6 tal-2003 - Regolamenti tal-2003 għal Skema ta' Kumpens lill-Investituri Arranġament tar-regolamenti

The title of these regulations is the Investor Compensation Citation and date of

Scheme Regulations, 2003, and shall come into force on such date as commencement.

the Minister may by Order in the Gazette establish, and different dates

may be appointed for different provisions or different purposes of these

regulations.

In these regulations, unless the context otherwise requires -

Interpretation.

“Act” means the Investment Services Act, 1994;

“Branch” means a place of business which forms a legally

dependent part of a licence holder and from which some or all of

the activities for which the licence holder has been authorised is

conducted; all the places of business set up in any one country by

a licence holder whose head office is in Malta or in another country

shall be regarded as a single branch;

“competent authority” means the competent authority under

the Act;

“Financial Services Tribunal” means the Tribunal established

in terms of the Malta Financial Services Authority Act;

“the Fund” means the Compensation Fund established under

regulation 10 of these regulations;

“instruments” shall have the same meaning as that assigned

to the words in article 2 of the Act;

“investor” means a person who has entrusted money or

instruments to a licence holder in connection with licensed business;

“joint account” means an account opened in the names of

two or more persons or over which two or more persons have rights

that may be exercised under the signature of one or more of those

persons;

“licensed business” means the carrying out of any activity in

regard to which there is a licence or an equivalent authorisation

under the Act;

“licence holder” means any person who holds a licence to

carry out investment services business in terms of the Act;

“Management Committee” means the Compensation Schemes

Management Committee established under regulation 3 of these

regulations;

“Relevant Income” is all gross income received or receivable

which is commission, brokerage fees or other earnings arising from

the licence holder’s business activities, whether those activities

are licensed under the Act or not, for the last accounting year or on

the basis of the business plan agreed with the competent authority

in respect of the relevant year or period

Provided that any income received or receivable in the form

of bank or bond interest and dividends shall not be taken into

account for the purpose of computing “Relevant Income”;

“Scheme” means the Investor Compensation Scheme

established under regulation 3 of these regulations;

“Total Revenue” means all gross income received or

receivable from the licence holder’s business activities.

(1) There shall be established an Investor Compensation

Scheme.

(2) The Scheme shall be a body corporate having a distinct

legal personality and shall be capable, subject to the provisions of the

Act and of these regulations, of entering into contracts of borrowing or

otherwise incurring indebtedness for the purposes of its functions, of

acquiring, holding and disposing of any kind of property for the purposes

of its functions, of suing or being sued and of doing all such things and

entering into all such transactions as are incidental or conducive to the

exercise or performance of its functions.

(3) The Scheme shall be managed and administered by and

be under the general control of the Management Committee appointed

in terms of regulation 5 of these regulations.

(4) The legal and judicial representation of the Scheme shall

vest in the chairperson of the Management Committee

Provided that and without prejudice to the foregoing, that the

Management Committee may vest any one or more of its members or

of the officers or agents of the Scheme with legal or judicial

representation.

(1) Without prejudice to any other power or function Functions of the

conferred on it by these regulations or by any other law, it shall be the Scheme.

function of the Scheme -

(a) to establish and maintain, after consultations with the

competent authority, arrangements for the making of payments to

investors in accordance with these regulations;

(b) to maintain a fund or funds out of which payments shall

be made to investors and to meet such other payments or expenses

as may be paid out of the fund or funds in accordance with these

regulations;

(c) to place contributions made by participants and any other

funds managed and administered by the Scheme on deposit or to

invest such contributions and funds;

(d) to advise the competent authority on matters relating to

compensation of investors; and

(e) to process claims for compensation by investors as

expeditiously as possible and to ensure that compensation is paid

out without undue delay.

