Regulatory Updates

Welcome

Welcome to PwC Malta’s Regulatory Updates - giving a month by month recap of  legislative updates and key regulator activity both local and international, relating to various areas including: asset management, banking, insurance, AML/Financial Crime etc.. 

Latest Updates - COVID-19 related updates

Beyond the public health emergency we are currently living through, these particular times are presenting unprecedented challenges from a business perspective. The regulatory environment is naturally responding. 

MFSA regulatory reporting deadline extensions

The MFSA issued a circular indicating that it will be making exceptions to the reporting deadlines for some of the submissions/publications due to be made by regulated entities across all sectors by March or April 2020. These include extensions for the submission of audited financial statements, on a case by case basis for credit and financial institutions, investment firms and collective investment schemes, and a two month extensions for insurance intermediaries and pension schemes/service providers. Read the MFSA’s Circular here.

FIAU Risk Evaluation Questionnaires 2020 (REQ) deadline extension

The FIAU issued a notice to Subject Persons notifying them that the late submission penalty fee applicable to REQs submitted between 1 April and 4 May 2020 shall not be applicable. There shall be no ‘late submission’ period, and the only deadline for the submission of the 2020 REQs shall be 4 May 2020 at 17:00hrs unless further extended. Read the FIAU’s Notice here.

MFSA pronouncement on expectation of COVID-19 Contingency and Business Continuity Plans

The MFSA set out its expectation that regulated firms take all reasonable measures in order to have appropriate contingency plans in place to be able to deal with any eventuality, looking to work with industry players to ensure that regulated firms are responding effectively to the evolving situation. Read the MFSA’s press release here.

 

March 2020

Anti-Money Laundering

06/03/2020 - Guidance on Digital Identity 

The FATF has issued a Guidance Document targeting digital transactions. In any financial transaction, knowing your customer is essential to ensure that the funds involved are not linked with crime and terrorism -  however, in a digital context, traditional verification tools do not apply. The FATF has developed guidance that will help governments, financial institutions, virtual asset service providers and other regulated entities determine whether a digital ID is appropriate for use for customer due diligence.

Guidance document can be found here.

16/03/2020 Notice to Subject Persons regarding the measures taken by the FIAU in response to the COVID‐19 outbreak (including REQ‐related measures)

The FIAU has taken a number of precautionary measures in response the COVID-19 outbreak, including: (i) the extension of the deadline for the submission of the REQ to 4 May 2020; and (ii) the FIAU will not be holding any physical meetings and is either postponing such meetings or holding them through alternative means.

Link to Publication can be found here.

17/03/2020 Malta Financial Services Oversight Newsletter 

This newsletter aims to inform all local stakeholders about the progress Malta is making to strengthen its financial regulation and oversight, in order to meet its international obligations in the fight against financial crime. 

Link to newsletter can be found here.

24/03/2020 FATF Business Bulletin 

The Bulletin provides a brief update on the key outcomes of the FATF Plenary held on 19-21 February 2020, including: (i) the mitigation of ML/TF risks of virtual assets; (ii) combatting the laundering of proceeds of illegal wildlife trade; (iii) promoting more effective supervision; (iv) strategic review of the FATF Global Network assessment process; (v) jurisdictions under increased monitoring; and (vi) high risk jurisdictions subject to a call for action. 

Link to Bulletin can be found here.

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Asset Management

03/03/2020 ESMA Consultation & Other Updates

The MFSA has issued a circular to update market participants on a few key recent updates issued by ESMA, including: (i) ESMA launching a public consultation on draft technical standards on the provision of investment services and activities in the Union by third-country firms under MiFID II and MiFIR; (ii) ESMA updating its Q&As on MiFID II/ MiFIR Investment Protection and Intermediaries topics; and (iii) ESMA publishing technical advice to the European Commission on the effects of product intervention measures under MiFIR. 

Link to Circular can be found here.

05/03/2020 Public Consultation on the MiFID II and MiFIR Regulatory Framework for Investment Firms and Market Operators

The European Commission published a public consultation on the regulatory framework of MiFID II and MiFIR for investment firms and market operators. The scope of the public consultation is to gather evidence from stakeholders on areas that would merit targeted adjustments in MiFID II and/ or MiFIR. The EC is also welcoming recommendations on how issues should be prioritised should a potential reform on the MiFID II and MiFIR rulebook occur.

Link to Circular can be found here.

