After a regulatory briefing held by the MFSA in May 2019 coupled with a determination to improve the authorisation process of tied agents, the MFSA is proposing that all entities holding a valid investment services licence may establish a tied agent in accordance with article 29 of MIFID II. Any entity which considers appointing a tied agent, whether in Malta or in a host member state, will be required to notify the MFSA in advance of such appointment.
The “tied agent” is a natural or legal person, who under the full and unconditional responsibility of only one investment services licence holder or a European investment firm on whose behalf it acts, promotes investment and, or ancillary services to clients or prospective clients, receives and transmits instructions or orders from the client in respect of investment services or instruments, places instruments and, or provides investment advice to clients or prospective clients in respect of those instruments or services.
The notification documents should contain the following information:
- The envisioned arrangements and organisation of the Licence Holder with regards to the activity to be undertaken such as internal measures and processes to be developed and implemented in order to ensure adherence with any general good provisions.
- Reporting and dual control arrangements between the Licence Holder and proposed tied agent.
- Support structures available to the Licence Holder’s Compliance Officer to mitigate any additional risks to which the Licence holder may be exposed through the establishment of a tied agent.
- Clarification on the anticipated number of staff to be involved in the provision of activities within the tied agent.
- The level of anticipated business to be undertaken through the use of tied agents.
- Segregation arrangements between the tied agent’s own activities and the activities carried out by the tied agent on behalf of the Licence Holder.
Furthermore, the MFSA expects to receive a declaration from the Licence Holder appointing the Tied Agent in which the Licence Holder is assuming responsibility for the fitness and properness assessment of the proposed individual/s. The declaration is also to contain a detailed explanation of the checks carried out by the Licence Holder in relation to the tied agent’s fitness and properness. The MFSA shall also be reassessing the competence of the proposed tied agent whose activities include the provision of advice.
Article written by Dr Cherise Abela Grech and Dr Luke Mizzi.
This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.