Malta Investment Services Licenses

Under EU law, and consequently, Maltese financial services legislation, companies providing financial services throughout Europe and internationally, require an investment services license and need to be regulated by a reputable financial authority. This would include brokers, stockbrokers, intermediaries, trustees, fiduciary services providers, banks, insurance companies, financial advisors and similar service providers.

MAltese law provides such licenses, which are confomratn to EU laws and regualtions. Cmpanies already in possession of a license in the EU can also opt for posspoMoreover, once Malta joints the European Union in 2004, through the company passporting system, it will be possible for Maltese Companies that hold an Investment Services Licence from the MFSA, to provide investment services throughout the European Union while still being regulated by the MFSA, rather than by the Financial Services Authority in the jurisdiction where the services are being provided.

Our law firm can assist you with a full service to ensure that your application is processed as speedily and efficiently as possible.

 

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 ACTIVITIES

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 Index

 

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