Investment Services
Investment Services are regulated in Malta by the Investment Services Act (Chap. 370 of the Laws of Malta). This law establishes the regulatory framework for two types of licences namely Investment Services Licences, which apply to providers of investment services and Collective Investment Schemes Licences which apply to investment funds. The Malta Financial Services Authority (“MFSA”) is the single regulator responsible for the licensing, regulation and supervision of Investment Services Providers, Collective Investment Schemes and Regulated Markets.
Any person or entity providing or hold himself out as providing, an investment service in Malta or from Malta must possess a valid investment services licence issued by the MFSA or, alternatively, have a validly endorsed or “passported” license from another EU Member State.
The following services constitute licensable investment services when carried out in connection with “instruments” in terms of Malta’s Investment Services Act:
- Reception and transmission of orders;
- Execution of orders on behalf of other persons;
- Dealing on own account;
- Management of third party assets;
- Trustee, custodian or nominee services;
- Investment advice in the form of personal recommendations (excluding recommendations issued exclusively through distribution channels or to the public);
- 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, bringing together multiple third parties buying and selling interests instruments, resulting in a contract.
The “instruments” listed in the Second Schedule to the Investment Services Act are the following:
- Transferable Securities including shares, bonds and other similar securities;
- Money Market Instruments, such as treasury bills, certificates of deposit and commercial papers but excluding instruments of payment;
- Units in collective investment schemes;
- Derivatives relating to securities, currencies, interest rates or yields, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash;
- Derivatives relating to commodities which may be settled in cash;
- Derivatives relating to commodities, that can be physically settled and are traded on a regulated market or multilateral trading facility;
- Derivatives relating to commodities, that can be physically settled, are not for commercial purposes and are cleared and settled through recognized clearing houses or subject to regular margin calls;
- Derivatives for the transfer of credit risk;
- Rights under a contract for differences;
- Derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics, settled in cash;
- Certificates or other instruments which confer property rights in respect of any other instrument;
- Foreign exchange acquired or held for investment purposes.
Maltese Investment services licences are divided into four broad categories which break down as follows:
Category | 1a | 1b |
Authorised Activities | 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.) | 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.
|
Minimum Initial Share Capital* | €50,000 | €20,000 (with PI cover) €50,000 (without PI cover) |
Application Fee- MFSA | €750 | €750 |
Licence Fee- MFSA | €1,300
| €1,800 |
Annual /Supervisory fee | For revenue up to €50,000: €1300
Further tranches of €50,000 up to a maximum of €1,000,000: €250 per tranche or part thereof
| For revenue up to €50,000: €1800
Further tranches of €50,000 up to a maximum of €1,000,000: €250 per tranche or part thereof
|
Category | 2 | 3 | 4 |
Authorised Activities | Authorised to provide any Investment Service, and 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. | Authorised to provide any Investment Service, hold and control clients' money or customers' assets. | Authorised to act as trustees or custodians of Collective Investment Schemes. |
Minimum Initial Share Capital* | €125,000 | €730,000 | €125,000 |
Application Fee- MFSA | €1,500 | €2,000 | €4,000 |
Licence Fee- MFSA | €3,000
| €4,000 | €10,000 |
Annual /Supervisory fee | For revenue up to €250,000: €3,000
Further tranches of €250,000 up to a maximum of €5,000,000: €350 per tranche or part thereof
| For revenue up to €250,000: €4,000
Further tranches of €250,000 up to a maximum of €5,000,000: €350 per tranche or part thereof | €10,000 |
Notes:
- Initial capital comprises paid-up equity capital plus share premium accounts (but excluding cumulative preferential shares) and reserves (where applicable).
- A Licence Holder will be considered to be “holding or controlling” Clients’ Money or Customers’ Assets where, for example, the Licence Holder holds a mandate over the client’s bank account or holds a power of attorney by which he can control a customer’s assets.
- A Manager of a CIS normally requires a Category 2 Licence.
For further information about how Zammit & Associates – Advocates can help you with your investment services requirements kindly contact us on finance [at] zammit-law [dot] com
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