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The Implementation of the Sustainable Finance Disclosure Regulation (“SFDR”) – Notification on the process to be adopted for the submission of updates to the pre-contractual document (prospectus) by PIFs and De-Minimis AIFMs

On 1 October 2021, the Authority issued a circular notifying the industry on the process to be adopted with respect to the submission of updates to the prospectus by PIFs and de-minimis AIFMs. The SFDR requires Financial Market Participants (“FMPs”) and Financial Advisors (“FAs”) to make pre-contractual and ongoing disclosures to investors regarding the integration of sustainability risks and the impact of adverse sustainability as well as the promotion of ESG characteristics.  Following clarification received from the European Commission, the MFSA shall require PIFs and de minimis AIFMs to submit the updates to their pre-contractual documents (prospectuses) in line with SFDR.

In this regard, the MFSA has put in place a fast-track filing process for the submission of updates to the Offering Documents based on the Level 1 text of the SFDR similar to the one adopted previously. Through this process, PIFs and de minimis AIFMs will be required to ‘self-certify’ their compliance with SFDR and notify the Authority accordingly. Compliance Officers of such Licence Holders are required to confirm in writing to the Authority whether the respective Licence Holder is working on the implementation of the necessary business changes to ensure compliance with the SFDR requirements and clearly state the plans of the entity to implement the required changes. Such confirmation was to be submitted to the Authority by 29 October 2021 on SFDR@mfsa.mt.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/The-Implementation-of-the-Sustainable-Finance-Disclosure-Regulation.pdf

 

Circular on Markets in Financial Instruments Directive (‘MiFID II’) and Markets in Financial Instruments Regulation (‘MiFIR’)

On 4 October 2021, the Authority published a circular informing market participants that ESMA has updated its Q&As on practical questions regarding transparency issues under MiFID and MiFIR. The updated Q&As provide clarifications on the temporary parameters to be applied when one or more of the parameters related to transparency calculations are not published by ESMA or the relevant non-delegating National Competent Authority. A new question relating to the information to be included in Annex IV of RTS 2, has also been added.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Circular-on-Markets-in-Financial-Instruments-Directive-and-Markets-in-Financial-Instruments-Regulation.pdf

 

Consultation on Review of the MiFID II Framework on Best Execution Reports issued by ESMA

On 4 October 2021, the Authority published another circular informing investment firms that on 24 September 2021 ESMA launched a consultation on proposals for improvement to the MiFID II framework on best execution reports. These proposals aim at ensuring effective and consistent regulation and supervision while also enhancing investor protection. ESMA’s proposals include technical changes to:

  • The reporting obligations for execution venues – aimed at simplifying the reporting requirements by reducing the granularity and volume of data to be reported and moving a set of seven indicators aimed at disclosing meaningful information to help firms to assess the venues’ execution quality; and
  • The reporting requirement for firms – focusing primarily on clarifying the requirements for firms that transmit client orders or decisions to deal with third parties for execution.

To this effect, ESMA invites all stakeholders to include their responses in response form provided in the circular by 23 December 2021. The outcome of this consultation will not lead to any immediate change in the existing RTSs 27 and 28 which currently regulate best execution reporting by execution venues and investment firms.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Consultation-on-Review-of-the-MiFID-II-Framework-on-Best-Execution-Reports-issued-by-ESMA.pdf

 

Circular on Updates to the Q&As on Regulation (EU) No 648/2021 – the European Market Infrastructure Regulation (“EMIR”)

On 6 October 2021, the Authority issued a circular addressed to entities who enter into derivative contracts, and which fall in scope of EMIR notifying such entities that ESMA has updated its Q&As on practical questions regarding the reporting of valuations and LEI changes due to mergers and acquisitions related to Article 9 of EMIR. The purpose of Q&As is to promote common supervisory approaches and practices in the application of EMIR whilst also providing responses to questions posed by the public, market participants and competent authorities in relation to practical application of the Regulation.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Circular-on-Updates-to-the-QAs-on-Regulation-EU-No-648_2012-the-European-Market-Infrastructure-Regulation.pdf

 

Circular on Updates to the Q&As on Regulation N0 2015/2365 – Securities Financing Transactions Regulation (‘SFTR’ or ‘the Regulation’)

On 6 October 2021, the Authority issued a circular informing market participants that ESMA has updated its Q&A document relating to reporting under SFTR. The updates specifically relate to the inclusion of Q&A 11 regarding LEI changes brought about due to mergers or acquisitions relating to regulation 4 of the SFTR.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Circular-on-Updates-to-the-QAs-on-Regulation-No-2015_2365-Securities-Financing-Transactions-Regulation.pdf

 

Circular on the Updates made to Part A of the Investment Services Rules for Investment Services Providers