(1) The Management Committee shall be appointed by the Composition of the

competent authority and shall consist of a chairperson and not more Management

Committee.

than six other members including

(a) an officer, not below managerial grade, performing duties

with the competent authority possessing the necessary expertise

and experience in financial services;

(b) one person nominated by an association or other body

representing persons holding a licence under the Act and recognised

for such purpose by the competent authority;

(c) one person nominated by an association or other body

representing credit institutions and recognised for such purpose

by the competent authority;

(d) an officer, not below managerial grade, performing

duties with the Central Bank; and

(e) a person, who because of his experience, qualifications

or activities is considered as being able to state and represent the

point of view of consumers

Provided that whenever, for any reason whatsoever, the

associations or other bodies representing licence holders and credit

institutions referred to in (b) and (c) of sub-regulation (1) of this

regulation fail to nominate, within the time given to it by the

competent authority, the person it is required to nominate, the

competent authority shall appoint the persons, or the remaining

person, at its discretion.

(2) The members of the Management Committee shall be

appointed from among persons who, in the view of the competent

authority, have proven experience and are qualified in financial services,

management, or possess any other relevant professional or commercial

knowledge and experience.

(3) The member of the Management Committee nominated

by an association or other body representing licence holders and the

member nominated by an association or other body representing credit

institutions shall not be eligible for appointment if he has a financial or

other interest as is likely to affect prejudicially the discharge by him of

his functions under these regulations.

(4) Every member of the Management Committee,

including the chairperson, shall hold office, for such period and upon

such terms and conditions as may be determined by the competent

authority and indicated in the letter of appointment. Such term of

office shall be of not less than three years and not more than five years.

Every member of the Management Committee, including the

chairperson, shall be eligible for re-appointment.

(5) A member of the Management Committee may be

relieved of office by the competent authority on the grounds of inability

to perform the functions of his office, whether due to infirmity of mind

or of body, or of misbehaviour; and for the purposes of this paragraph

repeated and unjustified non-attendance of meetings of the Management

Committee may be deemed to amount to misbehaviour.

(6) A member of the Management Committee may resign

from office by letter addressed to the competent authority.

(7) The competent authority may fill any vacancy occurring

in the Management Committee for any reason whatsoever, but having

regard to the provisions of sub-regulation (1) of this regulation.

(8) Notice of the names of the members of the Management

Committee (and any resignation, dismissal and new appointment) shall

be published in the Gazette.

(9) The competent authority shall establish any

remuneration to be paid to the members of the Management Committee.

(10) The Consumer Complaints Manager appointed in terms

of Article 20 of the Malta Financial Services Authority Act shall serve Cap. 330.

as secretary to the Management Committee and shall be responsible to

make the necessary preparations for the meetings of the Committee

and to keep the minutes thereof.

(1) The Management Committee shall have the power to Powers and duties

of the Management

appoint officers and agents of the Scheme and to grant them such powers Committee.

or authority as it may deem appropriate. In consultation with the

competent authority, the Management Committee may, for the better

fulfilment of its purpose, delegate specific parts of its business to be

conducted on its behalf by such body or person and under such

arrangement or arrangements as it may deem appropriate.

(2) The Management Committee may place contributions

made by licence holders in terms of regulation 11 of these regulations

and any other funds managed and administered by it on deposit or may

invest such contributions, having regard to the need for prudence.

(3) The Management Committee may take out insurance

policies, borrow or otherwise incur indebtedness on behalf of the Scheme

for the purposes of the Scheme’s functions, in any way and under any

terms it may consider appropriate, provided such borrowings do not

exceed 30 per cent of the net asset value of the Scheme.

(4) The Management Committee shall cause proper books

of account to be kept so that the financial position of the Scheme can be

ascertained with reasonable accuracy at any time.

Without prejudice to sub-regulation (1) of regulation 6 the Investment

Management Committee shall enter into such investment management management

administrative

and administrative support agreements as may be approved by the support agreements.

competent authority by not later than three months from the coming

into force of these regulations.

(1) The Management Committee shall prepare annual

forecast statements of the expected costs and revenues of the Scheme,

and shall make available such forecast statements to all participants.

