Regulatory Updates

October 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.

View more

Anti-Money Laundering

FIAU Notices

03/10/2019     Guidance Note issued by the Sanctions Monitoring Board

The FIAU would like to bring to the attention of all subject persons a Guidance Note issued by the Sanctions Monitoring Board (SMB) in October 2019 in relation to Targeted Financial Sanctions. The SMB is the entity tasked under the National Interest (Enabling Powers) Act, Chapter 365 of the Laws of Malta with monitoring the application of sanctions issued by the United Nations Security Council and by the Council of the European Union, among other functions.

The Guidance Note may be accessed through the following link: https://foreignaffairs.gov.mt/en/Government/SMB/Documents/Guidance%20Note %20on% 20Targeted%20Financial%20Sanctions%20in%20Malta.pdf

Subject persons are encouraged to subscribe to SMB notifications with the latest UN/EU and national sanctions by sending an email request on sanctions.mftp@gov.mt.

Link to Circular can be found here.

 

Consultation Document

14/10/2019     Consultation Exercise on the proposed amendments to the PMLFTR transposing provisions of the 5th AMLD

In view of the transposition of the 5th Anti-Money Laundering Directive in January 2020, the FIAU has issued a Consultation Document containing the proposed amendments to the local Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) (S.L.373.01).

The proposed amendments include the following:

  • New subject persons being introduced;
  • Revision of the definition of Politically Exposed Persons;
  • Amendments to the provisions on Enhanced Due Diligence applicable to dealings with non-reputable jurisdictions;
  • Customer Due Diligence exemptions for electronic money;
  • Revision of CDD provisions;

The FIAU was receiving feedback until the 5th November, 2019.

Link to Consultation Document can be found here.

 

MFSA Circulars

21/10/2019     Thematic Review on the reporting of beneficial ownership of Trusts Ultimate Beneficial Ownership Register (“TUBOR”)

Further to the introduction of TUBOR, the Conduct Supervision Unit carried out on-site inspections to a number of trustees who had reported trusts under their administration which had triggered reporting obligations as a result of the fact that they had generated a tax consequence. The purpose of these inspections was to evaluate the assessment undertaken by trustees to determine whether a trust triggers reporting obligations under the Trust and Trustees Act (Register of Beneficial Ownership) Regulations (the “Regulations”) and to verify the accuracy of the beneficial ownership information submitted on TUBOR.

The MFSA is issuing this circular to inform the industry of the common key findings emanating from this thematic review. Below is a list of the topics which the findings related to:

  • Assessment to determine whether a trust generates tax consequences and thus reportable under the Regulations; 
  • Written Procedures;
  • Declaration of beneficial ownership and changes thereto to be submitted in a timely manner in terms of the Regulations;
  • Beneficial ownership information is to be accurate, current and up-to date: discrepancies and errors relating to information provided; validity of information; the office of the protector; discrepancies in beneficial ownership; renunciation of a beneficial owner’s benefit; 
  • Verification of beneficial ownership information submitted on TUBOR;
  • Class of beneficiaries – named beneficiaries;
  • Discrepancies between the declaration of trust/ trust instrument and the declaration of beneficial ownership;
  • Persons exercising ultimate and effective control over a trust; and
  • Letter of wishes

Link to Circular can be found here.

View more

Asset Management

MFSA Circulars

01/10/2019     Tied Agent Regime Enhancements

Following the regulatory briefing held by the MFSA in May 2019 and the commitment to improve the authorization process of tied agents, through this circular, the AU has proposed the below:

Duly licensed companies authorized by the MFSA to provide investment services activities may establish a tied agent in accordance with MiFID II. Entities considering appointment of a tied agent are to notify the Authority in advance of the appointment.

The Authority expects to receive a declaration from the License Holder appointing the Tied Agent in which it is assuming responsibility for the fitness and properness assessment of the proposed individuals. Notwithstanding the foregoing, the level of competence of the proposed tied agent is to be reassessed by the Authority.

Moreover, the Authorisations wish to bring a number of matters which are listed in the circular, to the attention of potential applicants which shall be addressed in notification documents.

Link to Circular can be found here.

