Dr. Michelle Mizzi Buontempo Deputy Director. Securities and Markets Supervision Unit. 14 th March 2014

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1 Dr. Michelle Mizzi Buontempo Deputy Director Securities and Markets Supervision Unit 14 th March 2014

2 AGENDA Am I a CSP? By way of business/de minimis rule/exemptions from authorisation If I am a CSP, what do I have to do to be registered? What are the requirements to obtain registration? Application process Criteria of fitness and properness and manner in which this is assessed by the MFSA When should I apply for registration? Powers of the MFSA

3 COMPANY SERVICE PROVIDERS Am I a company service provider? A CSP is: Any natural or legal person resident or operating in or from Malta who, by way of business, provides any of the following: formation of companies or other legal entities; acting or arranging for a person to act as director or secretary of a company, a partner in a partnership or in a similar position in relation to other legal entities; providing registered office facilities and other related services for a company, partnership or other legal entity.

4 BY WAY OF BUSINESS What does by way of business mean? Any person who holds himself out as providing company services; OR Provides company services on a regular and habitual basis AND is directly or indirectly in receipt of remuneration or other benefits for the provision of such services

5 BY WAY OF BUSINESS Following factors may indicate that a particular activity is being undertaken by way of business: Amount of time taken to fulfil responsibility is significant; Individual has no other employment; Level of income received (in so far as quantum and as a proportion of individuals total income) is significant; Existence of a business relationship through which habitual or frequent or regular appointments are introduced; Person offering/providing more than one type of company service; Turnover of engagements is significant

6 WHAT IS NOT BY WAY OF BUSINESS Directorships of private companies where the director is a beneficial owner or has a substantial financial interest in the company; and Directorships of companies beneficially owned by family members Persons employed with a Company Service Provider who are appointed as directors or company secretary in companies which are being serviced by the CSP would not be subject to registration

7 DE MINIMIS RULE For the purpose of determining whether an individual is providing directorship and/or company secretarial services by way of business, the MFSA will consider the number of positions held: Rules set number of directorships and company secretarial positions beyond which you would need registration as a CSP as more than ten in aggregate Individuals holding directorships and/or company secretarial positions in companies which are licensed, recognised or authorised by the MFSA in terms of any of the laws for which the MFSA has been designated as competent authority shall not require registration The proposed de minimis rule relates to positions held by a natural person

8 EXEMPTIONS Article 3(1) of the Company Service Providers Act exempts certain persons from registration requirement: Persons in possession of a warrant to act as advocate, notary, legal procurator or certified public accountant; Persons authorised to act as trustee or to provide other fiduciary services in terms of the Trusts and Trustees Act However persons exempt from registration requirement will still need to notify the FIAU of their activities as CSP In case of doubt whether activity being carried out would be subject to registration, matter to be conclusively determined by MFSA. Carrying on activity of company service provider without registration from the MFSA is a criminal offence

9 SO I AM A CSP WHAT NEXT? Any person currently acting as CSP or who intends providing, by way of business, any of the services that fall within the definition of a CSP needs to submit an application to the MFSA to obtain registration Requirement emanates from Directive 2005/60/EC which requires company service providers to be licensed or registered EU Member States required to ensure that persons who effectively direct such entities as well as beneficial owners of such entities are fit and proper MFSA has the power to refuse an application for registration Registration may also be restricted to particular specified activities Registration may also be subject to such conditions as the MFSA may deem appropriate MFSA has power to revoke any conditions imposed as well as impose new/additional conditions

10 REQUIREMENTS TO OBTAIN REGISTRATION Person must be resident or operating in Malta If company services are provided by a natural person, that individual must be fit and proper If company services are provided by a limited liability company: the directors, as well as every person who directly or indirectly owns or controls 25% or more of the shares or voting rights, must be fit and proper; Objects clause must not include activities which are incompatible with the services of a company service provider Board of directors must be composed of at least two individuals Compliance Officer Money Laundering Reporting Officer

11 RESOURCES REQUIREMENTS Requirement for registered person to have sufficient financial resources so as to: Conduct its business effectively; and Meet its liabilities Commercial Partnerships - 5,000 initial paid up share capital Own funds must amount to 5,000 for duration of registration May be made up of Cash or other liquid assets Individuals Working Capital of at least 2,500 to be maintained for duration of the registration as a CSP. Individual may also opt to obtain guarantee or irrevocable letter of credit issued by a credit institution licensed by MFSA or in a reputable jurisdiction

12 APPLICATION PROCESS In the case of a juridical person: Completed application form; M&A; Copy of most recent financial statements; Clients agreements; Business plan; PQs of directors, qualifying shareholders and senior officers, including MLRO and Compliance Officer; Directors Resolution; Group Structure; Application fee of 250

13 APPLICATION PROCESS In the case of a natural person: Completed application form; Business proposal; Personal Questionnaire of the individual concerned; Evidence of working capital; Client s Agreement; Application fee of 250

14 CRITERIA OF FITNESS AND PROPERNESS Qualifying shareholders, members of Board of Directors, senior officials and other key functionaries are required to meet fit and proper test Onus of proving that an applicant is a fit and proper person for the type of registration applied for is on the applicant itself MFSA s approach is cumulative and will take into account all material facts, disclosed or otherwise MFSA will not grant registration if it appears that the criteria of fitness and properness are not or will not be satisfied

15 CRITERIA OF FITNESS AND PROPERNESS Integrity: applicant being of good repute and acting honestly and in a trustworthy fashion in relation to its clients and other parties Competence: persons carrying on business of the licence holder must be able to demonstrate an acceptable amount of knowledge, professional expertise and experience Solvency: MFSA must be satisfied that the applicant has financial resources sufficient to meet commitments on a continuing basis as well as the ability to withstand any financial risks to which the business is exposed

16 CRITERIA OF FITNESS AND PROPERNESS The satisfaction of the fit and proper criteria is a continuous obligation Licence holders and/or approved persons are required to report any material changes to the information submitted to the MFSA

17 PERSONAL QUESTIONNAIRE PQ assists the MFSA to assess whether a person is fit and proper MFSA reserves right to seek information and references from organisations and individuals mentioned in the PQ PQ is to be completed by the applicant personally who retains responsibility for its content

18 PERSONAL QUESTIONNAIRE Contents of PQ: Information regarding licence holder; Personal information regarding applicant; Qualifications/memberships; Employment history; Directorships; Bank references & other regulatory authorisations; General information; Declarations and confirmations A number of documents attached to the PQ

19 MFSA APPROVAL On conclusion of its review of application and fitness and properness exercise, the application referred to the Authority s Supervisory Council MFSA will issue an in principle approval subject to satisfactory resolution of any outstanding matters On satisfactory resolution of any outstanding matters MFSA will issue a certificate of registration

20 TRANSITORY PROVISIONS Any person acting as company service provider upon coming into force of Act regulating CSPs needs to apply for registration with the MFSA within three months By not later than 24 March 2014 MFSA to process applications within six months from receipt of a complete application, including supporting documentation

21 POWERS OF MFSA Power to cancel registration No longer fit and proper Registered person has contravened provisions of the Company Service Providers Act and/or any rules issued thereunder Registered person has knowingly supplied the MFSA with information which is false, inaccurate or misleading Person no longer acting as a Company Service Provider Power to issue directives Power to impose administrative sanctions including imposition of a penalty not exceeding 25,000 for each infringement Power to require information

22 In case of queries contact: Dr. Michelle Mizzi Buontempo on or Thank you