12/03/2020 Notification about Interim Supervisory Measures

As part of contingency planning for COVID-19, the MFSA will be aligning its procedures for the conduct of on-site inspections with current international recommendations and good practices, by increasing its use of remote data gathering supervisory tools. As the situation currently stands, the MFSA will be continuing with its planned schedule of inspections adopting these new procedures, and there will not be postponements unless the specific circumstances require it. 

Link to Circular can be found here.

13/03/2020 Circular on Contingency Planning in light of COVID-19

The MFSA has issued a Circular on Contingency Planning, in terms of which it expects license holders to take into consideration how they may be impacted by the COVID-19 outbreak and that business continuity and contingency plans are in place to deal with major events such as COVID-19. The MFSA also provided guidance on the requirement to hold physical Board Meetings, communicating with clients and investors, cyber security and unlawful disclosure of inside information and insider dealing, in light of the current circumstances.

Link to Circular can be found here.

16/03/2020 ESMA requires net short position holders to report positions of 0.1% and above, in reaction to COVID-19 pandemic

ESMA has issued a decision to temporarily require the holders of net short positions in shares traded on a regulated market within the EU to notify the relevant national competent authorities, if the respective position reaches or exceeds 0.1% of the issued share capital. These obligations apply to any natural or legal person, irrespective of their country of residence and do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country market. 

Link to Circular can be found here.

16/03/2020 Circularisation Exercise - R4-3.2.7 of Part B1 of the Investment Services Rules

Where licence holders hold or control client assets, the letter of engagement should also require a circularisation of exercise by the auditors to reconcile a representative sample of client assets. Following discussions with the Malta Institute of Accountants, the MFSA has issued guidance on what the MFSA expects from Investment Firms to adhere to the said rule for basis year 2019. 

Link to Circular can be found here.

20/03/2020 Circular on Regulation (EU) No 2015/2365 on Securities Financing Transactions (‘SFTR’) – Postponement of the reporting obligations in reaction to COVID-19 pandemic

ESMA issued a public statement on actions taken to mitigate the impact of COVID-19 on the European financial markets and acknowledged the challenges that Trade Repositories, relevant counterparties, entities responsible for reporting or report submitting entities and investment firms, may face in finalising their implementation of the SFT reporting requirements. Therefore, ESMA has advised National Competent Authorities to not prioritise its supervisory action on reporting obligations under SFTR as of 13 April 2020 and 13 July 2020.

Link to Circular can be found here.

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

 

As part of contingency planning for COVID-19, the MFSA will be aligning its procedures for the conduct of on-site inspections with current international recommendations and good practices, by increasing its use of remote data gathering supervisory tools. As the situation currently stands, the MFSA will be continuing with its planned schedule of inspections adopting these new procedures, and there will not be postponements unless the specific circumstances require it. 

 

Link to Circular - https://www.mfsa.mt/publication/timing-of-regulatory-reporting-due-to-the-outbreak-of-covid-19/

 

23/03/2020 Clarification of issues related to the application of MiFID II requirements on the recording of telephone conversations

Acknowledging that the COVID-19 outbreak and its global spread has created significant and immediate challenges to societies, economies and to financial institutions, ESMA issued a public statement in order to clarify certain MiFID II requirements on the recording of telephone conversations.

Link to Circular can be found here.

25/03/2020 ESMA Public Statement - Accounting implications of COVID-19 on the calculation of expected credit losses in accordance with IFRS 9

ESMA issued a public statement in order to ensure consistency in the application of IFRS 9 Financial Instruments in light of the specific context of the COVID-19 outbreak, whereby it specifically addresses accounting for economic support and relief measures that are being granted by European governments. 

Link to Circular can be found here.

26/03/2020 ESMA extends Consultation Response Dates

ESMA informed stakeholders of its decision to extend the response date for all ongoing consultations with a closing date on, or after, 16 March by four weeks.

Link to Circular can be found here.

27/03/2020  Circular on Regulation (EU) No 2015/2365 on Securities Financing Transactions (‘SFTR’) – Clarification of Position by ESMA on SFTR Backloading

Following industry feedback, ESMA has revised the public statement to clarify the reporting obligation under SFTR subject to backloading. In this respect, National competent authorities will not be prioritising their supervisory actions in respect of their reporting obligations pursuant to SFTR or MIFIR regarding SFTs subject to backloading, in addition to SFTs concluded between 13 April 2020 and 13 July 2020. 

Link to Circular can be found here.

