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Investment Services Act (Cap. 370) European Passport Rights For Investment Firms Regulations, 2004 (L.N. 87 Of 2004 )

INVESTMENT SERVICES ACT (Cap. 370)
European Passport Rights for Investment Firms
Regulations, 2004

Citation and commencement.

IN exercise of the powers conferred by article 12 of the Investment Services Act, the Minister of Finance and Economic Affairs, acting on the advice of the Malta Financial Services Authority as the competent authority appointed for the purposes of the Act, has made the following regulations>-
1. (1) The title of these regulations is the European Passport
Rights for Investment Firms Regulations, 2004.
2004.
(2) These regulations shall come into force on the 1st May,

Interpretation.

2. In these regulations, unless the context otherwise requires- “the Act” means the Investment Services Act<
“branch” means a place of business which is a part of the investment firm, and which has no legal personality and which provides the services for which the investment firm has been authorised< all the places of business set up in the same Member State or EEA State by an investment firm with headquarters in another Member State or EEA State shall be regarded as a single branch<
“Commission” means the Commission of the European
Communities<
“competent authority” means the Malta Financial Services
Authority appointed under article 2A of the Act<
“core investment service” means a service listed in Section A of the Annex to the Directive, incorporated in Schedule 1 to these regulations<
“Directive” means Council Directive 93#22#EEC of the 10th May 1993 on investment services in the securities field as amended from time to time<
“EEA State” means a State which is a contracting party to the agreement on the European Economic Area signed at Oporto on the 2nd May 1992 as amended by the Protocol signed at Brussels on the 17th March 1993 and as amended from time to time<
“European investment firm” means an investment firm as defined in Article 1(2) of the Directive authorised by its foreign authority within the meaning of Article 3 of the Directive or authorised by a foreign authority in an EEA State<
“European right” means the entitlement of a person to establish a branch, or provide services, in a Member State or EEA State other than that in which it has its head office –
(a) in accordance with the Treaty as applied in the
Member State or EEA State< and
(b) subject to the requirements of the Directive and subject to any rules, regulations, or Guidelines made under the Act implementing such requirements<
“foreign authority” means the body or bodies designated by a Member State or EEA State>
(a) to act as a supervisory authority in relation to the European investment firm concerned in that Member State or EEA State within the meaning of the Directive, or
(b) to carry out the duties provided for in the Directive in relation to a Maltese investment firm exercising or proposing to exercise a European right<
“Guidelines” means the Investment Services Guidelines within the meaning of article 6 of the Act<
“home Member State or EEA State” means
(a) where the European investment firm is a natural person, the Member State or EEA State in which the head office of that person is situated< or
B 791
B 792

Cap. 330.

(b) where the European investment firm is a legal person, the Member State or EEA State in which its registered office is situated or, if under its national law it has no registered office, the Member State or EEA State in which its head office is situated<
“host Member State or EEA State” means the Member State or EEA State where a Maltese investment firm exercises or proposes to exercise European rights<
“investment firm” means any person, other than persons to whom the Directive does not apply in terms of Article 2 of the said Directive incorporated in Schedule 2 to these regulations, whose regular occupation or business is the provision of any one or more core investment services to third parties on a professional basis<
“Maltese rules” means rules –
(a) made in accordance with the Directive< and
(b) which are the responsibility of the competent authority (as to implementation, supervision and compliance) in accordance with the Directive and subject to the provisions of the Act and any rules, regulations and Guidelines made thereunder<
“Maltese investment firm” means a person licensed in terms of the Act, whose head office is in Malta and who is entitled to carry on an activity in a Member State or EEA State other than Malta in exercise of a European right<
“Member State” means a Member State of the European
Communities<
“non-core service” means a service listed in Section C of the Annex to the Directive, incorporated in Schedule 1 to these regulations<
“supervisory authority” means the foreign authority in a
Member State or EEA State<
“Treaty” means Treaty of Rome signed in 1957, establishing the European Economic Community as subsequently amended<
“Tribunal” means the Financial Services Tribunal established in terms of the Malta Financial Services Authority Act.
Part I – Exercise of Passport Rights by European investment firms
3. (1) A European investment firm which is seeking to establish a branch in Malta in exercise of a European right shall satisfy the establishment conditions specified in subregulation (2) of this regulation and shall be exempt from the provisions of article
3 of the Act.
(2) The establishment conditions for the purposes of this regulation are that –
(a) the European investment firm has given the supervisory authority in its home Member State or EEA State a notice containing the requisite details of that State in terms of Article 17 of the Directive<
(b) the competent authority has received a consent notice in accordance with paragraph (c), from the supervisory authority of such European investment firm stating that it has given its consent to the investment firm to establish a branch in Malta< and
(c) the consent notice shall –
(i) be given in accordance with the Directive<
(ii) certify that the European investment firm is authorised to act as an investment firm by the foreign authority<
(iii) identify the activities to which the consent relates<
(iv) contain the information stated in the notice given by the European investment firm in terms of paragraph (a) above< and
(v) contain details of any compensation scheme which is intended to protect the branch’s clients.
(3) The supervisory authority of the European investment firm shall inform the competent authority of any change in the details of a compensation scheme referred to in subregulation (2) of this regulation.
B 793

