MFSA announces changes to the Investment Services Rulebooks
News    ·   07-04-2022
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AUTHOR: Luke Mizzi

On the 29th of March 2022, the Malta Financial Services Authority (“MFSA”) issued a circular to the industry in which several amendments to the Investment Services Rulebooks were detailed. Such amendments cover the following:

  • amendments to the Transparency provisions in the Investment Services Rulebooks to elaborate on the suitable channels Licence Holders may use to disclose the information required under the Shareholder Rights Directive (“SRD II Directive”);
  • additional whistle-blower protection provisions on the reporting of infringements by employees;
  • updated cross-references to the Investment Services Rules for Investment Service Providers, Part BI: Rules applicable to Investment Services Licence Holders which qualify as MiFID Firms (“‘ISR ISP Part BI”’); and
  • other miscellaneous amendments relating to own funds and capital requirements, reporting requirements, and removal of obsolete provisions.

Amendments to the ISR ISP Part BI

Transparency Provisions

Minor changes have been introduced to the section ‘Transparency provisions’ of the ISR ISP Part BI to elaborate on the suitable channels investment firms may use to disclose the information required under Article 3i of the SRD II Directive. Such disclosure shall be made in the Annual Audited Financial Statements report for the financial year, or together with the periodic communications referred to in Article 25(6) of Directive 2014/65/EU to the institutional investor or a collective investment scheme, or published on the licence holder’s website.

Provisions on Whistleblowing

Two new definitions have been inserted in the ISR ISP Part BI, namely the definitions of Approved Publication Arrangement (“APA”) and Approved Reporting Mechanism (“ARM”) to accompany the provisions of Section 23.

A new Section 23 dealing with the reporting of infringements by employees was included in Title 1. This new section imposes an obligation on certain institutions to develop and maintain appropriate mechanisms for employees to report potential or actual infringements internally through a specific, independent and autonomous channel. Section 23 applies to the following institutions:

  • investment firms, ARMs and APAs with a derogation in accordance with Article 2(3) of MiFIR;
  • credit institutions in relation to investment services or activities and ancillary services; and
  • branches of third-country firms.

Furthermore, such entities shall also be required to refer and comply with the applicable provisions within the Protection of the Whistleblower Act (Chapter 527 of the Laws of Malta).

Amendments to the Investment Services Rules for Investment Services Providers, Part BII:  Standard Licence Conditions applicable to Investment Services Licence Holders which qualify as UCITS Management Companies (‘ISR ISP Part BII’)

Own Funds and Capital Requirements

Two Standard licence conditions were introduced in lieu of the cross-references found in SLC 1.04 to regulate own funds and the capital requirements of the Licence Holder. Namely, the composition and amount of own funds, and the calculation of the capital requirement aligning these provisions with the ISR ISP Part BI.

Reporting Requirements

The amendments have also added several rules obliging licence holders to submit to the Authority;

i)                    the original Representations Sheet of the Annual Financial Return;

ii)                   the Audited Annual Financial Return;

iii)                 the original Representations Sheet,

iv)                 the annual supervisory fee calculator, and

v)                   the original Representations Sheet of the Interim Financial Return, all duly signed.

The Annual Financial Return should be submitted in electronic copy.

Transparency Provisions

The Section ‘Transparency provisions’ of the ISR ISP Part BII has also been amended to elaborate on the suitable channels UCITS Management Companies may use to disclose the information required under Article 3i of the SRD II Directive.

Amendments to the Investment Services Rules for Investment Services Providers, Part BIII:

Standard Licence Conditions applicable to Investment Services Licence Holders which qualify as Alternative Investment Fund Managers (‘ISR ISP Part BIII’) ISR ISP Part BI Cross References

Amendments to the ISR ISP Part BIII are identical to those of the ISR ISP Part BII insofar as ISR ISP Part BI cross references found in SLC 1.09, SLCs regarding own funds and capital requirements, reporting, and SRD II Disclosures.

Miscellaneous

The references to Categories were removed as these are now considered outmoded given the introduction of Classes following the IFDpackage.

Amendments to the Investment Services Rules for Alternative Investment Funds, Part B:

Notification & Reporting Requirements

The ISR AIF Part B has been amended to remove the requirement to notify the MFSA about address changes and clarifies the deadline for submission of annual reports by AIFs admitted to listing on a regulated market in line with the AIFMD. These entities must now report every six months.

Furthermore, the provision allowing the extension of the financial statements’ submission deadline of annual reports has been removed.

Transparency Provisions

The Section ‘Transparency provisions’ of the ISR AIF Part B has been amended to elaborate on the suitable channels AIFMs may use to disclose the information required under  the SRD II Directive

Amendments to the Investment Services Rules for Retail Collective Investment Schemes

Part BII: Malta Based UCITS Collective Investment Schemes (‘ISR RCIS Part BII)

Transparency Provisions

The Section ‘Transparency provisions’ of the ISR RCIS Part BII has been amended to elaborate on the suitable channels UCITS may use to disclose the information required under the SRD II Directive.

Amendments to the Investment Services Rules for Professional Investor Funds, Part BI:

Professional Investor Funds targeting Experienced Investors (‘ISR PIF Part BI’)

Minimum Entry Levels

Minor amendments were done to substitute the reference to the USD currency in the rulebook with the phrase “currency equivalent” to be in line with the relevant Authorisations Rulebook.

Amendments to the Investment Services Rules for Professional Investor Funds, Part BII:

Minimum Entry Levels

The same changes as explained in the Section relating to the ISR PIF Part BI have been reflected in the ISR PIF Part BII.

 

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