On 8 October 2021, the Authority published a circular notifying Investment Service Licence Holder (“ISLHs”) that the Authority is departing from the current categorisation applicable to ISLHs. In view of this reclassification, the MFSA has carried out changes to the Investment Services Rules for Investment Services Providers, Part A: The Application Process (the “Rulebook”). In particular, the MFSA has updated Section 4 (Classification of Investment Service Licence Holders), Section 7 (Fees) and Section 10 (Capital Requirements). Furthermore, additional minor changes have been carried out to better structure the Rulebook and to update the hyperlink to the Guidelines issued by the EBA and ESMA in terms of Article 16 of Regulation (EU) No 1095/2010 and Regulation (EU) No 1093/2010, on the assessment of suitability of members of the management body and key function holders.

In the Rulebook, the Authority has removed all text referring to the local ‘Categories’. In this regard, Section 4 was revised and ISLHs will now be classified according to Licence Type. The application fees will not change, however the reference to the category of licence has been replaced with the equivalent definition of what licensable activities, the respective LH may be authorised to provide.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Circular-on-the-Updates-made-to-Part-A-of-the-Investment-Services-Rules-for-Investment-Services-Providers.pdf

 

Investment Firms Classification & XBRL Submissions Testing Phase

On 11 October 2021, the Authority issued a circular notifying investment firms that following the implementation of the Investment Firm Regulation and Directive (“IFRD”) on 26 June 2021, Investment firms are required to compile and submit an excel file (attached to the circular) through the LH Portal by no later than 1 November 2021.

In addition, the MFSA has also launched the testing phase of XBRL submissions through the test repository of the LH Portal. In this regard, the Authority has encouraged individuals in charge of submission to create a test account.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Investment-Firms-Classification-XBRL-Submissions-Testing-Phase.pdf

 

Update on Central Bank of Malta (“CBM”) Reporting & Appendix 2B for Fund Managers

On 20 October 2021, the MFSA issued a circular notifying the industry that data pertaining to the CBM under the CBM Reporting schedules which was previously collected in relation to Fund Managers through a specific section in the Appendix 2B Financial Return will now be collected in a separate return will now be collected in a separate return. The newly updated Appendix 2B is now available for download and use on the MFSAs website and will be replacing the older version.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Update-on-CBM-Reporting-Appendix-2B-for-Fund-Managers.pdf

 

Reporting according to Annex IV to Article 3 and 24 of the Commission Delegated Regulation (EU) No 231/2013 supplementing Directive 2011/61/EU and Annex 5 to Appendix 13 of the Investment Services Rules for Investment Services Providers Qualifying as AIFMs and De-Minimis AIFMs (“AIFMD Reporting”) – New Validation Rules on the Reporting Files

On 26 October 2021, the MFSA issued a circular informing AIFMs of the newly introduced validation rules to improve the data quality of the AIFMD submissions made by fund managers or by self-managed funds subject to AIFMD Reporting obligations. A new set of validations on the structure of the reporting files have been implemented by the MFSA to ensure that the AIFM and the person appointed by the AIFM will submit the file on the MFSA’s Licence Holder Portal. Every AIFM or appointed sender thereof is kindly requested to refer to the automated message received via email for any upload failures and re-upload the file until all the required validations have been satisfied. It is pertinent to note that unless the status of the Annex IV reporting file is “ACCEPTED BY ESA”, the AIFM would not be considered as compliant with the applicable reporting requirements.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/AIFMD-Reporting-New-Validation-Rules-on-the-Reporting-Files.pdf

 

MFSA publishes a Discussion Paper reviewing the Asset Management Strategy, aimed at boosting this important sector

On 28 October 2021, the MFSA published a Discussion Paper reviewing the Asset Management strategy and aimed at boosting this sector. The Authority acknowledges that, over the past decade, Malta has proved particularly attractive to fund platforms, managers and administrators, who are able to service local or international funds in Malta. However, refreshing the regulatory approach to this sector is necessary to mitigate the challenges encountered by market players as the regulatory and competitive landscapes at an international level continue to evolve.

One of the main aims of the Asset Management Strategy is to ensure the continued stability and soundness of the sector through effective regulation, and facilitating business by means of streamlined, pragmatic and dynamic policy-making. In this respect, the Discussion Paper focuses on revisiting certain existing regulatory frameworks with the aim of making the regime more pragmatic and accessible. It also focuses on the development of potentially new regulatory frameworks, as well as on initiatives directed towards the enhancement of MFSA authorisation and supervisory processes. The consultation is open to the public until 17 December 2021. Industry participants and interested parties are invited to send their responses via email to AssetManagementStrategy@mfsa.mt

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2021/10/Discussion-Paper-Asset-Management-Strategy.pdf

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