Exercise of passport rights by European

investment firms- establishment.

B 794

Exercise of passport rights by European investment firms- services.

(4) A branch of a European investment firm shall not commence business unless –
(a) it has been informed by the competent authority of any applicable provisions and that it may establish the branch< or
(b) two months have elapsed from the date when the competent authority received the consent notice.
(5) In the event of a change in any of the following particulars, the European investment firm shall give written notice of that change to the competent authority and its supervisory authority at least one month before implementing the change -
(a) the programme of operations setting out inter alia the types of business envisaged and the organizational structure of the branch<
(b) the address in Malta from where documents may be obtained< and
(c) the names of those responsible for the management of the branch.
(6) For the purposes of this regulation “applicable provisions” means the Maltese rules with which the European investment firm is required to comply when carrying on an activity identified in the consent notice through a branch in Malta.
4. (1) A European investment firm which is seeking to provide services in Malta in exercise of a European right shall satisfy the service conditions specified in subregulation (2) of this regulation and shall be exempt from the provisions of article 3 of the Act.
(2) The service conditions for the purposes of this regulation are that -
(a) the European investment firm has given its supervisory authority a notice of intention to provide services in Malta with the requisite details in terms of Article 18 of the Directive< and
(b) the competent authority has received a notice of such intention from the supervisory authority of the European investment firm.
(3) When the competent authority has received such a notice and has been informed of the intention of the European investment firm to provide services in Malta, it shall, where appropriate –
(a) prepare for the supervision of the European investment firm< and
(b) notify the European investment firm of the applicable provisions, if any.
(4) In the event of a change in the content of the information given in relation to the programme of operations stating in particular the investment service or services which the European investment firm intends to provide, the European investment firm shall give written notice of that change to the competent authority and its supervisory authority before implementing such change.
(5) For the purposes of this regulation “applicable provisions” means the Maltese rules with which the European investment firm is required to comply when carrying on an activity identified in the notice from the supervisory authority of the European investment firm by providing services in Malta.
5. (1) The competent authority may, for statistical purposes, require a European investment firm which has established a branch in Malta in terms of these regulations, to report periodically on its activities in Malta.
(2) In discharging its responsibilities within the meaning of Article 19 of the Directive, the competent authority may require such a European investment firm to provide the same particulars as Maltese investment firms for that purpose.
(3) The competent authority may require a European investment firm providing services in Malta, to provide the information necessary for the monitoring of its compliance with the standards set by the competent authority to the extent permitted by the Directive.
6. A European investment firm shall not be prohibited from advertising its services through any available means of communication in Malta provided that it complies with any applicable laws and Guidelines.
B 795

Reporting to the competent authority.

Advertising.

B 796

On-site verifications.

Exercise of passport rights by Maltese

investment firms –

establishment.