 

02/10/2019     Revisions to the Conduct-Related Data Return

Whilst making reference to the latest circular issued by the MFSA regarding the Conduct-Related Data Return (the “Return”) to be submitted by investment services licence holders on a quarterly basis, the Authority has noted that it has revised the Return with major changes carried out to the Financial Innovation Survey.

Regulated Entities are required to refer to the latest version of the document available on the MFSA website dated September 2019. Furthermore, the said changes were also reflected in the COREP return.

The Authority is also updating the Guidance Document and the Glossary to be referred to by the relevant entities when compiling the return.

Entities are reminded that they are required to submit the return covering Q3 of 2019 by the 11th November 2019.

Link to Circular can be found here.

 

MFSA Circulars

04/10/2019     Rules on Equity Release Financial Products

The Authority has issued this circular to provide an update to the industry regarding Chapter 1 of the Equity Release Financial Products Rulebook. By virtue of this circular the Authority is publishing Chapter 1 following the feedback received from the industry.

Credit and financial institutions intending to offer equity release financial products can now submit the applicable application forms and supporting documentation. Upon submission of the application, the credit or financial institutions are to pay the MFSA an application fee of Euro 7,000. Any credit or financial institutions already offering equity release financial products before the coming into force of the Equity Release Financial Products Regulation are to notify the MFSA in writing of their intention to avail themselves of the Transitional Period of one year.

The Authority is currently in the process of finalising the remaining four chapters dealing with ongoing obligations and shall issue these chapters for consultations to the industry in the coming days.

Link to circular page can be found here.

 

04/10/2019     Circular addressed to officials entrusted with the submission of regulatory reporting in relation to custodians

The MFSA’s Licence Holder Portal (“the LH Portal”) will start facilitating the upload of regulatory reporting in relation to Custodians. This enhancement introduced the requirement for Licence Holders to submit the Custodians Statistical Return through the LH Portal with effect from the 30th September 2019 submission deadline.

Compliance officers of custodians will be granted access to the project ‘Custodians Statistical Return’ within the LH Portal. Compliance officers may delegate the submission of the Custodians Statistical Return to the reporting person completing the statistical return.

Further guidance on how to access the MFSA’s Licence Holder Portal and details on submission formats are included in the Guideline document enclosed with this Circular.

Link to circular page can be found here.

 

MFSA Circulars

08/10/2019     ESMA Consultation Paper on the Market Abuse Regulation

This circular is addressed to market participants falling within the scope of MAR, particularly issuers whose financial instruments are admitted to trading on a Trading Venue and to issuers who have requested that their financial instruments are admitted to trading on Trading Venue, as well as investment firms and asset management companies.

The Authority would like to inform market participants that ESMA has published a consultation paper on the provisions of MAR as requested by the European Commission. The consultation paper discusses a number of issues and proposals that as a whole affect the investor community, but which are of particular relevant to issuers of financial instruments admitted to trading or traded on a trading venue and their management, investment firms and asset managements companies.

ESMA invites all stakeholders to provide feedback on the consultation by 29 November 2019.

Link to circular page 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.

 

MFSA Circulars

17/10/2019     Circular to the Financial Services Industry on the Submission of Regulatory Reporting in relation to Collective Investment Schemes, Recognised Persons and Investment Services Licence Holders

All licence holders and recognised persons shall submit all regulatory reporting through the MFSA’s Licence Holder Portal (“LH Portal”) with effect from 31 October 2019. Hard copies shall continue to be submitted to the MFSA in all cases. No submissions via email will be accepted after the above date.

The circular lays down the current repositories and the newly created ones. Compliance Officers of licence holders and recognised persons will be granted access to the respective projects within the LH Portal depending on the type of licence/ recognition certificate held. In the event that the Compliance Officer does not receive such communication by the 18th October 2019, a request is to be submitted by email to lhportalinvestments@mfsa.mt. Additionally, this email address may also be used to request access to additional users.

Link to circular page can be found here.

 

24/10/2019     Circular addressed to officials entrusted with the submission of regulatory reporting in relation to Collective Investment Schemes

CBM Investment Funds return (the “Return”) must now be submitted through the LH Portal with effect from the 21st November 2019 submission deadline, i.e. returns for the period ending 31st October 2019. Additionally, Licence Holders are still required to submit the same return to the Central Bank of Malta through INFOSTAT.

