11 Jul 2019
Further to a jointly conducted public consultation launched on the 27th March 2019, the Malta Financial Services Authority ('MFSA') and the Financial Intelligence Analysis Unit ('FIAU') have published a joint Guidance Document for Credit Institutions, Payment Institutions and Electronic Money Institutions (‘Institutions’) opening accounts for FinTechs.
The Guidance Document is non-binding and is not intended to replace the Institutions’ internal procedures, nor as an obligation for Institutions to modify their risk appetite, but rather to (i) assist Institutions to acquire a better understanding of prospective FinTech customers active in technology reliant areas, prior to servicing them, and accordingly get a firmer understanding of the sector-specific risks involved and (ii) complement their due diligence procedures inter alia by providing guidance on which information and documentation may be requested in order to assist them in reaching decisions whether to on-board a customer or otherwise.
The Guidance Document is to be read together with the Implementing Procedures and any other relevant guidance document issued by the FIAU, as well as within the more general context provided by the Prevention of Money Laundering and Funding of Terrorism Regulations. The FIAU and MFSA encourage the Institutions to take the Guidance Document into consideration when formulating their risk assessment measures, controls, policies and procedures.
The Guidance Document may be found here.
On the 4th June 2019 the European Securities and Markets Authority ('ESMA') published updated questions and answers documents (Q&A) on the application of (i) the Alternative Investment Fund Managers Directive ('AIFMD') and (ii) the Undertakings for the Collective Investment in Transferable Securities ('UCITS') Directive (‘the Q&A documents’). The revised sections in the Q&A documents concern inter alia:
The Q&A documents aim to promote common supervisory approaches and practices in relation to the AIFMD and UCITS Directive and their implementation measures in relation to the depository function. The Q&A documents can be found here: AIFMD, UCITS.
The Prospectus Regulation (Regulation (EU) 2017/1129) (the ‘Prospectus Regulation’) will come into full effect across the European Union as from 21 July 2019. Certain specific provisions came into force in July 2017 and some in July 2018, however the bulk of the Prospectus Directive will apply as from 21 July 2019. The Prospectus Regulation will repeal the existing Prospectus Directive (EU Directive 2003/71/EC) (the ‘Prospectus Directive’) without any requirement for implementation into the national law of an EU Member State.
The Prospectus Regulation represents a complete overhaul of securities disclosure regulation in the European Union and is the most significant step to date in establishing a Capital Markets Union which would aid enterprises raise capital with greater ease across the European Union.
Some Key Changes under the Prospectus Regulation
One significant change brought about by the Prospectus Regulation relates to the exemptions under which no prospectus is required to be published. Presently under the Directive, offers of securities where the total consideration in the EEA is less than €5 million (calculated over 12 months) would fall outside the remit of the Directive. The Prospectus Regulation has reduced this threshold to €1 million. However, Member States now have the option to exempt offers they consider to be small from the obligation to publish a prospectus by setting a higher threshold – up to €8 million – for their domestic markets.
The Prospectus Regulation requires issuers when publishing their prospectus, to classify risk factors according to their materiality, with the most material risk factor being listed first. ‘Materiality’ would be assessed by quantifying the ‘likelihood of a particular scenario occurring and the impact if the scenario materializes’. This is a novel approach in assessing risk which wasn’t previously covered under the Prospectus Directive.
Significantly, the Prospectus Regulation applies different mandatory disclosures to the following kinds of prospectuses, namely: a standard prospectus, a wholesale prospectus for non-equity securities, a base prospectus, a simplified prospectus for secondary issuances, and an EU Growth prospectus for SMEs.
The MFSA has registered the first VFA Agents under the Virtual Financial Assets Act (‘VFA Act’). VFA Agents will be assisting VFA issuers and VFA service providers under the VFA Act and will be making applications to the MFSA on their behalf. The VFA Act requires the issuer (in terms of the VFA Act) to appoint a VFA Agent to assist, monitor and provide guidance throughout the whitepaper registration process, and beyond the offering stage. At the initial stage, the VFA issuer will need to perform a Financial Instrument Test as required by the MFSA to analyze the qualities and features of their token. This test is intended to ascertain whether the underlying nature of the coin or token to be issued is a virtual financial asset, a virtual token, electronic money or financial instrument. Such a test will be important to determine which laws, rules and regulations would apply for the token issuance and the classification of such assets. The VFA agent will also need to perform a thorough due diligence and KYC on their clients and would need to continue supporting the MFSA in its supervisory function by providing the necessary information during post-registration supervision.
WH Innovation Limited (part of WH group) was amongst the very first companies to be registered as a VFA Agent by the MFSA. Kindly contact us on firstname.lastname@example.org for further information on how WH Innovation Limited may assist your company in this respect.
The MFSA has issued two Consultation Documents on the implementation of national product intervention measures in relation with binary options and contracts for difference ('CFDs'). In 2018, ESMA formally adopted product intervention measures on binary options and CFDs which is essentially a prohibition (ban) on the marketing, distribution or sale of binary options and CFDs to retail investors. Since then, ESMA has extended this measure for three consecutive times.
In line with this above, the MFSA is proposing to adopt product intervention measures with respect to binary options and CFDs. The proposed measure would essentially mirror the temporary measures from ESMA referred to above and which are currently active throughout the European Union. The measures proposed to be taken by the MFSA in this regard, would be applicable to investment firms based in Malta and which market, distribute or sell binary options and/or CFDs to retail clients, as well as to investment firms from other EU Member States marketing, distributing or selling such instruments in Malta either through the establishment of a branch in Malta or through the provision of services on a cross border basis.
Following the public consultation conducted by the MFSA, the Authority has published its Guidance Notes on Cybersecurity. These Guidance Notes set out a minimum set of best practices and risk management procedures to be followed in order to effectively mitigate cyber risks.
The Guidance Notes emphasise, inter alia:
A copy of the Guidance Notes may be found here.
A new bill (89 of 2019) proposing changes to the Banking Act (Chapter 371) and the Financial Institutions Act (Chapter 376) has been tabled before the Maltese Parliament for the first reading. Bill 89 of 2019 transposes into Maltese law:
Bill 89 of 2019, implementing PSD II, will introduce and regulate inter alia third party payment service providers (TPPs), namely:
Read Bill 89 of 2019 here.
For more information please contact WH Partners at email@example.com
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