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Circular on the MAR – Prevention and Detection of Market Abuse

On 4 April 2022, the MFSA published a circular aimed at professionals that arrange or execute transactions, such as market operators and investment firms that operate a trading venue. The circular outlines the general obligations to maintain effective arrangements, systems, and procedures in place for the prevention and detection of Market Abuse and to notify suspicious orders and/or transactions.

The circular also provides a practical guidance on different Market Abuse Practices and highlights the Authority’s way forward with respect to the Suspicious Transaction and Order Report (“STOR”) whereby the Authority will be engaging with relevant persons subject to the obligations contained in Article 16 of MAR to question specific orders and/or transactions, where, in the Authority’s opinion, such orders or transactions were suspicious, hence requiring the submission of a STOR, but no STOR was submitted.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/Circular-on-the-Market-Abuse-Regulation-Article-16-of-MAR-Prevention-and-Detection-of-Market-Abuse.pdf

 

Clarification Note addressed to Investment Firms Operating on a Freedom of Services (FoS) Cross-Border Basis – Conduct Related Disclosures in the Financial Return Reporting and Other Important Regulatory Clarifications

On 5 April 2022, the Authority issued a circular addressing a number of common issues it has come across when reviewing the Financial Returns submitted by Investment Firms. The issues identified are the following:

  • In a number of cases Investment firms reported inaccurate Client Figures in the Passporting Survey of the MiFID Firms Quarterly Reporting Return. In this regard, the MFSA indicated that in the case of a cross-border activity of investment services, Investment Firms should take into consideration the location of the clients when it comes to the applicable laws and provisions they are expected to abide with. The Key Official signing off the Return should ensure that a reconciliation exercise is undertaken against client data to ensure that the data provided in accurate and factual;
  • The MFSA also came across certain Investment Firms claiming to resort to ‘reverse solicitation’ so as to be exempted from the requirements of Article 39 of MiFID II which lays down the rules in relation to the provision of services or performance of activities through the establishment of a branch. In this respect, the MFSA has re-iterated that the ‘reverse solicitation’ exemption applies only in scenarios where the client located in the EU initiates, at its own exclusive initiative, the provision of an investment service or activity by a third-country firm and should therefore be applied in very limited circumstances.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/Clarification-Note-addressed-to-MiFID-II-Investment-Firms-Operating-on-a-Freedom-of-Services-FoS-Cross-Border-Basis-on-Conduct-Related-Disclosures.pdf

 

Feedback Statement on the Proposed Settlement Procedure under the Malta Financial Services Authority Act

On 8 April 2022, the MFSA published a Feedback Document in relation to the Consultation Document issued earlier in 2022 on the Proposed ‘Settlement Procedure’ under the MFSA Act. The purpose of the Consultation Document was to highlight the changes proposed to include a specific provision within the Act empowering the MFSA to enter into settlement discussions and agreements.

In general, the responses obtained were all in favour of the MFSA having the legal authority to enter into settlement negotiations and agreements, and also in favour of settling investigations through a settlement agreement because it benefits the investigated party. Following the analysis of the feedback received as detailed above, the Authority will go ahead with proposing the legislative provision for approval by Parliament with the intention to implement Parliament’s decision within the next few months.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/Feedback-Statement-on-the-Proposed-Procedure-under-the-MFSA-Act.pdf

 

Circular on the Short-Selling Regulation – ESMA Publishes its final report on the review of the Short Selling Regulation

On 6 April 2022, the Authority issued a circular notifying all market participants that following the Consultation Paper published in September 2021, which undertook a further review of the SSR provisions following the COVID-19 crisis, ESMA has, on 04 April 2022, published its Final Report on the review of the SSR. The Final report focuses on 3 main areas:

  • An empirical analysis of the impacts of the emergency measures adopted during the COVID-19 crisis;
  • A review of the current framework for the calculation of Net Short Positions (“NSPs”), the list of exempted shares and the so called locate rule to be met when short selling; and
  • An assessment of the framework for transparency and publication of NSPs, also considering the recent market events.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/Circular-on-Regulation-EU-No-2362012-on-Short-Selling-ESMA-Publishes-its-final-report-on-the-review-of-the-Short-Selling-Regulation.pdf

 

ESMA Guidelines on Certain Aspects of the MiFID II Remuneration Requirements

On 13 April 2022, the MFSA issued a circular notifying investment firms that ESMA has published the final report on its Guidelines on certain aspects of the MiFID II Remuneration requirements relating to staff involved in the provision of investment or ancillary services and activities or selling or advising on structured deposits to clients, which is a crucial element of investor protection.

These Guidelines enhance clarity and foster convergence in the implementation of certain aspects of the MiFID II remuneration requirements and will replace the existing ESMA guidelines on the same subject matter. The Guidelines will apply six months after being translated in the official languages of the EU and published on ESMA’s website.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/ESMA-Guidelines-on-Certain-Aspects-of-the-MiFID-II-Remuneration-Requirements.pdf

 

Important Updates relating to the Trusts Ultimate Beneficial Ownership Register

On 19 April 2022, the MFSA issued a circular informing the industry that as part of the ongoing work being undertaken to implement the Beneficial Ownership Registers Interconnection System (‘BORIS’), enhancements were made to the field relating to the ‘Nationality’ of beneficial owners in terms of reporting within the Trusts Ultimate Beneficial Ownership Register (‘TUBOR’). The nationality field has been changed from a free text one to a drop-down list of countries. Furthermore, the MFSA has also updated its FAQs relating to the register of Beneficial Owners of Trusts.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/Important-Updates-Relating-to-the-Trusts-Ultimate-Beneficial-Ownership-Register.pdf

 

Sustainability-Related Disclosure in the Financial Services Sector

On 22 April 2022, the MFSA issued a circular drawing attention to the adoption by the European Commission of a Delegated Regulation with regulatory technical standards (RTSs) to be used by financial market participants under the SFDR. The Delegated Regulation specifies the exact content, methodology and presentation of the information to be disclosed, thereby improving its quality and comparability. These rules are scheduled to become applicable as from 1 January 2023.

The Authority encourages financial market participants and financial advisors to make use of the current interim period to prepare for the application of the Commission Delegated Regulation containing the RTSs.

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

https://www.mfsa.mt/wp-content/uploads/2022/04/Sustainability-Related-Disclosure-in-the-Financial-Services-Sector.pdf