(2) The Management Committee shall submit to the

competent authority an annual report on the discharge of its functions

and on the operation of the Scheme within two months from the financial

year end of the Scheme. Such annual report shall give details of the

exercise by the Management Committee of its powers of management

and shall include, inter alia -

(a) a statement showing the payments in and payments out

of the Scheme during its immediate previous financial year; and

(b) annual audited financial statements prepared in

accordance with International Accounting Standards, and the

provisions of the Companies Act, 1995, where relevant.

(3) The Management Company shall publish, in at least two

daily newspapers, one of which shall be in the Maltese language, its

annual report and audited financial statements within four months from

the financial year end of the Scheme.

(4) The Management Committee shall prepare a half yearly

report to the competent authority giving details of the exercise of its

powers of management, together with a report on the financial situation

of the Scheme but which need not be accompanied by an auditors’ report.

(5) The books of account shall be kept at the offices of the

Scheme or at such other place or places as the Management Committee

thinks fit, and shall be made available to participants and to the public

on request.

(1) The meetings of the Management Committee shall be

held as often as may be required but not less frequently than once every

three calendar months.

(2) Meetings of the Management Committee shall be

convened by the chairperson either on his own initiative or at the written

request of any two members of the Management Committee.

(3) The Management Committee shall only conduct

business if at least four members (which shall include the chairperson

or, in his absence, the member nominated by the competent authority)

are present.

(4) For the purpose of decisions of the Management

Committee, each member shall have one vote. Voting shall be by simple

majority of the members present, save that in the case of sub-regulation

(3) of regulation 6 and sub-regulation (1) of regulation 8, where a

majority vote shall be equivalent to at least two-thirds of the votes of

those present. In the event of an equality of votes, the chairperson shall

have a second or casting vote.

(5) Subject to the foregoing provisions of this regulation,

the Management Committee shall have power to regulate its own

proceedings and may also establish such procedures or make such rules

as it may deem appropriate for the better fulfilment of its purposes.

(6) The Management Committee may invite any person who

in its opinion possesses specialised knowledge or expertise on a

particular subject, to attend any meeting and take part in the discussions.

(1) In terms of regulation 4 of these regulations, the Scheme The Fund.

shall establish and maintain a fund or a number of funds out of which

payments shall be made in accordance with these regulations to investors.

(2) The sources of funding shall include

(a) contributions levied from participants of the Scheme by

the Management Committee;

(b) money paid as administrative fees by all participants,

as may be prescribed;

(c) money received as income from the investment of the

assets of the fund;

(d) money borrowed by the Management Committee for

the purposes of the Scheme;

(e) money received by the Management Committee on any

insurance policy it takes out; and

(f) any other money required to be paid in to the fund or

funds, received or recovered by the Management Committee for

the purposes of the Scheme.

(3) There shall be paid out of the funds

(a) money determined by the Management Committee as

compensation for investors;

(b) money required for the repayment of (or interest on or

charges in connection with) any money borrowed or for the

payment of premia on any insurance policies taken out, for the

purposes of the Scheme;

(c) the costs incurred in administering and managing the

Scheme; and

(d) any other money paid out by the Management

Committee for the purposes of the Scheme.

(4) The Management Committee shall hold, manage and

apply the fund or funds in accordance with these regulations.

(1) Every licence holder in possession of a Category 2 or

Category 3 licence in terms of the Investment Services Act (Licence

and Other Fees) Regulations, 1995 shall participate in and contribute to

the Scheme, including branches of licence holders operating in other

countries

Provided that licence holders providing investment services

solely and exclusively to clients falling within the First Schedule to

these regulations shall not be required to participate in and contribute

to the Scheme.

(2) In the case of a participant whose head office is situated

in a country outside Malta, as well as branches of a licence holder having

their head office in Malta but operating outside Malta, and where there

is supplementary cover by a corresponding scheme in that other country,

the Management Committee shall enter into a bilateral agreement with

the authority responsible for the management and administration of the

scheme in that other country stipulating, inter alia, the rules and

procedures to be followed for the payment of compensation to claimants.

