The Malta Financial Services Authority (MFSA)
is the single regulator for banking, investment and insurance business in
Malta and also houses the country's Companies Registry. The MFSA
supervises all licensed financial businesses, issues guidance notes,
monitors local and international developments, works with relevant parties
on legislative matters, plays a major role in training. It encourages high
standards of compliance and runs a consumer affairs unit.
The Investment Services Act 1994 (“the Act”)
was enacted to establish a regulatory regime for Investment Services and
Collective Investment Schemes.
The Law, which is in line with the relevant EU directives, provides a
great opportunity for Companies that deal in the financial services sector
within Europe or wish to expand their operations in Europe. A Licensed
Maltese Investment Services Company holds a passport to operate in any
country of the European Union. In other words, the Company may set a
branch in any European country without having to obtain another license
from the country in which the branch will be established.
Regulated Activites
Dealing as Principal or Agent
Buying, selling, subscribing for or underwriting instruments as principal
or agent.
Arranging Deals
Arranging for another person to buy, sell, subscribe for or underwrite
instruments.
Management of
Investments
Managing or agreeing to manage assets belonging to another person if
those assets consist of or include one or more instruments or the
arrangements for their management are such that the person managing or
agreeing to manage those assets has a discretion to invest any of those
assets in one or more instruments.
Trustee, Custodian or
Nominee Services
Acting as trustee, custodian or nominee holder of an instrument, or of
the assets represented by or otherwise connected with an instrument, where
the person acting as trustee, custodian or nominee holder is so doing as
part of his providing any investment service; Or
Holding an instrument or
the assets represented by or otherwise connected with an instrument as
nominee, where the person acting as nominee is so doing on behalf of
another person who is providing any investment service or on behalf of a
client of such person, and such nominee holding is carried out in relation
to such investment service; or acting as trustee or custodian in relation
to a collective investment scheme.
Categories of Licenses
Category 1
Authorisation to provide any investment service but not to hold or
control clients' money or assets nor to deal for their own account or to
underwrite.
Category 2
Authorisation to provide any investment service and to hold or control
clients' money or assets, but not to deal for their own account or to
underwrite.
Category 3
Authorisation to provide any investment service, to hold and control
clients' money or assets, and to deal for their own account and to
underwrite.
Category 4
Authorisation to act as custodians of collective investment schemes.
The Application Process
The application process
usually commences with a formal meeting with the MFSA in order to discuss
the projected application before the formal submission of the application
documents. The Application process and the ongoing requirements to which
licences issued under the
ISA are subject can be divided into three stages:
The
Preparatory Stage - including a meeting with the Authority, submission
of a draft Application Form & supporting documentation, review by the
MFSA, delineation of the Standard License Conditions to be applied to that
particular Applicant by the Authority.
The
Pre-Licensing Stage - issuance of an 'in principle' approval for the
license by the Authority, incorporation of the corporate vehicle,
submission of final & signed application form & supporting documentation,
other documents arising during the application process.
The
Post-Licensing/Pre-Commencement of Business Stage - satisfaction of ad
hoc requirements arising post licensing but pre-commencement of business.
Observance of High Level of Competence, Integrity & Fair Dealing
Under Maltese Investment
Laws, a License holder is required to:
a. observe high standards of integrity and
fair dealing;
b. act with due skill, care and diligence;
c. seek information from customers about
their circumstances and investment objectives in order to fulfil its
responsibilities to them;
d. take reasonable steps to give its
customers, in a comprehensible and timely manner, information needed to
enable them to make balanced and informed decisions and be ready to
provide them with a full and fair account of its responsibilities;
e. avoid any conflict of interest, or else
ensure fair treatment to all its customers by disclosure, internal rules
of confidentiality or by declining to act, and by not unfairly placing its
interests above those of its customers;
f. (if applicable), arrange proper protection
for clients’ assets which it controls or for which it has accepted
responsibility, by way of segregation and identification of those assets,
in order to safeguard them;
g. ensure that it maintains adequate
financial resources to meet its investment business commitments and to
withstand the risks to which its business is subject;
h. organise and control its internal affairs
in a responsible manner, keeping proper records, have adequate
arrangements to ensure that its staff and representatives are suitable,
adequately trained and properly supervised and have well-defined
compliance procedures; and
i. deal with the MFSA in an open and
co-operative manner and promptly report to it any matters which should be
disclosed.
Advantages of a Maltese
Investment Services License
Protection of Investors
The Act makes it illegal for any person to provide an investment service
in or from Malta unless such person is in possession of a valid investment
services licence.
The power of granting
investment services licences is the responsibility of the MFSA. The Act
provides that in granting a licence, the MFSA, as the competent authority,
may subject the Licence Holder to such conditions, as it may deem
appropriate. The conditions which MFSA generally imposes upon an
investment services Licence Holder centre around the observance of
reasonable standards of competence, integrity and fair dealing.
Favourable tax treatment
Maltese Investment Services License Holders, whose activities are limited
to services from Malta but not in Malta (i.e. not advising Maltese
individuals) could benefit from the use of the
Maltese International
Company as the corporate vehicle wherein they are subject to a corporate
tax of 35% but non-resident shareholders would then benefit from a very
attractive tax refund ending up in a final rate of taxation of 4.17%. (See
also:
International Trading Companies).
Excellent legal, accounting and banking
services
Malta has established a worldwide reputation for its
excellent legal,
accounting and banking services. The main advantages that Malta offers in
this respect are the considerably lower costs in the provision of these
services, reduced unwarranted red-tape, maintenance of high standards and
efficiency.
Set up costs and operational costs
The costs of acquiring an investment license in Malta and setting up
of the corresponding corporate vehicle as well as the running expenses of
the Company are reasonable and relatively lower than the same costs in
other financial centres of Europe.
Passporting Rights in Europe
Due to the compliance of the Law with the relevant EU Directive,
a
Malta Licensed Investment Services Company is able to operate in any other
country member of the European Union either directly or through the
establishment of a branch. This may be regarded as an advantage of great
essence for non-EU companies, which wish to expand their operations in
Europe.
See also:
Library:
Malta International Trading Companies
International Tax
Licensing
.