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Banking

05/03/2020 Circular to Credit Institutions on the Issuance of a New Banking Rule

The MFSA has issued a new Banking Rule BR/22 on ‘Complaints-Handling Procedures for Credit Institutions authorised under the Banking Act 1994’ intended to adopt the provisions in relation to credit institutions prescribed in the Joint Guidelines by ESMA and the EBA for Complaints-Handling for the securities and the banking sector (04/10/2018 - JC 2018 35) and to provide for ancillary matters thereto.

Link to Circular can be found here.

12/03/2020 Notification about Interim Supervisory Measures

As part of contingency planning for COVID-19, the MFSA will be aligning its procedures for the conduct of on-site inspections with current international recommendations and good practices, by increasing its use of remote data gathering supervisory tools. As the situation currently stands, the MFSA will be continuing with its planned schedule of inspections adopting these new procedures, and there will not be postponements unless the specific circumstances require it. 

Link to Circular can be found here.

13/03/2020 Circular to Financial Institutions authorised in terms of the Financial Institutions Act on Contingency Preparedness in the Context of Coronavirus (COVID-19)

This Circular is intended to remind financial institutions of the critical need to address the challenges posed by the spread of COVID-19 in their business continuity arrangements, by ensuring their operational preparedness to minimise the potential adverse effects of the spread of COVID-19 and take all actions necessary to respond to the pandemic scenario.

Link to Circular can be found here.

13/03/2020 Circular to Credit Institutions on Temporary Capital and Operational Relief in Reaction to Coronavirus (COVID-19)

The MFSA has taken into consideration an ECB Banking Supervision Press Release relating to temporary capital and operational relief provided as a reaction to COVID-19. Accordingly, the MFSA announced that the measures taken by the ECB shall apply in their entirety to all Maltese credit institutions licensed in terms of the Banking Act from the day of this Circular and until further notice.

Link to Circular can be found here.

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

The MFSA is aware of the increasingly difficult conditions being faced currently, and presumably to be faced in the immediate future - accordingly, The MFSA considers it necessary and proportionate to apply flexibility in the applicable deadlines for the submission of regulatory reporting falling due over the next months. 

Link to Circular can be found here.

24/03/2020 Notification regarding Malta Development Bank

Following discussions with the Supervisory Board of the Malta Development Bank (MDB), the MFSA hereby notifies that it has informed the EBA that it has established that exposure to the MDB shall be treated as exposures to the central government in line with Article 116(4) of the Capital Requirements Regulation.

Link to Circular can be found here.

25/03/2020 Accounting implications of COVID-19 on the calculation of expected credit losses in accordance with IFRS 9

The EBA has issued a statement on the application of the prudential framework in relation to COVID-19 related measures to ensure that statements are consistent with financial reporting aspects.

Link to Circular can be found here.

25/03/2020 Circular to Credit and Financial Institutions on the EBA’s clarity on the application of the prudential framework in light of Coronavirus (COVID-19) measures

The EBA has issued a statement to explicitly clarify interpretative aspects on the functioning of the prudential framework, specifically with respect to the classification of loans in default, the identification of forborne exposures, and their accounting treatment. 

Link to Circular can be found here.

31/03/2020 EBA provides additional clarity on measures to mitigate the impact of COVID-19 on the EU banking sector

The EBA clarified its expectations in relation to dividend and remuneration policies and provided additional guidance on how to use flexibility in supervisory reporting. It also recalled the necessary measures to prevent ML/TF. the EBA called upon competent authorities to offer leeway on reporting dates (urging one-month flexibility) - however, since ML/TF measures remain crucial at this challenging time, the EBA calls on competent authorities to support financial institutions’ ongoing efforts by sharing information on emerging ML/TF risks and setting clear regulatory expectations.

EBA News Publication can be found here.

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Company Service Providers

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

The MFSA is aware of the increasingly difficult conditions being faced currently, and presumably to be faced in the immediate future - accordingly, The MFSA considers it necessary and proportionate to apply flexibility in the applicable deadlines for the submission of regulatory reporting falling due over the next months. 

Link to Circular can be found here.

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Financial Markets

02/03/2020 Enforcement of Non-Financial Information Main Findings for 2018 Annual Financial Statements

Directive 2014/95/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups - lays down rules on disclosure of non-financial and diversity information in their Annual Financial Report. The MFSA has, during 2019, reviewed the non-financial statements presented by large listed companies in Malta and accordingly, has issued this Circular to highlight a number of disclosure weaknesses having been found. 

Link to Circular can be found here.

03/03/2020 Main Findings in relation to 2019 Alternative Performance Measures

Following ESMA’s Report on EU issuers’ use of Alternative Performance Measures (APM) and their compliance with ESMA’s APM Guidelines, the Listing Authority assessed the issuers’ compliance with the said guidelines and highlighted specific areas of improvement for Issuers in relation to APMs disclosures.

