MALTA FINANCIAL SERVICES AUTHORITY

Transcription

1 QUARTERLY UPDATE MALTA FINANCIAL SERVICES AUTHORITY Assessment of the MFSA s Regulatory Structures On 7 January 2011, the MFSA presented a report on an assessment that was carried last year on the MFSA s regulatory structures. The assessment was carried out by an independent team of assessors led by Mr Piero Ugolini, a former Assistant Director at the IMF and mission Chief of the IMF/World Bank team that had conducted the 2002/3 FSAP exercise. The team included also Mr Richard Nun, a former Deputy Director of the Texas Banking/Finance Commission, Austin-Texas, and currently peripatetic expert in banking Supervision at the IMF and Centennial Group, Washington D.C., USA, and Mr Michael Kehr, Senior Advisor International Policy/Affairs at BaFin, Bundesanstalt fur Finanzdienstleistungsaufsicht, Federal Financial Supervisory Authority of Germany. The assessment was based on Basel Core Principles (BCP), the International Organisation of Securities Commission (IOSCO) and the International Association of Insurance Supervisors (IAIS). Government and other leading personalities together with top representatives of licensed companies were present for the presentation including the Hon Prime Minister, Dr Lawrence Gonzi and the Hon Minister for Economy, Finance and Investment, Mr Tonio Fenech. Since its setup in 2002 as the single regulator for financial services, the MFSA has worked to ensure the creation of a reputable financial centre. As part of the initial efforts, the IMF / World Bank were requested in late 2002 and early 2003 to conduct a Financial Sector Assessment Programme (FSAP). The assessment concluded that Malta s financial system appeared to be healthy and well supervised, with a comprehensive legal framework Professor Joe Bannister introducing Mr Piero Ugolini, and strong adherence to most international standards the Head of the Assessment team and codes for regulatory and supervisory practices. EU membership provided a further assessment of the MFSA s regulatory and supervisory regimes prior to accession in 2004 which has proved to be an important catalyst for the further development of the financial services industry. FIRST QUARTER The Economic Update - I

2 In order to maintain the highest standards in regulation and supervision, the Board of Governors of the MFSA requested that an internal audit of the MFSA regulatory activities is carried out every two to three years following the IMF/World Bank assessment. Internal audits were carried out in 2005 and A further internal audit was due to be carried out in 2009, however, because of the number of new legislative changes coming into force at EU level and because of changes in composition of the Supervisory Council, the internal audit was postponed to The Board noting that increased transparency was being requested from companies following the global financial crises decided that the 2010 internal audit should take the form of an independent assessment and should be carried out using the same format as the FSAP, and this assessment and future assessments should be made public. Following the publication of the De Larosiere Report* recommending increased emphasis on supervision, the EU Commission has moved towards the creation of three European Supervisory Authorities to deal with banking, insurance and pensions, securities and markets supervision. These Authorities will periodically organise and conduct peer review analyses of some or all of the activities of Competent Authorities, to further enhance consistency in supervision across all Member States. It is envisaged that when conducting peer reviews, existing information and evaluations already made with regard to the Competent Authority concerned shall be taken into account by the new Authorities. This independent assessment therefore assumes greater importance for the reputation of the MFSA. The overall outcome of the assessment was that progress was noted in all sectorial assessments with that regarding the Banking sector having the most clear progress. With regards to Insurances, the recent extensive changes in the Principles did not allow a proper comparison between the assessments. In the Securities sector, progress was made from an already relatively 2002/3 positive assessment. BCP Comparison IOSCO 2002/ Principles 2002/3 Implemented : 22 Broadly implemented : 0 Partly implemented : 6 Non-implemented : 0 Not applicable : Implemented : 24 Broadly implemented : 4 Partly implemented : 0 Non-implemented : 0 Not applicable : 2 IAIS Principles - Broad Comparison 2002/ /3 Assessment 2010 Assessment 2002/ ICP ICP Compliant : 11 Largely Compliant : 12 Materially NC : 1 Compliant : 21 Largely Compliant : 5 Materially NC : 0 Observed : 12 Broadly observed : 3 Materially non observed : 2 Observed : 22 Largely observed : 4 Partly observed : 2 Non observed : 0 *De Larosiere: The high-level group on financial supervision in the EU. Report 2009 II - The Economic Update - FIRST quarter 2011 FIRST QUARTER The Economic Update - III