(3) Participation in the Scheme does not exclude the

possibility that particular licence holders may have to participate also

in another compensation or similar schemes set up under a different

law and governed by another competent authority or other body.

(4) When a licence holder becomes a member of the Scheme

after the coming into force of these regulations, the Management

Committee shall determine all the relative obligations and conditions

of the new participant.

(1) Participants shall pay such contributions to the

Contributions to the

Scheme on such terms and conditions as to the allocation of such

contributions, as are prescribed in the Second Schedule to these

regulations as the same may be amended or varied from time to time by

the competent authority, in consultation with the Management

Committee.

(2) The Management Committee may specify different rates

or amounts of contributions or different bases for the calculation of

contributions for different classes or categories of licence holders.

(3) Without prejudice to the generality of sub-regulation (2)

of this regulation, the Management Committee, when specifying

different rates or amounts of contributions or bases for the calculation

of contributions for different classes or categories of licence holders or

for different licence holders within the same class or category, may

take into account any money or investment instruments entrusted to

such a licence holder and any financial or accounting records as may be

specified from time to time, before or after the coming into force of

these regulations.

(1) The competent authority shall make a determination Determination.

where

(a) it appears to the competent authority that a participant is

unable, for the time being, for reasons which are directly related to

its financial circumstances to meet its obligations arising from

claims by its investors and to have no early or foreseeable prospect

of being able to do so, or has otherwise suspended payment; or

(b) in respect of a participant which has its head office in

Malta and, in respect of which an order has been made by the

Courts in Malta for its winding-up or liquidation under the laws of

Malta;

whichever is the earlier.

(2) The competent authority may, by way of guidelines,

establish those circumstances or criteria which it may consider in arriving

at a decision as to whether it will make a determination in terms of sub-

regulation (1) of this regulation.

(3) On the day the determination is made, the competent

authority shall inform the Management Committee in writing of its

determination. The Management Committee may take additional

measures it deems necessary or appropriate within its powers under

these regulations.

(4) The competent authority shall immediately inform any

other compensation scheme relating to financial services activities, as

may be established under any other law and regulated by other competent

authority or other body, which it believes may be effected by such

determination.

(5) In making a determination in accordance with sub-

regulation (1) of this regulation, the competent authority shall have

regard to any report of an officer or officers authorised by it on the state

of affairs of the licence holder, and any other information in its

possession.

(1) On being informed by the competent authority that a

determination has been made under regulation (1) of regulation 13 the

Management Committee shall publish a notice in at least two local

newspapers, informing investors of the licence holder concerned of such

determination and of the manner in which claims supported by

documentary evidence are to be submitted.

(2) The right of an investor for compensation shall not be

forfeited if the investor has been unable to assert his right to

compensation within any prescribed time-limits as may be announced.

(3) The Management Committee may, following an

application for compensation being made to it by an investor, accept or

refuse to provide compensation in accordance with these regulations.

(4) The Management Committee shall proceed to pay

compensation for verified claims within three months of the date of the

determination given in terms of sub-regulation (1) of regulation 13

Provided that the Management Committee may, in exceptional

circumstances, apply to the competent authority for an extension of

this period by a further period of up to three months, and up to two

further periods of up to three months each thereafter.

(1) The Management Committee shall make its own

administrative arrangements for verifying claims. These arrangements

shall include

(a) providing a clearly understandable application form for

claimants (in English and Maltese in Malta, and in the official

language or languages of a third country where a branch of a licence

holder is established);

(b) providing for the exercise of the Management

Committee’s right of subrogation under regulation 22 of these

regulations; and

(c)

requiring claimants to give

(i)

their identity and address;

(ii) the capacity in which they claim;

(iii) evidence of the eligible investments; and

(iv) any other matter reasonably required by the

Management Committee.