Link to Circular can be found here.

09/03/2020 ESMA’s Supervision Focuses on Outstanding Credit Ratings, Data Quality and Third Country CCPS

ESMA has published its ‘2020 Supervision Work Programme’ detailing the areas of focus relating to its supervision of Credit Rating Agencies, Trade Repositories, as well as the monitoring of third-country Central Clearing Counterparties and Central Securities Depositories.

Link to ESMA News Publication can be found here.

12/03/2020 ESMA recommends action by financial market participants for COVID-19 impact

ESMA issued a public statement addressing actions that market participants have to take in relation to the COVID-19 outbreak in order to preserve investor protection, the integrity of markets and financial stability, including those related to business continuity planning, market disclosure, financial reporting and fund management.

Link to Circular can be found here.

13/03/2020 Circular to Listed Entities in Reaction to Coronavirus (COVID-19)

ESMA has issued a statement wherein it recommended that issuers disclose as soon as possible, any relevant significant information concerning the impacts of Covid-19 on their fundamentals, prospect or financial situation in accordance with their transparency obligations under the Market Abuse Regulation (MAR). Accordingly, the MFSA would like to remind issuers of their obligations under MAR and to ensure utmost transparency in the market by informing the public as soon as possible of inside information which directly or indirectly concerns the issuer. 

Link to Circular can be found here.

16/03/2020 Market Abuse Regulation (MAR) - Onsite Compliance Meetings with Issuers

The MFSA has, since 2018, been holding a number of onsite compliance meetings relating to MAR, with issuers whose financial instruments are traded on a Maltese trading venue. Accordingly, the MFSA has issued this Circular to summarise its findings relating to the extent of issuer’s adherence with MAR, whilst also providing recommendations for guidance purposes. 

Link to Circular can be found here.

16/03/2020 ESMA Public Statement – Actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive

The aim of the above-mentioned public statement issued by ESMA, is to promote coordination between national competent authorities regarding issuers’ obligations to publish periodic information for reporting periods ending 31st December 2019 or after in the context of Covid-19. With respect to the local context, where issuers reasonably anticipate that the publication of their financial reports will be delayed, they are expected to inform the MFSA and the market of such delay. Furthermore, the Listing Authority’s policy relating to the automatic suspension of securities listed on the Malta Stock Exchange following a default in publishing audited financial statements, shall not be enforced in these current exceptional circumstances.

Link to Circular can be found here.

20/03/2020 Circular on Regulation (EU) No 2015/2365 on Securities Financing Transactions (‘SFTR’) – Postponement of the reporting obligations in reaction to COVID-19 pandemic

Kindly refer to Asset Management section.

Link to Circular can be found here.

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

The MFSA is aware of the increasingly difficult conditions being faced currently, and presumably to be faced in the immediate future - accordingly, The MFSA considers it necessary and proportionate to apply flexibility in the applicable deadlines for the submission of regulatory reporting falling due over the next months. 

Link to Circular can be found here.

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Fintech

25/03/2020 Circular to the Industry in relation to updates to the FAQs

The VFA Function has issued an updated version of its FAQs in order to ensure that the requirements emanating from Chapter 3 of the VFA Rulebook, are supplemented by adequate guidance. Some of the main additions include inter alia FAQs in relation to Systems and IT Audit requirements, and guidance on the recently introduced Live Audit Log requirement.

Link to Circular can be found here.

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Gaming

18/03/2020 Publication of Legal Notice 76 of 2020, Closure of Places Open to the Public Order

The Malta Gaming Authority would like to inform the public that in terms of Legal Notice 76 of 2020, entitled Closure of Places Open to the Public Order, 2020, all bingo halls, casinos, gaming parlours, and lotto booths, have been closed to the public for an indefinite period following the latest measures adopted by the Maltese Government in relation to COVID-19.

Link to Publication can be found here.

25/03/2020 MGA extends deadline for the submission of audited financial statements

The MGA is aware that in view of the COVD-19 outbreak, the deadline for the submission of the audited financial statements may be difficult to adhere to by MGA licensees. In this light, the MGA is hereby informing licensees whose last concluded financial year ended, or ends, between December 2019 and March 2020 - that the deadline for submission of the audited financial statements is extended to the end of October 2020. 

Link to publication can be found here.

