Malta Financial Services Authority (MFSA) Update
- Circular to VFA Agents in relation to the authorisation process of VFA Service Providers
The MFSA has issued a circular to VFA Agents regarding their clients’, specifically VFA Service Providers, VFA Applications. This circular is specific to those VFA Service Providers who have applied for a VFA Services licence after having benefited from the Transitory Period in terms of Article 62 of the VFA Act.
The Circular states that the MFSA intends to expedite the authorisation process by:
- Imposing a cut-off date; and
- Imposing a deadline to reply.
VFA Service Providers must either complete their pending applications by the 15th of September 2020, or else risk having their application shelved. This will effectively require VFA Service Providers to cease all VFA operations taking place in or from Malta. The MFSA makes reference to two sets of documents and expects to receive the Type A ‘critical set of documents’ as complete for the MFSA to deem the application complete and ready for review.
Furthermore, the MFSA is imposing a three-week deadline for applicants to reply to clarifications requested by the MFSA. Failure to adhere to this deadline will also lead to the application being shelved.
The MFSA is issuing this circular to primarily ensure that VFA Service Providers do not continue operating in or from Malta on the basis of the transitory provision and without ever concluding the VFA application process.
2. Circular on the amendments of Chapter 7 in Part B of the Insurance Distribution Rules
The Circular issued by the MFSA amends the previously imposed requirements of continuous professional development training that needs to take place annually by persons registered in the Agents Register, Managers Register or Brokers Register and their relevant employees.
Following the introduction of such requirement, the MFSA received feedback from the industry that the requirement as too restrictive. Effectively the MFSA is now amending Chapter 7 in Part B of the Insurance Distribution Rules, which currently states that “a relevant person and a relevant employee may attend in-house training provided in a structured manner by an authorised insurance undertaking, an authorised reinsurance undertaking or a person registered in the Agents Register or the Brokers Register, as applicable, which address one or more subject matters indicated in Sections 6.8 to 6.10 of Chapter 6 of the Insurance Distribution Rules.”
The MFSA is now amending this paragraph to include an additional criterion to the effect that a person who satisfies one of the requirements of paragraph 6.3.1 of Chapter 6 of the Insurance Distribution Rules, made up of a list of experiences that the person in question would need to fulfil, such person may now conduct in-house training to persons registered in the Agents Register, Managers Register or Brokers Register and their relevant employees.
The amendment applies as of the 10th of August 2020.
3. Circular in relation to the professional member criteria in line with the Standard Licence Condition B.9.3 of the Pension Rules for Personal Retirement Schemes issued in terms of the Retirement Pensions Act, 2011
Following the publication of the Pension Rules, the MFSA has received several queries regarding an interpretation for the term ‘a professional member’, who would be permitted to direct investments within their account, rather than using an intermediary, such as an investment manager or investment advisor.
For such a professional member to be deemed as such, the member must write to the Retirement Scheme Administrator and include a declaration by which the member states that his is aware of the responsibilities over the individual account. To this end the relevant rules have been modified to ensure that the professional member in question has the necessary experience and sufficient knowledge of the investment field relevant to the specific types of financial instruments in which he is investing in.
Specifically, the MFSA has clarified that the prospective member must have worked in the financial services sector for at least three years in the previous ten years and to have done so in a professional position and not in an administrative position. The prospective member’s account within the Retirement Scheme must have at least half a million Euros.
The management of involved transactions must be carried out for personal reasons and not as part of the member’s employment.
European Securities and Markets Authority (ESMA) Updates
EBA and ESMA Launch Consultation to Revise Joint Guidelines for Assessing the Suitability of Members of the Management Body and Key Function Holders
ESMA together with the EBA have launched a consultation spurred by the goal to combat money laundering and terrorist financing. Within this context, the draft guidelines, which will repeal the current 2017 guidelines, and which have been issued jointly by the mentioned authorities, focus on the necessary knowledge, skill and experience that function holders operating within the financial system must have to identify, manage and mitigate all money laundering risks.
The Guidelines also speak about independence of mind in terms of persons holding roles with affiliated companies, a gender-balanced composition in staff in management positions and about guidance in relation to the Ban Recovery and Resolution Directive (BRRD).
The consultation period ends on the 31st of October 2020. These draft Guidelines have been developed on the basis of Article 91 (12) of Directive 2013/36/EU (CRD) and Article 9 of Directive 2014/65/EU (MiFID II).
European Banking Authority (EBA) Updates
EBA provides clarity on the implementation of the reporting and disclosure framework in the context of COVID-19 measures
The EBA published frequently asked questions relating to the implementation of its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis. The technical clarifications provided by the EBA aim to assist supervisors and credit institutions in the implementation of the Guidelines.
Since the publication of the Guidelines on COVID-19 reporting and disclosure, several points including, technical questions, have been brought to the EBA’s attention by supervisors and credit institutions. The EBA thus seeks to provide the required clarification.
This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.