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Special Funds (Regulation) Act (Cap. 450) Special Funds (Control Of Assets) Regulations, 2003 (L.N. 366 Of 2003 )

SPECIAL FUNDS (REGULATION) ACT (CAP. 450)Special Funds (Control of Assets) Regulations, 2003

IN exercise of the powers conferred by paragraph (b) of sub-article (1) of article 50 of the Special Funds (Regulation) Act, the Minister of Finance and Economic Affairs, acting on the advice of the Malta Financial Services Authority, has made the following regulations:

(Control of Assets) Regulations, 2003.

Citation and commencement.

2004.
(2) These regulations shall come into force on the 1st January,

Interpretation.

requires-
(2) In these regulations unless the context otherwise
“assets” means movable and immovable property of any kind;
“control of assets” means the holding or control of assets belonging to, or on behalf of a customer, by a person hereinafter referred to as the subject person, acting in the course of rendering a service under the Act, and includes custody of assets;
“custodian” means a Retirement Fund Administrator maintaining custody of the fund’s assets or a Retirement Fund Custodian qualified in accordance with regulation 14 of these regulations;
B 4870

CAP. 386.

Assets held under control constitute a distinct patrimony.

Cap.16.

“customer” means any person, scheme or fund whose assets are held under the control of a subject person;
“fund” means a Retirement Fund as defined in article 2 of the Act;
“Retirement Fund Custodian” means a person duly registered with the Authority to act as a Retirement Fund Custodian in terms of sub-regulation (1) of regulation 3 of the Special Funds (Registration of Retirement Fund Custodians) Regulations, 2003;
“subject person” means a person who is in possession of a registration under the Act to act as a Retirement Scheme Administrator, a Retirement Fund Administrator or as a Retirement Fund Custodian.
(3) For the purposes of regulations 9 and 20 of these regulations, “group company” in relation to a subject person, means any body corporate which is the subject person’s subsidiary or parent company, or a subsidiary of the subject person’s parent company; and the terms “parent” and “subsidiary” shall be construed in accordance with sub-article (2) of article 2 of the Companies Act.

(2) Notwithstanding anything stated in article 1894 of the Civil Code or in the agreement entered into between the subject person and the customer or the fact that a customer’s assets held under the control of a subject person are registered in the name and title of or are otherwise vested in the subject person, such assets shall be deemed to constitute a distinct patrimony, separate from that belonging to the subject person and from that of other customers the assets of whom are also held under the control of the subject person.
(3) Except as expressly provided in the agreement entered into between the subject person and the customer and notwithstanding the Provisions of the Civil Code, the control of assets belonging to a customer by a subject person shall not give or be deemed or construed to give to the subject person any rights over such assets nor shall it
create any form of loan between the subject person and the customer and this notwithstanding the nature of the assets or the rights or obligations of the subject person in relation to the assets.

(2) The records, accounts and other statements held or issued by the subject person in terms of sub-regulation (3) of regulation 7 of these regulations shall, saving any proof to the contrary, constitute evidence of their contents and of the right of ownership of the customer as provided in sub-regulation (1) of this regulation.

(2) In the event of any such insolvency or bankruptcy or related order or resolution, or in the event that the Authority so requires, the subject person or any administrator or receiver or other officer appointed to represent it by any court or otherwise, shall on demand of any customer or of the Authority, immediately transfer the control, possession and title to all assets held by or in the name of the subject person on behalf of the customer to another subject person or to such other person as may be instructed by the customer or by the Authority.
(3) In the event that any assets held under the control of the subject person are, at the request of any creditor of the subject person, made subject to any precautionary or executive act or warrant granted by any Court in terms of the Code of Organization and Civil Procedure, the customer on whose behalf such assets are being held or the Authority may, by application to the Court, request the release of the assets from such act or warrant and the Court shall, on production of evidence as it may deem fit, accede to the application without undue delay.

B 4871

Customer enjoys right of ownership in assets

Assets held under control not subject to the rights of creditors of the subject person.

Cap. 12.

Applicability of the Duty on Documents and Transfers Act, and the Income Tax Act.

B 4872

Cap. 364. Cap.123.