26/03/2020 MGA issues notice on socially responsible commercial communications with respect to COVID-19

The MGA would like to remind its licensees that, in accordance with the Commercial Communications Regulations, all commercial communications must be socially responsible, especially in light of the current situation. Any direct or indirect reference to Covid-19, or any related circumstance, would be considered to amount to a breach of this regulation.

Link to Publication can be found here.

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Insurance

11/03/2020 Circular for Insurance and Reinsurance Undertakings - Measures in the light of COVID-19 Outbreak

MFSA published this Circular to communicate its expectations in light of the current circumstances and to request that insurance/ reinsurance undertakings provide the MFSA with the information relating to: (i) contingency plans adopted by undertaking to ensure continuity and regularity in the performance of their activities; and (ii) policy terms and conditions, whereby undertakings servicing retail clients are to advise the MFSA as to the interpretation of current policies vis-a-vis claims arising. 

Link to Circular can be found here.

12/03/2020 Notification about Interim Supervisory Measures

As part of contingency planning for COVID-19, the MFSA will be aligning its procedures for the conduct of on-site inspections with current international recommendations and good practices, by increasing its use of remote data gathering supervisory tools. As the situation currently stands, the MFSA will be continuing with its planned schedule of inspections adopting these new procedures, and there will not be postponements unless the specific circumstances require it. 

Link to Circular can be found here.

17/03/2020 - EIOPA statement on actions to mitigate the impact of Coronavirus/COVID-19 on the EU Insurance Sector

EIOPA is issuing various measures that may be implemented by undertakings and intermediaries to help navigate through challenging market conditions, while taking steps to protect employees and customers. The key measures relate inter alia, to Business Continuity and Solvency and Capital Position.

Link to EIOPA News Publication can be found here.

18/03/2020 Consultation Document regarding Conduct-Related Data Return for Insurance Undertakings

The MFSA issued a Consultation Document to the industry to provide feedback in relation to the surveys included in the Conduct-Related Data Return, which should be submitted on a quarterly basis, with the reporting deadline being six weeks after quarter end. The said return covers complaints, including those raised with the Office for the Arbiter for Financial Services, sales data and passporting.

Link to Consultation Document can be found here.

20/03/2020 - Circular for Insurance - MFSA’s Expectations in the Context of Coverage under Insurance Policies for Claims arising out of COVID-19

The purpose of this Circular is to bring to the attention of all insurance undertakings providing services to retail clients, as to the MFSA’s expectations in the context of coverage under insurance policies for claims arising of COVID-19. 

Link to Circular can be accessed here.

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

As part of contingency planning for COVID-19, the MFSA will be aligning its procedures for the conduct of on-site inspections with current international recommendations and good practices, by increasing its use of remote data gathering supervisory tools. As the situation currently stands, the MFSA will be continuing with its planned schedule of inspections adopting these new procedures, and there will not be postponements unless the specific circumstances require it. 

Link to Circular can be found here.

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Pensions

12/03/2020 Notification about Interim Supervisory Measures

As part of contingency planning for COVID-19, the MFSA will be aligning its procedures for the conduct of on-site inspections with current international recommendations and good practices, by increasing its use of remote data gathering supervisory tools. As the situation currently stands, the MFSA will be continuing with its planned schedule of inspections adopting these new procedures, and there will not be postponements unless the specific circumstances require it. 

Link to Circular can be found here.

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

The MFSA is aware of the increasingly difficult conditions being faced currently, and presumably to be faced in the immediate future - accordingly, The MFSA considers it necessary and proportionate to apply flexibility in the applicable deadlines for the submission of regulatory reporting falling due over the next months. 

Link to Circular can be found here.

23/03/2020 Circular on the publication of the new Pension Rules for Occupational Retirement Schemes

Directive (EU) 2016/2341 on the activities and supervision of institutions for occupational retirement provisions (IORPs II Directive) introduces a new regulatory framework for occupational retirement schemes, intended to provide adequate protection to members and beneficiaries of occupational retirement schemes. Accordingly, the Maltese Retirement Pensions Act, subsidiary legislation and Pension rules for Occupational Retirement Schemes have been amended to transpose the remaining provisions of the IORP II Directive. 

Link to Circular can be found here.

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Trusts and Fiduciaries

21/03/2020 Timing of Regulatory Reporting due to the outbreak of COVID-19

The MFSA is aware of the increasingly difficult conditions being faced currently, and presumably to be faced in the immediate future - accordingly, The MFSA considers it necessary and proportionate to apply flexibility in the applicable deadlines for the submission of regulatory reporting falling due over the next months. 

Link to Circular can be found here.

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