(2) The Management Committee may refuse to make a

payment for compensation in respect of an investment until the person

claiming to be entitled to the investment informs the Management

Committee as to the capacity in which he is the beneficial owner of the

investment and provides satisfactory documentary evidence and

information to allow the Management Committee to determine the

amount of compensation payable.

(3) The Management Committee may decide to delay

payment to a claimant until determination of any criminal charge brought

against the claimant, investor, or any person entitled to or interested in

respect of an investment under the provisions of the Prevention of Money

Laundering Act or a corresponding law of a country outside Malta.

Whenever it appears to the Management Committee that When funds appear

to be inadequate.

the funds for the time being held by the Scheme are inadequate for the

Management Committee to exercise its functions, the Management

Committee may require a contribution to be made to the Scheme by

licence holders out of, but not exceeding, funds reserved for this purpose

by the licence holder in accordance with the Second Schedule to these

regulations. Such further contributions shall be provided to the Scheme

within 30 calendar days of their being requested.

The total amount of compensation that may be paid out to Limit of

any investor shall be the lesser of ninety per cent (90%) in respect of all Compensation.

claims which have been made by each investor, or up to the Maltese liri

equivalent of 20,000 Euros converted on the basis of the official closing

middle rate issued by the Central Bank of Malta prevailing on the date

of settlement of the claim

Provided that the total compensation paid by the Scheme in any

one year shall not exceed 75 per cent of the net asset value of the Scheme

as shown in the latest audited financial statements.

(1) Investors may make a claim against the Scheme in terms

of these regulations. Investors listed in the First Schedule to these

regulations are excluded from submitting claims to the Scheme.

(2) In the event of doubt as to whether an investor is

excluded from submitting a claim to the Scheme the matter shall be

conclusively determined by the Management Committee for all purposes

of these regulations.

(3) Claimants will not be able to claim against more than

one scheme in respect of a single claim. Where a claim has been made

under two or more compensation schemes, the Management Committee

shall conclusively determine under which scheme the claimant is eligible

for compensation.

(4) Claims shall be made in such form, and shall be

accompanied by such documentation or information, as the Management

Committee may determine and make public from time to time.

(1) Cover shall be provided for claims arising out of a

licence holder’s inability to

(a) repay money owed to or belonging to investors and held

on their behalf in connection with licensed business; or

(b) return to investors any instruments belonging to them

and held, administered or managed on their behalf in connection

with licensed business or, where this is not possible, their monetary

equivalent or value.

(2) The amount of an investor’s claim shall be calculated

by the Management Committee after taking into account any or all of

the following factors

(a)

legal and contractual conditions;

(b) counterclaims;

(c)

market value; and

(d) surrender value.

(3) Claims arising out of transactions in connection with

which a criminal conviction has been obtained for money laundering in

terms of the Prevention of Money Laundering Act, 1994 shall be

excluded from any compensation.

(1) Where the Management Committee is of the opinion Eligibility

compensation.

that an investor is not eligible for compensation in whole or in part

because such investor falls within the list of exclusions in the First

Schedule to these regulations, the Management Committee shall give

notice in writing to such investor of that opinion and the reasons therefor

and the steps that may be taken by the investor under sub-regulation

(2) of this regulation.

(2) An investor to whom a notice under sub-regulation (1)

of this regulation has been given in accordance with this regulation

may, within 21 calendar days of being so given, apply to the Financial

Services Tribunal to have the relevant exclusion or deduction to which

the notice relates revoked or amended.

(1) In considering compensation to any investor for any Compensation paid

to be deducted from

payment under these regulations, the Management Committee shall compensation

take into account any payments made under a policy of professional payable.

indemnity insurance held by the licence holder in terms of regulation

26 of these regulations; or any payments made under any other law in

respect of the same losses.

(2) The Management Committee shall deduct such amount

of compensation paid from the amount of compensation that may be

payable to the investor in respect of any or all of the circumstances

arising from this regulation.