Functions and duties of subject persons

shall not be deemed to constitute a chargeable transfer for the purposes of the Duty on Documents and Transfers Act, and for the purposes of sub-article (1) of article 5 of the Income Tax Act, where the delivery of such assets does not constitute a change in the beneficial owner of the assets.
(2) For the purpose of this regulation, beneficial owner means a person who is the real owner of, or who is otherwise beneficially entitled to the assets held under control by the subject person, as is provided in regulation 4 of these regulations.

(2) The subject person shall carry out such functions and duties as shall be required in accordance with these regulations, the terms and conditions of the agreement entered into with the customer, the conditions of registration which may be required by the Authority, and such other requirements as may be laid down by the latter from time to time.
(3) The subject person shall maintain proper and adequate records and accounts of all customers’ assets held under control. The records and accounts shall identify the customers to whom such assets belong and shall clearly indicate that the assets of every customer are separate and distinct from the assets belonging to the subject person and from other customers’ assets held by the subject person. The records and accounts shall, upon due notice being given to the subject person, indicate where any pledge or other right over assets held under the control of the subject person has been given by the customers to any third parties and where any order by any Court has been made in connection with such assets.
(4) The subject person entrusted with the control of assets belonging to customers shall, to every extent reasonably possible, segregate in a proper manner the assets of every customer from the assets belonging to the subject person and from the assets of other customers:Provided that the subject person may, in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of any registration, and such other requirements as may be laid down by the Authority and without prejudice to the customer’s right of ownership over the assets held under control, place and keep such assets in a common pool of identical assets or otherwise deposit them in a clients’ account or in a common account.
(5) The subject person shall make appropriate arrangements for the protection of customers’ assets held under control and shall ensure that such assets are placed under adequate systems to safeguard such assets from damage, misappropriation or other loss and which permit the delivery of such assets only in accordance with the terms and conditions of the agreement entered into with the customer.
(6) Where it is not reasonably possible for the subject person to carry out any of the duties specified in this regulation due to the nature of the assets and of the arrangements whereby control is exercised, the said duties may be varied with the written consent of the customer or in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of registration which may be required by the Authority, and such other requirements as may be laid down by the latter from time to time.

(2) For the purposes of this regulation, subject person includes such other subject person to whom functions, duties or assets may be delegated or entrusted in terms of regulation 9 of these regulations.
(3) This regulation shall not apply to a custodian as defined in sub-regulation (2) of regulation 2 of these regulations.

(2) The liability of the subject person for its own acts or omissions under regulation 8 of these regulations shall not be affected or reduced as a result of the subject person delegating functions and duties or entrusting all or part of the assets belonging to a customer, to another subject person.
B 4873

Liability of the subject person.

Subject person may delegate functions and duties or entrust assets to another subject person.

B 4874

Use of clearing,settlement and de-materialised systems and settlement risk

(3) Where the subject person delegates or entrusts functions, duties or assets in terms of sub-regulation (1) of this regulation to a person which is a group company, without prejudice to the liability of such person, the subject person shall be liable for any loss or prejudice suffered by the customers as a result of the acts, omissions or insolvency of such person.
(4) Where the subject person delegates or entrusts functions, duties or assets in terms of sub-regulation (1) of this regulation to a person which is not a group company, without prejudice to the liability of such person, the subject person shall be liable for any loss or prejudice suffered by the customers as a result of the acts or omissions of such person unless the subject person can prove that such person was and remains qualified and competent to carry out the functions and duties delegated and that the subject person exercised reasonable care to oversee that the functions and duties delegated were undertaken by such person competently.
(5) The liability of the subject person under sub-regulations (3) and (4) of this regulation may be varied or reduced with the written consent of the customer or in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of registration which may be required by the Authority, and such other requirements as may be laid down by the latter from time to time:
Provided that the subject person discloses fully to the customer any risks that may be associated with the nature of the arrangements whereby control is to be exercised and that the agreement with the customer shall clearly define the extent of liability of the subject person.
(6) This regulation shall not apply to a custodian as defined in sub-regulation (2) of regulation (2) of these regulations.

(2) Such systems as are provided for in sub-regulation (1) of this regulation may also be used to effect all transactions including conveyance, assignment, transfer, transmission and pledging of assets held under the control of the subject person and the law of the country
in which the system is maintained shall apply to the validity of such transactions notwithstanding the provisions of any other law.
(3) The agreement with the customer shall clearly define the extent of liability of the subject person for any losses that may be incurred by the customer as a result of the use of such systems.

