Regulatory Updates

November 2019

 

 

 

Contact the PwC Malta Regulatory Team for further information in relation to any of the updates or if you wish to discuss how these may impact your business.

Welcome

Welcome to PwC Malta’s Regulatory Updates - giving a recap for this month of the main legislative updates and key regulator activity.

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Anti-Money Laundering

MFSA Cross Sectoral Analysis

06/11/2019     Supervision: Risks Identified, Weaknesses and Expected Controls

Kindly refer to the ‘General’ section.

Link to Document can be found here.

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Asset Management

MFSA Circulars

06/11/2019     Update to Part BI: Rules applicable to Investment Services Licence Holders which qualify as MiFID Firms (the “Rules”)

Further to a circular issued on the 22nd August 2o19, the MFSA has updated Chapter 2 of the Rules on Prudential Requirements in relation to local firms, as well as the Rules to remove specific requirements.

The changes mainly relate to ‘CRR Local Firms’, the requirements for Investment Services Firms distributing or intending to distribute contracts for differences (CFDs) and/or rolling spot forex contracts and/or carry out binary options trading and other miscellaneous changes.

Link to Circular can be found here.

 

12/11/2019     Joint Consultation Paper concerning amendments to the PRIIPs KID

The PRIIPs Regulation provides a temporary exemption for management and investment companies and persons advising on, or selling, UCITS from the obligation to produce and provide a PRIIPs KID (Article 32). For such funds, a Key Investor Information (KII) document is currently provided to investors in accordance with the UCITS directive. This exemption was originally due to expire on 31 December 2019.

Further to the above, the European Supervisory Authorities (ESAs) formally agreed to extend the date in Article 32 of the PRIIPs Regulation until the end of 2021. As things stand, in the absence of legislative changes, from 1 January 2022, UCITS will be required to prepare a PRIIPs KID and UCITS KIID. In view of this, the European Commission are expected to table legislative proposals in due course to address the requirements that would apply to UCITS from 1 January 2022 onwards.

In this context the ESAs have issued this Consultation Paper proposing amendments to the PRIIPs Delegated Regulation mainly to:

  • Allow the appropriate application of the PRIIPs KID by UCITS and relevantnon-UCITS funds, subject to the potential end of the temporary exemption of such funds from the requirements of the PRIIPs Regulation (see next section below);
  • Address the main regulatory issues that have been identified since the implementation of the PRIIPs KID to those products that are currently in scope.

The consultation closes on 13 January 2020. The ESAs will consider the feedback received to the consultation in Q1 2020 and expect to publish a final report in Q1/Q2 2020

Link to Circular can be found here.

 

MFSA Circulars

21/11/2019     Circular on Regulation (EU) No 2019/834 – the European Market Infrastructure Regulation (‘EMIR’) Regulatory Fitness Programme (‘Refit’)

The MFSA is issuing a circular addressed to all market participants, particularly collective investment schemes which enter into derivative contracts falling within the scope of EMIR. This circular is to be read in conjunction with the EMIR and EMIR Refit Regulations.

It may be noted that EMIR Refit expanded the definition of financial counterparty to capture all EU AIFs and, where relevant, their EU AIFMs, together with AIFs with an authorised or registered AIFM.

In this respect, Article 4 of the AIFMD defines an AIF as collective investment undertaking, including investment compartments thereof, which: (i) raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and (ii) does not require authorisation pursuant to Article 5 of the UCITS Directive.

The MFSA would like to therefore clarify that all licensed collective investment undertakings, not falling under the definition of the UCITS directive, will fall under the definition of financial counterparties as per Article 2(8) of EMIR. Accordingly, AIFs falling within scope of the AIFMD and Professional Investor Funds ( PIFs) licenced by the MFSA, will be considered as financial counterparties.

Link to Circular can be found here.

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Banking

MFSA Cross Sectoral Analysis

06/11/2019     Supervision: Risks Identified, Weaknesses and Expected Controls

Kindly refer to the ‘General’ section.