(1) Where the scheme has made a payment to an eligible Subrogation.

investor, the Scheme shall be subrogated to the rights and remedies of

that eligible investor against the licence holder.

(2) Prior to or simultaneously with payment, investors shall

confirm in writing to the Management Committee that

(a) they have not received any payment from any other

scheme or from the licence holder concerned in respect of the

same loss;

(b) they will provide any assistance the Management

Committee may ask to enable the Management Committee to

exercise its rights and remedies against the licence holder; and

(c) their rights in respect of any money or instruments

comprising the claim are subrogated in favour of the Management

Committee.

Establishment of the

(1) Where two or more persons are jointly entitled to an

investment account, each of these persons shall be treated as having a

separate account of an amount produced by dividing the amount of the

investment to which such persons are jointly entitled by the number of

persons so entitled, unless there exists specific evidence or special

contractual provisions determining the particular entitlements of such

persons in which case such evidence shall be taken into account in

determining their entitlements.

(2) Where a person is acting as trustee or nominee for one

or more persons under a deed of trust or other similar agreement, the

amount comprising the claim shall be deemed to belong to the beneficial

owners equally, unless there exists specific evidence or special

contractual provisions determining the beneficial interests of such

persons in which case such evidence shall be taken into account in

determining their entitlements, and provided in any event that ownership

is proved to the entire satisfaction of the Management Committee.

The Management Committee shall ensure that the general

public is fully informed about the operation of the Scheme arrangements

and that such information is imparted to the public as widely and

effectively as possible, and as determined by the Management

Committee.

(1) Licence holders shall make available to actual and

intending investors adequate and clear information concerning the

applicability of the Scheme together with such other particulars as may

from time to time be specified by the competent authority in a manner

and form specified by the competent authority

Provided that a licence holder shall not advertise or cause to

be advertised the fact that money or instruments placed with a licence

holder are protected by or through the Scheme except with the prior

written consent of the competent authority.

(2) The competent authority may, from time to time, specify

the information that licence holders are to provide to investors regarding

the Scheme and its operations, as well as the manner and form in which

such information should be provided.

(1) The Management Committee shall have the right to

request participants, either directly or through the competent authority,

Committee to obtain

to submit such data and information in the form it requests relevant for

the proper administration of the Scheme, within such time as the

Management Committee may require. The duty of co-operation extends

to any successor of the participant, including any person or persons

who have continuing responsibility for the affairs of the participant.

(2) Without prejudice to any other regulation contained in these

regulations, licence holders who fail to comply with the Management

Committee’s request for information or data within 15 calendar days

shall be liable to an administrative penalty not exceeding Lm1,000 as

may be imposed by the competent authority.

(1) Members of the Management Committee and persons Respect

confidentiality.

appointed under sub-regulation (1) of regulation 6 shall be subject to

the provisions of the Professional Secrecy Act and shall keep confidential Cap. 377.

any information obtained by them in the course of performing their

duties under these regulations, and shall not reveal any information to

any person, credit institution, association or entity except as may be

allowed by these regulations or any other law or by Court order.

(2) The duty of confidentiality shall not be contravened in

the case of

(a) exchange of information between the Management

Committee and competent authorities in other countries, or the

competent authorities for the management and administration of

corresponding schemes in other countries, provided that the

relevant information is necessary for the discharge of their duties

under these regulations; and

(b) any use or disclosure as is otherwise reasonably needed

to enable the Management Committee and its officers or agents to

perform their duties under and carry out the functions contemplated

by these regulations.

(1) The Management Committee shall notify the competent Failure to comply

with obligations.

authority where a licence holder fails to comply with the obligations

imposed on it by and under these regulations and in co-operation with

the competent authority shall take all measures appropriate, including

the imposition of penalties to ensure that the licence holder meets its

obligations.

(2) If these measures fail to secure compliance on the part

of the licence holder, the scheme shall with the express consent of the

competent authority, give not less than twelve months’ notice of the

competent authority’s intention to restrict or withdraw the licence

holder’s licence under the Act. The Scheme shall continue to provide

cover during such period.