7. (1) Where a European investment firm carries on business in Malta through a branch in exercise of a European right, its supervisory authority may, after informing the competent authority, either directly or through an intermediary it appoints for the purpose, carry out on-site verification of the information within the meaning of Article 23 (3) as referred to in Article 24 of the Directive.
(2) The foreign authority may also ask the competent authority to have such on-site verification carried out. The competent authority shall, within the framework of its powers under the law, act upon the request by carrying out the verification itself or by allowing the requesting authority to carry it out or by allowing auditors or experts to do so.
(3) This regulation shall not affect the right of the competent authority, in discharging its responsibilities under the Directive, to carry out on-site verifications of branches established in Malta.
Part II – Exercise of Passport Rights by Maltese investment firms
8. (1) A Maltese investment firm may exercise a European right to establish a branch if it satisfies the requirements set out in the following provisions of this regulation.
(2) The Maltese investment firm shall give the competent authority a notice of intention to establish a branch which shall contain -
(a) the Member State or EEA State within the territory of which the investment firm plans to establish a branch<
(b) a programme of operations identifying the activities which it seeks to carry on through the branch<
(c) the address of the proposed branch from where documents may be obtained<
(d) the proposed organisational structure of the branch and the names of the proposed managers< and
(e) such other information as may be specified by means of Guidelines.
(3) Without prejudice to subregulations (6) and (8) of this regulation the competent authority shall give a consent notice within the terms of subregulation (4) of this regulation to the foreign authority within three months of receiving a complete notice of intention.
(4) The consent notice shall –
(a) be given in accordance with the Directive<
(b) certify that the Maltese investment firm is licensed to act as such an investment firm by the competent authority<
(c) identify the activities to which consent relates<
(d) contain the information stated in the notice of intention of the Maltese investment firm<
(e) contain details of any compensation scheme which is intended to protect the branch’s investors< and
(f) include such other information as may be specified by means of Guidelines.
(5) The foreign authority shall be informed by the competent authority of any change in the details of a compensation scheme referred to in subregulation (4) of this regulation.
(6) If the European right of the Maltese investment firm derives from the Directive and the requirements specified in subregulation (2) of this regulation are satisfied, the competent authority shall issue a consent notice to the foreign authority unless it has reason to doubt the adequacy of the administrative structure or the financial situation of the Maltese investment firm, taking into account the activities envisaged>
Provided that in the event of change in any of the particulars referred to in this subregulation the competent authority shall inform the foreign authority accordingly.
(7) If the competent authority decides to refuse to give a consent notice –
(a) it shall, within three months from the date when it received a complete notice of intention, give the person who gave that notice the reasons for its decision in writing< and
B 797
B 798
(b) that person may appeal to the Tribunal and the provisions of article 19 of the Act shall apply mutatis mutandis.
(8) A branch of the Maltese investment firm shall not commence business unless –
(a) the foreign authority notifies the Maltese investment firm of the applicable provisions< or
(b) two months have elapsed from the date on which the competent authority has given the consent notice without receipt of any communication from the foreign authority.
(9) In the event of change in any of the particulars communicated in accordance with paragraphs (b), (c) and (d) of subregulation(2) of this regulation, the Maltese investment firm shall give written notice of that change to the competent authority and the foreign authority at least one month before implementing the change.
(10) The prudential supervision of a Maltese investment firm shall be the responsibility of the competent authority whether the investment firm establishes a branch or provides services in another Member State or EEA State or not, without prejudice to those provisions of the Directive which give responsibility to the foreign authority.
(11) In this regulation, “applicable provisions” means the host state rules with which the Maltese investment firm will be required to comply when conducting business through the proposed branch in the Member State or EEA State concerned.
(12) In this regulation, “host state rules” means rules – (a) made in accordance with the Directive< and
(b) which are the responsibility of the foreign authority of the Member State or EEA State concerned (as to implementation, supervision and compliance) in accordance with the Directive.
(13) The competent authority shall inform the Commission of the number and type of cases in which there have been refusals in terms of subregulation (7) of this regulation.
9. (1) A Maltese investment firm may not exercise a European right to provide services unless the Maltese investment firm has given the competent authority, a notice of its intention to provide services as specified in subregulation (2) of this regulation.
(2) For the purposes of this regulation, a notice of intention shall –
(a) identify the services which it intends to provide together with a programme of operations<
(b) set out the Member State or EEA State in which it intends to operate< and
(c) include such other information as may be specified by means of Guidelines.
(3) If the European right of the Maltese investment firm derives from the Directive, the competent authority shall, within one month of receiving a notice of intention, send a copy of it to the foreign authority.It shall also communicate details of any applicable compensation scheme intended to protect investors.
(4) When the competent authority sends the copy under subregulation (3) of this regulation or gives a consent notice, it shall give written notice to the Maltese investment firm concerned. The Maltese investment firm may then start to provide the service or services in question in the host Member State or EEA State>
Provided that where appropriate, the foreign authority shall, on receipt of the information from the competent authority, indicate to the Maltese investment firm the conditions, including the rules of conduct, with which, in the interest of the general good, the provider of the services in question shall comply in the host Member State or EEA State.
(5) In the event of a change in any of the particulars provided by the Maltese investment firm in accordance with paragraph (a) of subregulation (2) of this regulation, the Maltese investment firm shall give written notice of that change to the competent authority and the foreign authority before implementing such change.
10. A European right shall entitle a Maltese investment firm to provide one or more core investment services>
B 799

Exercise of passport rights by Maltese

investment firms –

services.