Link to Document can be found here.

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Gaming

MGA News

26/11/2019     Guiding Principles for the Application of Enforcement Measures

The MGA is publishing a guidance note to shed light on how it exercises the discretion afforded to it by law in the selection of the nature and scope of enforcement measures it takes when a breach of law is committed.

The contents are especially noteworthy to licensees, as they lay out in a non-exhaustive manner the circumstances and actions which the Authority gives particular importance to in its decision-making processes, including the interaction between a licensee in breach and the Authority.

Link to notice can be found here.

 

15/10/2019     Circular on Self-Assessment on potential Closet Indexing by Collective Investment Schemes targeting retail investors

Reference is made to the MFSA’s circular dated 11 July 2018 concerning the evaluation of potential closet indexing practices adopted by UCITS and Retail AIFs, with the initial deadline of submission of the self-assessment certificate on 28 September 2018. The above-mentioned circular contains an in-depth explanation of what shall be understood as closet indexing and provides methodology for the UCITS Management Companies and Alternative Investment Fund Managers (‘AIFMs’) to conduct a relevant self-assessment in relation to the investment strategy which they are undertaking.

This self-assessment exercise applies to: (i) self-managed UCITS licensed in Malta; (ii) management companies managing UCITS licensed in Malta; (iii) self-managed retail Alternative Investment Funds (AIFs) licensed in Malta; (iv) Maltese AIFMs managing retail AIFs licensed in Malta (collectively referred to as ‘Fund Managers’).

Following the Authority’s analysis of self-assessment certificates submitted by Fund Managers between July and October 2018, it transpired that none of the actively-managed Schemes licensed by the MFSA, nor their sub-funds, showed signs of being potential closet indexing. Nonetheless, the Authority expects that Licence Holders report to the MFSA any instances of Closet Indexing as soon as they are aware of such instances.

Link to circular page can be found here.

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General

MFSA Cross Sectoral Analysis

06/11/2019     Supervision: Risks Identified, Weaknesses and Expected Controls

The MFSA is publishing this document in order to outline its views on the key risks that authorised firms operating in the financial services sector might pose to their clients and the market in general. This document also sets out the MFSA’s expectations of the applicable controls for the various operators within the industry. Additionally, this document also highlights the common weaknesses and deficiencies.

The document is divided into 2 chapters: (i) includes a detailed AML/CFT section and provides a list of cross-sectoral risks, expectations and controls; and (ii) includes 4 detailed sector specific sections relating to insurance and pensions, credit and financial institutions, securities and markets and Trusts and Corporate Services Providers.

Link to circular page can be found here.

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Insurance and Pensions

MFSA Cross Sectoral Analysis

06/11/2019    Supervision: Risks Identified, Weaknesses and Expected Controls

Kindly refer to the ‘General’ section.

Link to circular page can be found here.
 

MFSA Circulars

11/11/2019    Circular on the contents to be included in the Written Declaration to be submitted to the MFSA on Continuous Professional Development Requirements

Relevant persons, as defined in Chapter 7 on Continuous Professional Development of Part B of the Insurance Distribution Rules (“Chapter 7”), are required to submit a written declaration to the MFSA stating that the relevant persons, Tied Insurance Intermediaries, Ancillary Insurance Intermediaries and the relevant employees have successfully completed the relevant professional training and development established in Chapter 7, on an annual basis. The submission of the said declaration shall not be later than the 31st January 2020. The contents of this written declaration are set out in the circular.

The written declaration is to be submitted through the Licence Holder Portal , as from January 2020. The LH Portal contains Guidelines on the file naming convention. Following the completion of the form on the LH Portal, the CPD written declaration is to be scanned and attached in a ZIP file.

Link to circular page can be found here.

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Trusts and Fiduciaries

MFSA Cross Sectoral Analysis

06/11/2019    Supervision: Risks Identified, Weaknesses and Expected Controls

Kindly refer to the ‘General’ section.

Link to Document page can be found here.

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