(3) After the restriction or withdrawal of a licence, cover

shall continue to be provided in respect of licensed business up to the

date of restriction or withdrawal of the licence.

In accordance with the Third Schedule, the competent

authority may require licence holders to effect a policy of professional

indemnity insurance in a form specified by the competent authority

(and different forms may be specified for different classes of licence

holders), indemnifying the licence holder up to such sum, in such

manner, in respect of such matters and valid for such minimum period

as the competent authority may specify from time to time.

The Scheme shall establish and maintain adequate internal

procedures to investigate complaints against it by licence holders and

by investors.

(1) The competent authority may issue directives and

guidelines to licence holders for the purposes of these regulations.

(2) Such directives and guidelines may contain such

incidental, supplementary and consequential provisions as appear to

the competent authority to be expedient for any purpose of these

regulations.

The Management Committee and officers and agents of the

Scheme shall not be liable in damages for anything done or omitted in

the discharge of functions under these regulations unless it is shown

that the act or omission was in bad faith.

The financial year end of the Scheme shall be an accounting

period of twelve months ending on the thirty-first day of December of

each year.

The accounts of the Scheme shall be audited by auditors

appointed by the Management Committee from among persons who

are qualified to be appointed as auditors of a company under the law for

the time being in force in Malta, as if the Scheme were such a company.

The competent authority and the Management Committee

shall consult the relevant competent authorities and the persons

responsible for compensation schemes in other countries outside Malta

and seek to reach agreement with those authorities and persons about:-

(a)

the procedures to be followed if a participant defaults;

(b) the amounts of compensation payable, after deductions

if any, under each scheme; and

(c) any other aspect which is deemed appropriate for the

proper management and administration of the schemes.

B

All contributions made to the Scheme and any income of Exemption from

tax.

any funds belonging to the Scheme shall be exempt from any liability

for the payment of income tax, duty or any other charge due under any

fiscal law for the time being in force.

First Schedule

List of Exclusions

(Regulation 11, 18, 20(1))

The following shall be excluded from claiming against the Scheme

(a) Professional and institutional investors, including

(i) Persons holding an investment services licence under article 6

of the Investment Services Act;

(ii) Credit Institutions carrying on the business of banking under the

Banking Act;

(iii) Financial Institutions as defined in article 2 of the Financial

Institutions Act;

(iv) Insurance undertakings licensed to carry on the business of

insurance under the Insurance Business Act;

(v) Collective investment schemes as defined in article 2 of the

Investment Services Act;

(vi)

Pension and retirement funds as defined in the Special Funds

Act; and

(vii) Other categories of local and/or foreign professional and

institutional investors, whether resident or non-resident in Malta, as may be

determined by the competent authority from time to time.

(b) National and international institutions, governments and administrative

authorities;

(c)

Local and municipal councils or authorities;

(d) Directors and managers of the relevant licence holder and members of

the licence holder with personal liability, persons holding 5% or more of the capital

of such licence holder, the auditors of the licence holder and persons of the same

description with respect to a company forming part of the same group of companies

as the licence holder;

(e) Close relatives, that is, ascendants or descendants or spouse and third

parties acting on behalf of the investors referred to in (d) above;

(f) Other companies in the same group of companies as the licence holder;

(g) Debt securities issued by the same licence holder and liabilities arising

out of own acceptances and promissory notes;

B

(h) Investors who, in the view of the Management Committee, have any

responsibility for or have taken advantage of certain facts relating to a licence

holder which gave rise to the licence holder’s financial difficulties or contributed

to the deterioration of its financial situation; and

(i) Companies of such a size that they do not qualify as small companies in

terms of sub-article (1) of article 185 of the Companies Act.

Second Schedule

Contributions

in terms of regulation 12

The Total Contribution of a licence holder to the Scheme in any one year shall be

divided into two: Fixed and Variable.