Entitlement to provide core and non-core services.

B 800

Contraventions by European investment firms.

Provided that a European right may additionally entitle a Maltese investment firm to provide one or more non-core service, but it shall in no case be exercised solely in relation to non-core services.
Part III – Contraventions by European investment firms
11. (1) Where the competent authority ascertains that a European investment firm which has a branch or provides services in Malta -
(a) has contravened or is likely to contravene the Maltese rules or any provision of the Act or any rules or regulations made thereunder< or
(b) in purported compliance with any such provision, has furnished it with false, inaccurate or misleading information<
the competent authority shall in writing require the investment firm concerned to remedy and rectify its position.
(2) If the European investment firm concerned fails to take the necessary steps to remedy and rectify its position, the competent authority shall inform the foreign authority of such failure.
(3) If despite the actions taken by the foreign authority or because such actions prove inadequate or are not available in Malta, the European investment firm persists in violating the legal or regulatory provisions referred to in subregulation (1) of this regulation in force in Malta, the competent authority may, after informing the foreign authority, take appropriate measures to prevent or to penalize further irregularities and, in so far as necessary, to prevent that European investment firm from initiating any further transactions in Malta.
(4) The foregoing subregulations shall not affect the powers of thecompetent authority to take appropriate measures to prevent or penalize irregularities committed in Malta which are contrary to the rules of conduct introduced pursuant to Article 11 of the Directive as well as to other legal or regulatory provisions adopted in the interest of investors and the general public. This shall include the possibility of preventing European investment firms that have committed such irregularities from initiating any further transactions in Malta.
(5) Any measure adopted pursuant to this regulation shall be communicated to the European investment firm concerned in writing, together with reasons justifying such measures and shall be
subject to a right of appeal to the Tribunal and the provisions of article 19 of the Act shall apply mutatis mutandis.
(6) Notwithstanding the provisions of this regulation, the competent authority may, in exceptional circumstances, take any precautionary measures necessary to protect the interests of investors and others for whom services are provided. The competent authority shall inform the Commission and the foreign authority concerned of such measures at the earliest opportunity.
(7) In the event of withdrawal of authorization by the foreign authority, the competent authority shall be informed by the said authority and shall take appropriate measures to prevent the European investment firm concerned from initiating any further transactions in Malta and to safeguard the investors’ interests and others for whom services are provided.
(8) A prohibition under this regulation may be – (a) absolute< or
(b) limited, that is, imposed for a specified event or until specified conditions are complied with,
and any period, event or condition specified in the case of a limited prohibition may be varied by the competent authority and any such notice shall take effect on such date as is specified in the notice.
Part IV – Applicability Provisions
12. (1) A person who, on the date of the coming into force of these regulations was in possession of a licence issued by the competent authority which covers the provision of an investment service classified as a core service in terms of Section A of the Annex to the Directive incorporated in Schedule 1 to these regulations, shall be deemed to be a Maltese investment firm for the purposes of these regulations>
Provided that such person conforms with all applicable
Guidelines issued by the said competent authority>
Provided further that such person may if already so licensed also provide a non-core service in terms of Section C of the Annex to the Directive incorporated in Schedule 1 to these regulations.
B 801

Applicability

Provisions.

B 802

Interpretation.