Compliance Officers of collective investment schemes will be granted access to the project CBM Investment Funds Statistical Return within the LH Portal, which can be accessed through the following link https://lhportal.mfsa.com.mt. In this regard, the Compliance Officer will receive an automated email communicating the access to the project.

The compliance officer may delegate the submission of the Return to the respective fund administrator or reporting agent. If the fund administrator or reporting agent is not yet registered on the LH Portal, one can find a step-by-step guideline explaining the registration process in Appendix 1 of the guideline document enclosed with this Circular.

Link to circular page can be found here.

 

MFSA Circulars

31/10/2019     Submission of the Conduct-Related Data Return: Change in Naming Convention

Investment Services Licence Holders shall note the change in naming convention to be used when uploading documents via the LH portal. The Conduct-Related Data Return (the “Return”) shall be submitted on a quarterly basis and the List of Financial Service Instruments on a bi-annual basis. The following naming conventions shall be used when making the said submissions:

Document Name
Conduct Related Data Return
List of Financial Instruments

New Naming Conventions
LICENCEHOLDERCODE_MMMYYYY_Investments
LICENCEHOLDERCODE_MMMYYYY_FIList

Category 2 and 3 Investment Services Licence Holders shall refer to the Circular and the Guidelines on Regulatory Reporting Requirements and the Submission of Financial documentation through the LH Portal on the submission of the COREP.

Lastly, investment services licence holders were required to submit the Return covering Q3 of 2019 by not later than 11th November 2019.

Link to circular page can be found here.

 

MFSA Circulars

31/10/2019     Submission of the Conduct-Related Data Return: Change in Naming Convention

Investment Services Licence Holders shall note the change in naming convention to be used when uploading documents via the LH portal. The Conduct-Related Data Return (the “Return”) shall be submitted on a quarterly basis and the List of Financial Service Instruments on a bi-annual basis. The following naming conventions shall be used when making the said submissions:

Document Name
Conduct Related Data Return
List of Financial Instruments

New Naming Conventions
LICENCEHOLDERCODE_MMMYYYY_Investments
LICENCEHOLDERCODE_MMMYYYY_FIList

Category 2 and 3 Investment Services Licence Holders shall refer to the Circular and the Guidelines on Regulatory Reporting Requirements and the Submission of Financial documentation through the LH Portal on the submission of the COREP.

Lastly, investment services licence holders were required to submit the Return covering Q3 of 2019 by not later than 11th November 2019.

Link to circular page can be found here.

View more

Banking

MFSA Circulars

16/10/2019    Circular to Institutions on a new CRR Requirement

This circular applies to all institutions that do not fall within the remit of the Single Resolution Board in terms of Article 7(2) of Regulation (EU) No 806/2014 which established uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and Single Resolution Fund.

The objective of this circular is to inform all institutions subject to minimum requirement for own funds and eligible liabilities (‘MREL’) decision of a regulatory change introduced through ‘the Banking Package’. Particularly, this circular focuses on the new article 78a of the CRR2. As from 27 June 2019, all institutions subject to MREL decision, are obliged to seek the approval of the Resolution Committee.

The CRR2 has introduced two categories of permissions regimes to be issued by the Resolution Committee: (a) an instrument-by-instrument permission regime; and (b) a general prior permission regime.

Link to Circular page can be found here

 

31/10/2019    Circular to Financial Institutions on the Amendments to Financial Institutions Rules FIR/01, FIR/02 and FIR/03

Further to recent amendments to the Financial Institutions Act, the MFSA has issues revised versions of the Financial Institution Rules FIR/01, FIR/02 and FIR/03 (collectively referred to as the “Rules”). The amendments to the Rules are aimed at aligning them with the PSDII.

The circular provides further information on the following amendments:

Amendments to FIR/01 on Application Procedures and Requirements for

  • Authorisation under the Act;
  • Amendments to FIR/02 on the Supervisory and Regulatory Requirements of Institutions Authorised under the Act; and
  • Amendments to FIR/03 on the Taking up, Pursuit and Prudential Supervision of the Business of Financial Institutions Authorised to Issue Electronic Money under the Act

Link to Circular page can be found here.

