Investment Services

In Financial Services

About

Malta has enjoyed a steady increase in investment services and established itself as a key player within Europe over the past years. This success is the result of a robust legal framework which still allows flexibility combined with the ability to passport services to other jurisdictions within the European Union and the European Economic Area.

The Investment Services Act, Chapter 370 of the Laws of Malta, provides the regulatory framework and requires that every person providing investment services in or from within Malta must have a valid investment services licence.

Key Features:

  1.   The protection of investors and the general public;
  2.   The protection of the reputation of Malta taking into account Malta’s international commitments;
  3.   The promotion of competition and choice; and
  4.   In the case of a collective investment scheme licence, the reputation and suitability of the applicant and all other parties connected with the scheme.

The MFSA imposes several requirements in furtherance of these criteria, including a fitness and properness test on all senior staff. The MFSA tests the competence, reputation and solvency of subject persons to determine whether they are capable of exercising their roles with skill and diligence.

An ‘investment service’ is defined in the Investment Services Act as any of the activities listed hereunder when provided in relation to an instrument:

  •   Reception and transmission of orders;
  •   Execution of orders on behalf of clients;
  •   Dealing on own account;
  •   Management of investments;
  •   Trustee, Custodian or Nominee services;
  •   Investment advice;
  •   Underwriting of instruments and, or placing of instruments on a firm commitment basis;
  •   Placing of instruments without a firm commitment basis;
  •   Operation of a Multilateral Trading Facility (MTF);
  •   The reception, transmission and submission of a bid relating to emission allowances; and
  •   Operation of an Organised Trading Facility (OTF).

The term ‘instrument’ is also defined in the Investment Services Act, including, inter alia;

  •   Transferable securities;
  •   Money market instruments;
  •   Units in collective investment schemes;
  •   Options, futures and swaps; and
  •   Derivative instruments.

Investment Services licenses are divided into four categories, based on the nature of the services being provided:

  • Category 1a:  Authorised to receive and transmit orders in relation to one or more instruments and/ or provide investment advice and/ or place instruments without a firm commitment basis but not to hold or control clients’ money or customers’ assets (this Category does not include managers of Collective Investment Schemes);
  • Category 1b: Authorised to receive and transmit orders, and/ or provide investment advice in relation to one or more instrument and/ or place instruments without a firm commitment basis solely for professional clients and/ or eligible counterparties but not to hold or control clients’ money or customers’ assets (this Category does not include managers of Collective Investment Schemes);
  • Category 2: Authorised to provide any Investment Service and to hold or control clients’ money or customers’ assets, but not to operate a multilateral trading facility or deal for their own account or underwrite or place instruments on a firm commitment basis;
  • Category 3: Authorised to provide any Investment Service and to hold and control clients’ money or customers’ assets;
  • Category 4a: Authorised to act as trustees or custodians of all types of Collective Investment Schemes;
  • Category 4b: Authorised to act:
  • (a) as custodians of AIFs which have no redemption rights exercisable during the five year period from the date of initial investment and which generally do not invest in assets that must be held in custody in terms of the Investment Services Rules;
  • (b) as custodians to AIFs marketed in Malta in terms of regulation 7 of the Investment Services Act (Alternative Investment Fund Manager) (Third Country) Regulations.

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