3 The Companies Act (Amendment of the Tenth Schedule) Regulations, 2010 and the Investment Services Act (Contractual Funds) Regulations, During January the MFSA issued two Information Notes. The first one regarded the publication of regulations (LN561 of 2010) that were amending the Tenth Schedule of the Companies Act, and the other Note related to the publication of the Investment Services Act (Contractual Funds) Regulations, 2010 (LN3 of 2011). 1. The Companies Act (Amendment of the Tenth Schedule) Regulations, 2010 These regulations are aimed at aligning the Tenth Schedule of the Maltese Companies Act with the SICAV Regulations (L.N. 241 of 2006 as amended). This alignment was considered necessary so as to bring en commandite, or Limited Partnership structures on a level playing field with SICAVs. In 2008, a number of amendments were carried out to the SICAV regulations. These amendments had included a distinction between multi-class and multi-fund companies, introduced segregation of assets for multi-fund companies and exempted SICAVs from certain provisions in the Companies Act. Segregation of assets and liabilities With the amended Tenth Schedule, Limited Partnerships will benefit from more structural and operational flexibility under the Companies Act, which is the principal legislation that regulates these types of structures. It will also be possible for Limited Partnerships to be formed either as a multi-class partnership or as a multi-fund partnership. The multi-fund partnership may moreover elect for the segregation of assets and liabilities between separate funds. Other changes The following are the other main changes brought in by the new amendments to the Tenth Schedule: Article 73 of the Companies Act, which provides flexibility in the type of consideration for the acquisition of shares, is now applicable to Limited Partnerships, with certain modifications that make it particularly attractive for Limited Partnerships that are licensed as Professional Investor Funds by the MFSA; Article 120 of the Companies Act, which requires notification of all transfers and transmissions of shares to the Registrar of Companies, no longer applies to Limited Partnerships and notifications shall instead be made to the partnership itself; the same applies to the notification of pledges of shares in a Limited Partnership which - together with the formalities for constituting a pledge - are now regulated by the Tenth Schedule, para. 3(13), instead of by Article 122 of the Companies Act; Article 186 of the Companies Act, which regulates the currency denomination of the share capital as well as changes in currency denomination, no longer apply to Limited Partnerships in virtue of the new para. 3 (10) of the Tenth Schedule; Also as a result of para. 3 (10) of the Tenth Schedule, a Limited Partnership constituted as a multi-fund or multiclass partnership is no longer required to present its annual accounts in the same currency as that of its share capital, as was previously the case under Artilce 187(1) of the Companies Act; Other proposed amendments refer to the power of the competent authority to issue Investment Services Rules and to the issue of shares at a discount. Limited Partnerships with capital not divided into shares These new possibilities build on another important amendment to Article 66A of the Companies Act that was introduced by Act XIX This made it possible for Limited Partnerships to be set up with capital that is not divided into shares. The change in the law followed on an interpretation of the term Unit recently given by the MFSA which considered that an interest that does not amount to a share in a fund may still qualify as a unit in terms of the Investment Services Act. 2. The Investment Services Act (Contractual Funds) Regulations, 2010 Contractual Funds are collective investment schemes which are set up by agreement and consequently do not have legal personality. In response to renewed interest in the establishment of these types of funds, the MFSA has revisited the current provisions related to contractual funds under the principal legislation. The ensuing Investment Services Act (Contractual Funds) Regulations, 2011 have set out a more functional framework for the set-up, operation and regulations of these types of funds. The main features of these Regulations are the following: A contractual fund is set up by a deed of constitution entered into by the fund manager and the custodian of the fund in accordance with the provisions of the Regulations. A contractual fund is licensed and regulated by the MFSA as a collective investment scheme under the Investment Services Act. It may be an open-ended scheme or a closed-ended scheme. In a contractual fund the liabilities of a unit holder are limited to the amount agreed to be contributed by the unit holder for the subscription of units therein. Investors holding units in a contractual fund participate and share in the property of the fund. The property of the contractual fund,(and any sub-funds constituted thereunder) constitute a patrimony which is separate and distinct from the property of the unit holders, the manager and the custodian. Therefore, a creditor of a unit holder, of the manager, or of the custodian, cannot enforce any rights over the property held by the fund. The deed of constitution of the contractual fund may also stipulate that sub-funds shall be considered as a patrimony which is separate from the main fund and from other sub-funds under the same Scheme. Contractual funds may also set up a Special Investment Vehicle (SIV) for the purpose of investing and IV - The Economic Update - FIRST quarter 2011 FIRST QUARTER The Economic Update - V