(2) Upon the termination of an agreement for the control of assets, the subject person shall convey for no consideration the assets held for the customer, as instructed by the customer or by the Authority, without prejudice to the subject person’s right to payment of any lawfully due fees or expenses in terms of the agreement entered into with the customer and to any obligations arising in favour of the customer thereunder.

12 of Part 3 of these regulations shall apply to the custody of assets of funds under this Part, and for the purposes of this Part, unless the context otherwise requires, any references in Parts 1, 2 and 3 to “subject person”, “control of assets” and “customer” shall be construed to refer to “custodian”, “custody of assets” and “fund” respectively.

(a) a credit institution licensed under the Banking Act; or
(b) an entity licensed as a Custodian for Collective
Investment Schemes under the Investment Services Act; or
(c) a credit institution licensed in a country where, in the opinion of the Authority, it is subject to an adequate level of regulatory supervision, having an established place of business in Malta; or
(d) such other entity acceptable to the Authority;
B 4875

Subject person’s fees.

Termination of the control of assets.

Applicability.

Qualifications of a custodian.

B 4876

Custody of assets of a fund.

Functions and duties of the custodian.

Independence of the custodian from the Asset Management of a Retirement Fund.

Administration and management of Asset Manager and custodian.

Liability of the custodian.

having the business organisation, systems, experience and expertise deemed necessary by the Authority for it to maintain custody of assets.

(2) In addition to the functions and duties specified in regulation 7 of these regulations, the custodian shall carry out the functions required in accordance with the terms and conditions of the agreement appointing it as custodian, the deed or other instrument establishing or regulating the fund and the conditions of registration of the fund by the Authority, and such other requirements as may be laid down by the latter from time to time.

Provided that where the Retirement Fund Administrator maintains custody of the fund’s assets, it shall only act upon the instructions of the fund and, or of the Asset Manager and the fund and, or the Asset Manager shall act upon the instructions of the custodian to the extent required by the conditions of its registration which may be stipulated by the Authority and by the conditions of the deed or other instrument establishing the fund:
Provided further that where the Retirement Fund Administrator appoints a separate entity to act as a Retirement Fund Custodian, the latter shall only accept instructions from the former.

the custodian, the deed or other instrument establishing or regulating the fund, the conditions of registration which may be required by the Authority, and such other requirements as may be laid down by the latter from time to time.
(2) For the purposes of this regulation, custodian includes such other persons to whom functions, duties or assets may be delegated or entrusted in terms of regulation 20 of these regulations.

(2) The liability of the custodian for its own acts or omissions under regulation 19 of these regulations shall not be affected or reduced as a result of the custodian delegating functions and duties or entrusting all or part of the assets of the fund, to another person in terms of sub-regulation (1) of this regulation.
(3) Where the custodian delegates or entrusts functions, duties or assets in terms of sub-regulation (1) of this regulation to a person which is a group company, without prejudice to the liability of such person, the custodian shall be liable for any loss or prejudice suffered by the fund or by the participants in it, as a result of the acts, omissions or insolvency of such person.
(4) Where the custodian delegates or entrusts functions, duties or assets in terms of sub-regulation (1) of this regulation to a person which is not a group company, without prejudice to the liability of such person, the custodian shall be liable for any loss or prejudice suffered by fund or by the participants in the fund, as a result of the acts or omissions of such person unless the custodian can prove that such person was and remains qualified and competent to carry out the functions and duties delegated to it and that the custodian exercised reasonable care to oversee that the functions and duties delegated were undertaken by such person competently.
(5) The liability of the custodian under sub-regulations (3) and (4) of this regulation may be varied or reduced with the written consent of the fund, and, in the case of a Retirement Fund Custodian with the written consent of the Retirement Fund Administrator, and in accordance with the terms and conditions of the agreement appointing the custodian, the deed or other instrument establishing or regulating the fund, the conditions of
B 4877

Custodian may delegate functions and duties or entrust assets to another person.

B 4878

Termination of custody

registration which may be required by the Authority, and such other requirements as may be laid down by the latter from time to time:
Provided that the custodian discloses fully to the fund, any risks that may be associated with the nature of the custody arrangements, and that the agreement appointing the custodian shall clearly define the extent of liability of the custodian. Any such risks shall also be fully disclosed to the fund and to the participants in the fund.

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

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press

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