 

MFSA Circulars

31/10/2019    Circular to Credit Institutions on Amendments to Banking Rule BR/14

The MFSA is issuing a revised version of Banking Rule BR/14 on Outsourcing by Credit Institutions Authorised under the Banking Act 1994 (the “Rule”). These amendments are aimed at aligning the aforementioned Rule with the recent amendments made to Banking Act further to the transposition of PSDII.

In particular, the Rule has been amended to eliminate the details on the necessity of recognition of the outsourcing service provider by the Authority and the provision of such outsourced services. Credit institutions which intend to outsource material services shall solely be required to notify the MFSA in writing, by providing the Authority with information as specified in the Rule.

The MFSA shall further revise Banking Rule BR/14 in the near future in order to implement the requirements specified in the EBA Guidelines on Outsourcing Arrangements which were published on 25 February 2019. The revised Banking Rule BR/14 will come into force with immediate effect.

Link to Circular page can be found here.

View more

Financial Markets

MFSA Circulars

02/10/2019     Circular in relation to the amendment of the Delegated Regulation (EU) 2019/815 with regards to updates of the taxonomy to be used for the single electronic reporting format

In terms of the circular dated 11 June 2019, the Final Report on the draft Regulatory Technical Standard (RTS) had been submitted to the European Commission (EC), where the EC had three months to decide to endorse the technical standard. On 30 September 2019, the draft amendment to the ESEF Regulation had been adopted by the European Commission with no changes.

The taxonomy to be used for marking-up the IFRS consolidated financial statements is specified in the Annexes to the ESEF Regulation. The 2019 IFRS Taxonomy includes the presentation and disclosure requirements of the IFRS as issued by the IASB at 1 January 2019. The delegated act amends the ESEF Regulation to reflect all the updates included in the 2019 IFRS Taxonomy, irrespective of the endorsement status of each IFRS within the Union. This amendment is purely technical and is needed to align electronic reporting with the existing reporting standards, thus facilitating the implementation by issuers of the mark-up requirements contained in the ESEF Regulation.

Link to Circular page can be found here.

 

25/10/2019     ESMA Public Statement European Common Enforcement Priorities for 2019 Annual Financial Reports

ESMA has recently issued a Public Statement outlining the European common enforcement priorities and other considerations for the 2019 annual financial reports (‘AFRs’). These priorities reflect those areas that European enforcers will consider, along with other relevant requirements, during the examination of the 2019 AFRs of listed companies.

The Public Statement is split into two main sections:

- Section 1: Priorities related to IFRS Financial Statements – specifically IFRS 16 on Leases and Lessees; IFRS 9 on Financial Instruments; IFRS 15 on Revenue from Contracts with Customers and IAS 12 on Income Taxes

- Section 2: Topics related to other parts of the Annual Report – including non-financial information and alternative performance measures.

The Public Statement also discloses the expectations by ESMA regarding the new European Single Reporting Format (ESEF) requirements applicable as from the 2020 AFRs. Moreover, reference is made to the disclosures concerning the possible impacts of the United Kingdom leaving the European Union.

Link to Circular page can be found here.

 

MFSA Circulars

10/2019     Market Consultation Document on Admission Requirements And Disclosure Standards for Real Estate Investment Trusts (“REITs”)

The Malta Stock Exchange issued this Market Consultation Document in order to allow relevant market operators and stakeholders to provide feedback, comment and submit other contributions to the draft bye-laws being proposed. These bye-laws are intended to allow REITs to become eligible financial instruments that may be admitted to the Exchange for listings with additional conditions for an Issuer to classify as a REIT within Chapter 5 of the Bye-Laws of the Malta Stock Exchange (the bye-laws). The consultation period will be open until 22 November 2019.

View more

Fintech

MFSA Circulars

02/10/2019     AML/CFT Approved Courses for VFA Issuers & VFA Service Providers

By virtue of this circular, the industry is hereby informed that a new course entitled ‘Certified Anti-Money Laundering Specialist (CAMS) Certification’ has been approved by the MFSA for the purposes fulfilling the competence requirements for Money Laundering Reporting Officers in terms of the Virtual Financial Assets Rulebook. The training provider for the above-mentioned course shall be the Malta Institute of Management & Association of Certified Anti-Money Laundering Specialists (ACAMS).

