institutions Act

Provisions for non-bank financial institutions undertake financial activities except for deposit taking, investment services and insurance. These are subject to the general regulatory framework applicable for banks but specific regulatory conditions and capital requirements depend on the activities that are undertaken by the particular non-bank financial institution. Licensable activities under the Act include:

  • Lending, trading for their own account or on behalf of customers

  • Financial Leasing

  • Venture or risk capital

  • Money transmission services

  • Issuing and administering means of payment (such as credit cards, travellers’ cheques and bankers’ draft)

  • Guarantees and commitments


Emoney institutions

eMoney Institutions

  • Regulatory requirements included in the Banking Directive issued in terms of the Banking Act 1994 is modeled on EU Directive 2000/46/EC on the Taking up Pursuit of and Prudential Supervision of Electronic Money Institutions.

  • Regulatory requirements for emoney institutions are less onerous then those necessary for credit institutions.


Insurance legislation

Insurance Legislation

Insurance Business Act

Insurance Brokers and Other Intermediaries Act

The legislation aims to create a favourable regulatory and competitive environment particularly in potential growth areas such as affiliated (captive) insurance and insurance management companies operating carrying out international business. It reflects Malta’s international commitments, in particular the WTO and provides a procedure for exchange of information between the MFSA and foreign insurance regulatory authorities, other local or overseas regulatory, judicial or enforcement authorities;


Insurance legislation1

Insurance Legislation

  • modeled on European Union rules (particularly with regards to solvency margin and technical provision requirements) and provides for passporting of products and services in relation to the EU single market by Malta-based intermediaries;

  • continuance of companies provisions apply to all insurance companies, insurance managers and insurance brokers;

  • Protected Cell Company provisions apply to insurance companies, insurance managers and insurance brokers;

  • Application determined within 6 months of submission of complete information - 3 months in the case of affiliated insurance;

  • Insurance licence holder to meet following criteria on an ongoing basis:

    a) Fit and proper persons

    b) Sound and prudent management

    c) Financial soundness


Affiliated insurance captive insurance

Affiliated Insurance (captive insurance)

Definition of Affiliated Insurance Company (AIC):

An insurance company registered in Malta whose business is restricted to insuring risks originating with shareholders or connected undertakings or entities including:

- parent companies;

- associated or group companies;

- persons/entities with majority ownership or

control in AIC ;

- members of trade, industry or profession

associations insuring risks related with their trade.


Affiliated insurance captive insurance1

Affiliated Insurance (captive insurance)

Affiliated Insurance regulations:

provide a regulatory framework tailor-made for such companies

AICs are exempt from a number of provisions of the Insurance Business Act

Material Exemptions

Protection and Compensation Fund

Document Duty chargeable on contracts of insurance in so far as concerns contracts relating to a risk situated outside Malta

Other features

Redomiciliation of companies carrying on affiliated insurance;

Protected Cell Companies


Trusts and trustees

Trusts and Trustees

Trusts and Trustees Act

The legislation creates the trustee following the elimination of the nominee and transparency in the management of trusts


Regime for trustees

Regime for Trustees

  • The relationship whereby a person holds assets for another, in the name of the former, is defined as a trust relationship and is covered by the Act.

  • Regulations apply to trustees in the holding of all types of assets and not only shares in Maltese companies

  • Any person who acts as a trustee in Malta needs a licence if he is remunerated, holds himself out to provide such services or is a company. All trustees will be “subject persons” under the Prevention of Money Laundering legislation

  • Private trustees (non-remunerated, non-corporate and not holding themselves out as such) will not need a licence.


Registration of trusts

Registration of Trusts

  • The regulation will focus on trustees and not on trusts which are not entities but assets under administration. All laws to apply to beneficiary and if not declared for the purposes of any law, then the law will apply to the trustee.

  • Ring fencing to non-residents is eliminated and anyone can form trusts for any property.

  • Principle of transparency introduced.Confidentiality provisions eliminated and trustees subject only to limits of Professional Secrecy Act.

  • Duty to report suspicion of money laundering. “Know your client” obligations and clear record keeping obligations on the part of trustees.

  • MFSA will not hold but will have access to records in cases to be defined by the law particularly in case of irregularities.

  • Trustees will be obliged to ensure that beneficiaries act regularly.Trustees given wide powers to deal with assets in such cases.


Malta2

Malta

Critical Success Factors


Critical success factors

Critical Success Factors

  • Well educated/low cost pool of labour

  • Inexpensive and modern office developments with capacity

  • Good telecommunications infrastructure

  • Very competitive tax regime

  • Flexible legal and regulatory environment

  • English is the spoken and written language of business


Human resources

Human Resources

  • Multilingual community - English and Italian spoken fluently, French, Spanish, German and Arabic also spoken by a substantial number of the population;

  • Free market for labour;

  • Availability of multilingual graduates in disciplines related to financial services;

  • Availability of multilingual administrative and clerical staff.


Education

Education

Our people are our greatest intellectual capital

  • Strong commitment to high standards of education - based on the UK system - people are Malta’s prime asset. The total number of graduates in Malta is 24,335 which is 6% of the Maltese population

  • 8,000 students the ancient University of Malta - large numbers graduate in law, economics, management, accountancy etc and many with specialist IT training, plus numerous vocational training programmes

  • Many professionals and graduates obtain postgraduate training and work experience in the European Union particularly the UK


Legal services

Legal Services

  • Malta is a civil law jurisdiction – derived from Roman Law and Napoleonic Codes, however, under the British rule (1800 – 1964) Malta enacting business legislation (ex. Company law, financial law, public law) based on English law principles. The underlying principal is that commercial usage and practice overrides conflict with Maltese Civil Code where commercial matters are concerned.

  • Legal framework is therefore flexible, versatile and able to relate to different legal systems.

  • Legal community is well established with many practitioners obtaining further training overseas and most firms form part of international legal networks.


Accounting services

Accounting Services

  • IAS – International Accounting Standards applicable since 1997;

  • Major international accountancy firms BDO, Deloitte & Touche, Ernst & Young, Grant Thornton, KPMG, PKF, PWC and others operate in Malta


Next step

Next Step

If you want to shed more light on international business opportunities …….

…visit Malta and explore the opportunities first-hand


Maltese financial services regulation standards direction

Your visit

Virtual Trip

http://www.mfsa.com.mt

http://www.emoneymalta.com

http://registry.mfsa.com.mt


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