4 holding assets on behalf of the fund in accordance with the fund s deed of constitution and prospectus. This SIV would take the form of a limited liability company set up under the laws of Malta. SIVs are regulated under and as part of the same collective investment scheme licence granted to the contractual fund. Generally, Investment Services Rules applicable to collective investment schemes and to their service providers also apply to contractual funds and their SIVs. However, the MFSA may issue rules that are specifically applicable to contractual funds and/or to an SIV established by a contractual fund. Copies of these Information Notes are available at the MFSA website under Announcement/ Notices. The Malta Financial Services Authority launches a revamped Website and a New Careers Website In February the Malta Financial Services Authority (MFSA) launched its revamped Website The new Website structure has been designed to provide a more focused source of information in particularly where it regards Legislation and Licensees information. The Legislation Web pages provide a collection of all the relevant legislation, regulation and rules in force while the Licensed Companies gathering provides details of all the MFSA s licensed financial services providers. This design provides a more user-friendly way of securing required information with the easiest way possible. Another related web-development of the MFSA Website was intended to provide a better coverage of the Authority s announcements. Special emphasis was made to highlight sanctions applied while also bringing more awareness on regulatory warnings issued by other financial regulatory institutions and financial supervisory jurisdictions. website is segmented into sections that are relevant to 5th Formers, 6th Formers, MCAST students, university students and post-graduate students. Guidance, resources and tools in the portal also provide teachers and parents with the help that youngsters need to plan their career in this sector. Considerable effort was taken to put the project together. Six short testimonial films form part of the project. These six shorts will be streamed on the site to encourage young people of all ages to consider the industry as a fruitful career move. They feature six individuals who have successfully made careers in the industry, allowing young job seekers and school leavers the opportunity to view the actual development of existing careers in finance. Member organisations of the ECC under the guidance of its Chairman, Professor Charles Farrugia, actively contributed to the development of this project. These were supported by FinanceMalta and the Malta Chamber of Commerce, Enterprise and Industry. Thanks to the dedication of staff within the MFSA s Human Resources and ICT Units, the Authority lent considerable technical support to the project. All the organizations involved fully recognise the need to provide a wider pool of labour that can develop careers in what has become a tangible growth area in the sector and in the economy. This was the main reason behind the collective effort that was undertaken to launch this initiative. To access the website one can also log on the MFSA Website on and click on the Education Consultative Council Section. For further information one can contact the MFSA s Human Resources and Development Unit via e mail on hr@mfsa.com.mt or on telephone number In this regard a media release was also issued by the MFSA. Also during the month of February, the MFSA Education Consultative Council (ECC) launched a new financial services careers Website that aims to help young people plan a career in the financial services industry in Malta. The Website also contains useful hints to parents, career advisors and those who seek employment in the sector. This latest initiative is another major step in the Authority s quest to promote and encourage best standards of compliance, professionalism and competence within the finance industry in Malta. While the Malta Financial Services Authority (MFSA) is the single regulator for financial services activities in Malta, it also plays an active role in ensuring that the sector benefits from training that is up to standard with requirements that are, by their very nature, dynamic and demanding. The MFSA / ECC Website contains valuable information on how to enter the financial services industry supported by advice, guidance and job opportunities that are periodically available across the banking, insurance, investment funds and trusts businesses. To increase the relevance and value of the information provided, the VI - The Economic Update - FIRST quarter 2011 FIRST QUARTER The Economic Update - VII

5 LICENCES: JANUARY MARCH 2011 NEW LICENCES ISSUED Investment Services Category 2 licence issued to AUM Asset Management Ltd. Category 2 licence issued to Swiss Settlements Fund Management Limited. Category 2 licence issued to Alpha Value Management Limited. Category 2 licence issued to PVE Capital Limited. Recognised Fund Administrators Certificate issued to Alpha Value Management Limited. Collective Investment Scheme Licences Professional Investor Funds targeting Qualifying Investors Collective Investment Scheme licence issued to Knights of Malta Investments Funds SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to Kerylos Malta SICAV plc in respect of two sub-funds. Collective Investment Scheme licence issued to Forsythe Investment SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to 3 Sigma Riskcap SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to Novium Opportunity Umbrella SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to Orange Capital Funds SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to CTH SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to TPO Global Opportunities SICAV plc in respect of six sub-funds. Collective Investment Scheme licence issued to Swiss Investment Fund SICAV plc in respect of one sub-fund. Collective Investment Scheme licence issued to The Gandon Macro Fund SICAV plc. Collective Investment Scheme licence issued to Abbey Capital Fund L.P. in respect of fifteen sub-funds. Professional Investor Funds targeting Experienced Investors Collective Investment Scheme licence issued to Swiss Settlements Fund. This scheme is licensed as a Unit Trust. Professional Investor Funds targeting Extraordinary Investors Collective Investment Scheme licence issued to JFP Investments SICAV plc in respect of one sub-fund. Trusts and Trustees Licence issued to Alpha Business Ltd to receive property under trusts and to act as a trustee or co-trustee. Extension of Licences Licence issued to Ganado Trustees & Fiduciaries Limited was extended to include acting as an administrator of private foundations. Licence issued to RBG Fiduciary Services Limited was extended to be able hold property under trust and to act as trustee or co-trustee. Licence issued to STM Malta Trust and Company Management Limited was extended to include acting as an administrator of private foundations. Insurance Companies Licence issued to Abbey International Insurance PCC Limited to carry on business of insurance in Malta. Pensions Certificate of registration issued to Worldwide Pensions Limited as a retirement scheme administrator. LICENCES SURRENDERED Collective Investment Schemes UCITS Surrender of licence issued to Celsius Global Funds (SICAV) plc in respect of one sub-fund. Surrender of licence issued to LLYNS Investment Funds SICAV plc in respect of three sub-funds. Professional Investor Funds Surrender of licence issued to Primvalue (Malta) SICAV plc in respect of one sub-fund. Insurance Companies Central General Ltd ceased to carry on business of insurance in Malta. Central Life Ltd ceased to carry on business of insurance in Malta. Issued by the Communications Unit, Malta Financial Services Authority: communications@mfsa.com.mt VIII - The Economic Update - FIRST quarter 2011