Training providers interested in having their courses approved by the MFSA are to submit a request for approval to the Authority providing the course content and information on the certification award mechanism.

Link to Circular page can be found here.

 

25/10/2019     Circular to the Industry – MFSA’s FinTech and Innovation Correspondence

As from 25/10/2019, any correspondence to the FinTech and Innovation Function within the MFSA shall be directed to the following email addresses:

Virtual Financial Assets Framework - VFA@mfsa.mt

FinTech Strategy - FinTech@mfsa.com.mt

Annexes which are required to be submitted in conjunction with the applicable Registration and Application Forms are now also available on: https://www.mfsa.mt/fintech/virtual-financialassets/#applyForAuthorisation.

Link to Circular page can be found here.

View more

Gaming

MGA News 

21/10/2019     Guidelines on the Impact of the UK’s Exit from the European Union

The MGA has published a guidance note on the impact of the UK’s exit from the EU. The contents of the guidance note relate solely to regulatory affairs within the remit of the MGA, and operators should also be aware of ulterior consequences resulting from Brexit, including but not limited to data protection, immigration, employment, duty, and copyright considerations.

The contents of this guidance note are of particular importance to entities established in Malta and operating in the UK, or entities established in the UK providing services and supplies within Malta, and it also details transitory measures in place for operators to ensure readiness and avoid regulatory disruption.

Link to Notice can be found here.

 

21/10/2019     Amendments to the Gaming Licence Fees Regulations of 2018

The MGA would like to inform the industry that on 15 October 2019, the publication of L.N. 266 of 2019 confirmed the introduction of several amendments to the Gaming Licence Fees Regulations of 2018 (S.L. 583.03 of the Laws of Malta, the ‘Regulations’).

For a licensee to be considered a start-up undertaking (‘start up’), it must cumulatively satisfy a list of criteria established by the Regulations, which include amongst other criteria, requirements relating to maximum amounts of revenue from the same or related sector. Following this amendment, in order for an applicant to qualify as a start up, it and its corporate group must not have generated more than €10 million of revenue in the 36 months prior to application. This amendment is aimed at ensuring that undertakings classified as start-ups are truly such, whilst simultaneously not prejudicing corporate groups that were in the business many years back and wish to benefit from such an incentive by starting up again.

Such amendments will come into effect starting 1 January 2020.

Link to News Alert can be found here.

View more

Insurance

MFSA Circulars

29/10/2019     EIOPA issues Warning to Insurance Undertakings and Insurance Intermediaries to Tackle High Commissions for Travel Insurance Products

The European Insurance and Occupational Pensions Authority (EIOPA) carried out a thematic review aimed at better understanding of travel insurance products which highlighted a number of problematic business models. In light of these findings, EIOPA has published a warning to the industry, stating that it considers that such business models are not in line with the requirements of the Insurance Distribution Directive (IDD), since they are not in conformity with the principle of acting in the best interest of customers. EIOPA has also identified a lack of compliance with the obligations relating to product oversight and governance, particularly in ensuring that travel insurance products are in line with the characteristics and objectives of the target market. Furthermore, the said warning also highlights EIOPA’s concerns with respect to travel insurance products offering health coverage but excluding pre-existing conditions without pre-screening.

The MFSA would like to bring the above to the attention of insurance undertakings who shall assess their product offering and approval process to ensure that their products offer fair value to customers and are fully capable of meeting the needs of their customers. Additionally, the said undertakings should also asses their distribution agreements.

Link to Circular page can be found here.

View more

Trusts and Fiduciaries

MFSA Circulars

21/10/2019     Thematic Review on the reporting of beneficial ownership of Trusts Ultimate Beneficial Ownership Register (“TUBOR”)

Kindly refer to the section on Anti-Money laundering (Part 2).

Link to Circular page can be found here.

View more

 

 

 

 

 

 

 

Follow us

Enquire about your personalised Regulatory Updates

Fill in the form below to receive more information about how we can customise our Regulatory Updates to meet the requirements of your business.

Required fields are marked with an asterisk(*)

Hide