The Total Contribution is, essentially, a notional amount because a part of such

contribution (the Variable Contribution) will be held by the licence holder until a call

is made by the Management Committee in terms of regulation 16 of these regulations.

The other part (the Fixed Contribution) is, however, paid to the Scheme annually.

The use of a bankers’ guarantee for the purposes of the Scheme shall not be

acceptable.

Fixed Contribution

The Fixed Contribution is calculated by applying a rate of 2.5 per centum to the

minimum Net Tangible Asset requirement which licence holders are required to

maintain.

In case where a licence holder has a derogation from maintaining minimum Net

Tangible Assets under its investment services licence because it is required to maintain

financial resources requirements under another licence, the Fixed Contribution is

calculated on the minimum Net Tangible Asset as if the licence holder is deemed to

maintain such requirements under its relevant investment services licence category.

Payment of the Fixed Contribution to the Scheme shall be within four months

from the licence holder’s financial year end.

Variable Contribution

The Variable Contribution is calculated by applying a percentage rate to the Total

Revenue of the licence holder on an annual basis. The percentage rate for the Variable

Contribution is set at 0.1 per centum.

The Variable Contribution shall be accounted for in the financial year when the

Fixed Contribution is paid.

Investor Compensation Scheme Reserve

The Variable Contribution shall be held by the licence holder in a reserve so that

the funds will be made available within 30 calendar days from the time when the

Scheme makes a call on such funds in terms of regulation 16.

B

Funds in this reserve, which shall be called the “Investor Compensation Scheme

Reserve” in all accounts and documents, may be invested by the licence holder having

regard to the need for prudence and within specified parameters, as specified hereunder.

If the Investor Compensation Scheme Reserve is more than the Variable

Contribution then no transfer to the Investor Compensation Scheme Reserve will be

made. This implies that when a Variable Contribution is higher than the Investor

Compensation Scheme Reserve, the licence holder shall be required to make a Variable

Contribution for the difference to ensure that the higher amount is always on reserve.

The Investor Compensation Scheme Reserve shall never be less than Lm300.

Investments of funds on reserve by the licence holder

Funds comprising the Investor Compensation Scheme Reserve can only be invested

in listed bonds (debt instruments) and/or placed in an interest bearing bank account

subject to the following

• Minimum 25 per cent of the total amount has to be maintained in an Lm-

denominated interest bearing bank account (maximum 60 day call).

• Maximum 75 per cent invested in listed debt instruments of which

– minimum 50 per cent (in this case 37.5% of the total Reserve) has to

be invested in Malta Government Stocks;

– the balance (37.5 per cent of the total Reserve) may be invested in

debt instruments issued by local or international entities, with an investment

grade of not lower than A (Moody’s or Standard & Poor’s), where applicable.

The above parameters are only indicative and may be changed by a directive

by the competent authority, upon consultation with the Management Committee

and licence holders.

Financial reporting of the reserve

The licence holders shall be required to insert a suitable note in the annual financial

statements as to the market value of the instruments in which the reserve has invested,

together with a maturity schedule according to the type of instrument.

The amount on reserve will be deducted in full as a liquid capital adjustment

(thus reducing liquid capital) for the purposes of calculating the licence holder’s financial

resources in its financial return submitted in terms of its licence conditions.

Maximum limit of payment

Licence Holders will be required to contribute to their Investor Compensation

Scheme Reserve each year until such time that aggregate fixed contributions paid to

the Scheme and accumulated reserves held by licence holders by way of the Variable

Contribution amount to Lm1,000,000.

B

Third Schedule

Professional Indemnity Insurance

(Regulation 29)

Professional Indemnity cover is reduced to twice the relevant income for the next

3 years, after which another review of the operation of the Scheme is conducted.

However, the competent authority should reserve the right to require licence holders to

increase indemnity to three times the relevant income where considered appropriate.

Moreover, the minimum indemnity limits as set out in the Investment Services

Guidelines will be retained (Lm 50,000 per claim and Lm250,000 in aggregate).

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