(2) Every licence issued after the coming into force of these regulations shall indicate whether the licence holder is an investment firm in terms of these regulations.
Part V – Interpretation
13. (1) The objective of these regulations is to implement the relevant provisions of the Directive as amended and shall be interpreted and applied accordingly.
(2) In the event that any of these regulations conflict with the provisions of the Directive, the latter shall prevail.
SCHEDULE 1
Annex to the Directive
B 803
“SECTION A Services
1. (a) Reception and transmission, on behalf of investors, of orders in relation to one or more of the instruments listed in Section B.
(b) Execution of such orders other than for own account.
2. Dealing in any of the instruments listed in Section B for own account.
3. Managing portfolios of investments in accordance with mandates given by investors on a discriminatory, client-by-client basis where such portfolios include one or more of the instruments listed in Section B.
4. Underwriting in respect of issues of any of the instruments listed in Section
B and,or the placing of such issues.
SECTION B Instruments
1. (a) Transferable securities.
(b) Units in collective investment undertakings.
2. Money-market instruments.
3. Financial-futures contracts, including equivalent cash-settled instruments.
4. Forward interest-rate agreements (FRAs).
5. Interest-rate, currency and equity swaps.
6. Options to acquire or dispose of any instruments falling within this section of the Annex, including equivalent cash-settled instruments. This category includes in particular options on currency and on interest rates.
B 804
SECTION C
Non-core services
1. Safekeeping and administration in relation to one or more of the instruments listed in Section B.
2. Safe custody services.
3. Granting credits or loans to an investor to allow him to carry out a transaction in one or more of the instruments listed in Section B, where the firm granting the credit or loan is involved in the transaction.
4. Advice to undertakings on capital structure, industrial strategy and related matters and advice and service relating to mergers and the purchase of undertakings.
5. Services related to underwriting.
6. Investment advice concerning one or more of the instruments listed in
Section B.
7. Foreign-exchange service where these are connected with the provision of investment services.”
SCHEDULE 2
Article 2(2) of the Directive
“2. This Directive shall not apply to>
B 805
(a) insurance undertakings as defined in Article 1 of Directive 73#239#EEC or Article 1 of Directive 79#267#EEC or undertakings carrying on the reinsurance and retrocession activities referred to in Directive 64#225#EEC <
(b) firms which provide investment services exclusively for their parent undertakings, for their subsidiaries or for other subsidiaries of their parent undertakings<
(c) persons providing an investment service where that service is provided in an incidental manner in the course of a professional activity and that activity is regulated by legal or regulatory provisions or a code of ethics governing the profession which do not exclude the provision of that service<
(d) firms that provide investment services consisting exclusively in the administration of employee-participation schemes<
(e) firms that provide investment services that consist in providing both the services referred to in (b) and those referred to in (d)<
(f) the central banks of Member States or EEA States and other national bodies performing similar functions and other public bodies charged with or intervening in the management of the public debt<
(g) firms
- which may not hold clients’ funds or securities and which for that reason may not at any time place themselves in debit with their clients, and
- which may not provide any investment service except the reception and transmission of orders in transferable securities and units in collective investment undertakings, and
- which in the course of providing that service may transmit orders only to
(i) investment firms authorized in accordance with this Directive<
(ii) credit institutions authorized in accordance with Directives
77#780#EEC and 89#646#EEC<
B 806
(iii) branches of investment firms or of credit institutions which are authorized in a third country and which are subject to and comply with prudential rules considered by the foreign authority as at least as stringent as those laid down in this Directive, in Directive 89#646#EEC or in Directive 93#6#EEC<
(iv) collective investment undertakings authorized under the law of a Member State or EEA State to market units to the public and to the managers of such undertakings<
(v) investment companies with fixed capital, as defined in Article
15 (4) of Directive 77#91#EEC (13), the securities of which are listed or dealt in on a regulated market in a Member State or EEA State<
- the activities of which are governed at national level by rules or by a code of ethics<
(h) collective investment undertakings whether coordinated at Community level or not and the depositaries and managers of such undertakings<
(i) persons whose main business is trading in commodities amongst themselves or with producers or professional users of such products and who provide investment services only for such producers and professional users to the extent necessary for their main business<
(j) firms that provide investment services consisting exclusively in dealing for their own account on financial-futures or options markets or which deal for the accounts of other members of those markets or make prices for them and which are guaranteed by clearing members of the same markets. Responsibility for ensuring the performance of contracts entered into by such firms must be assumed by clearing members of the same markets<
(k) associations set up by Danish pension funds with the sole aim of managing the assets of pension funds that are members of those associations<
(l) ‘agenti di cambio’ whose activities and functions are governed by Italian Royal Decree No 222 of 7 March 1925 and subsequent provisions amending it, and who are authorized to carry on their activities under Article
19 of Italian Law No 1 of 2 January, 1991.”

Ippubblikat mid-Dipartiment ta’ l-Informazzjoni (doi.gov.mt) — Valletta — Published by the Department of Information (doi.gov.mt) — Valletta

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