Regulations, 2011

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 18,725, 29 ta’ Marzu, 2011

L.N. 118 of 2011

SET-OFF AND NETTING ON INSOLVENCY ACT

(CAP. 459)

Financial Collateral Arrangements (Amendment)

Regulations, 2011

IN exercise of the powers conferred by article 7 of the Set-Off

and Netting on Insolvency Act, the Minister of Finance, the Economy

and Investment has made the following regulations:-

(1) The title of these regulations is the Financial Citation,

Collateral Arrangements (Amendment) Regulations, 2011, and these commencement

and scope.

regulations shall be read and construed as one with the Financial S.L. 459.01

Collateral Arrangements Regulations, hereinafter referred to as "the

principal regulations".

(2) These regulations shall enter into force on the 30th June,

2011. (3) The objective of these regulations is, in part, to implement

the provisions of Directive 2009/44/EC of the European Parliament

and of the Council of 6 May 2009 amending Directive 98/26/EC on

settlement finality in payment and securities settlement systems and

Directive 2002/47/EC on financial collateral arrangements as regards

linked systems and credit claims, as currently in force and as may be

amended from time to time, including any implementing measures

that have been issued or may be issued thereunder and to provide for

other matters relating to financial collateral arrangements and they

shall be interpreted and applied accordingly.

Regulation 1 of the principal regulations shall be amended Amends

regulation 1 of

as follows

the principal

regulations.

(a) for subregulation (2) thereof, there shall be

substituted the following

"(2) The purpose of these regulations is, in part, to

implement the provisions of Directive 2002/47/EC on

financial collateral arrangements and Directive 2009/44/

EC of the European Parliament and of the Council of 6

May 2009 amending Directive 98/26/EC on settlement

finality in payment and securities settlement systems and

Directive 2002/47/EC, as currently in force and as may be

amended from time to time, including any implementing

measures that have been issued or may be issued

thereunder and to provide for other matters relating to

financial collateral arrangements and they shall be

interpreted and applied accordingly.";

(b) for subregulation (3) thereof, there shall be

substituted the following

"(3) In the event of a conflict between any of these

regulations and the provisions of any of the Directives

mentioned in subregulation (2), the provisions of the

Directives shall prevail.”; and

(c) immediately after subregulation (3) thereof, there

shall be added the following new subregulation

"(4) The provisions of these regulations

are without prejudice to Directive 2008/48/

EC of the European Parliament and the

Council of 23 April 2008 on credit

agreements for consumers and the Consumer

Credit Regulations.".

Regulation 2 of the principal regulations shall be amended

as follows

(a)

the present regulation

shall be renumbered as

subregulation (1) thereof;

(b) subregulation (1) thereof, as renumbered, shall be

amended as follows

(i) immediately after the definition "close-out

netting provision" there shall be inserted the following

new definitions

" "credit claims" means pecuniary claims

arising out of an agreement whereby a bank or

credit institution within the meaning of regulation

4(1)(1) grants credit in the form of a loan;

"EEA State" means any State which is a

contracting party to the agreement on the

European Economic Area signed at Oporto on the

2nd May, 1992, as adjusted by the Protocol signed

in Brussels on 17th March, 1993 and as amended

by any subsequent act;";

(ii)

the

definition

"financial

collateral

arrangement" shall be amended as follows

A. in paragraph (a) thereof, for the words

"full ownership of" there shall be substituted the

words "full ownership of, or full entitlement to,";

and

B. for paragraph (b) thereof, there shall

be substituted the following

"(b) in the case of a security

financial collateral arrangement, an

arrangement under which a collateral

provider provides financial collateral by

way of security for the purpose of

securing or otherwise covering the

performance of relevant financial

obligations to or in favour of a collateral

taker, and where the full or qualified

ownership of, or full entitlement to, the

financial collateral remains with the

collateral provider when the security right

is established:";

(iii) for the definition "instrument" there shall be

substituted the following

" "instrument” has the same

meaning as is assigned to it by article 2

of the Investment Services Act and

includes shares in companies and other

securities equivalent to shares in

companies, partnerships or other

entities and bonds and other forms of

debt instrument, and any other

securities which give the right to

acquire any such shares, bonds or other

securities by subscription, purchase or

exchange or which give rise to a cash

settlement (excluding instruments of

payment), whether or not issued in

Malta;";

(iv) the definitions "multilateral development

bank" and "provision" shall be deleted; and

(v) in the definition "relevant account", for the

words "the register or account in which the entries are

made", there shall be substituted the words "the register or

account, which may be maintained by the collateral taker,

in which the entries are made"; and

(c) immediately after subregulation (1) thereof, as

renumbered, there shall be inserted the following new

subregulations

"(2) References in these regulations to financial

collateral being "provided", or to the "provision" of

financial collateral, are

references to the financial

collateral being delivered, transferred, held, registered or

otherwise designated so as to be in the possession or under

the control of the collateral taker or of a person acting on

the collateral taker’s behalf

Provided that any right of substitution, right to

withdraw excess financial collateral, right to give

instructions in relation to an account until an event of

default occurs, any right to exercise rights or receive the

fruits attaching to or in respect of the financial collateral in

favour of the collateral provider or, in the case of credit

claims, any right to collect the proceeds thereof until

further notice, shall not prejudice the financial collateral

having been provided to the collateral taker as mentioned

in these regulations

Provided further that in the case of financial

collateral included under a collateral arrangement affecting

all the property, present and future, of the debtor, including

general hypothecs, the right of the collateral provider to

freely dispose of or otherwise have possession or control

of such financial collateral until the collateral taker

exercises its enforcement rights against such financial

collateral, shall not prejudice the financial collateral

having been provided to the collateral taker as mentioned

in these regulations.

(3) References in these regulations to "writing"

include recording by electronic means and any other

durable medium.".

Regulation 3 of the principal regulations shall be amended

as follows

(a)

the present regulation shall be renumbered as

subregulation (1) thereof;

(b) in paragraph (a) of subregulation (1) thereof, as

renumbered, for the words "or instruments" there shall be

substituted the words "or instruments or credit claims";

(c)

in the proviso to subregulation (1) thereof, as

renumbered, for the words "a designated account.", there shall

be substituted the words "a designated account;"; and

(d) immediately after the proviso to subregulation (1)

thereof, as renumbered, there shall be added the following new

proviso

"Provided further that for credit claims, the

inclusion of the claim in a list of claims submitted to the

collateral taker in writing, or in a legally equivalent

manner, is sufficient to identify that credit claim and to

evidence the provision of the claim provided as financial

collateral between the parties."; and

(e)

immediately after subregulation (1) thereof, as

renumbered, there shall be added the following new

subregulation

"(2) In addition and without prejudice to the

foregoing, the inclusion of the claim in a list of claims

submitted to the collateral taker in writing, is sufficient to

identify that credit claim and to evidence the provision of

the claim provided as financial collateral against the debtor

or third parties.".

Immediately after regulation 3A of the principal Adds new

regulation 3B to

regulations there shall be added the following new regulation

the principal

regulations.

" Inapplicability

3B. The obligations arising out of

article 122(10) of the Companies Act do not

of article

122(10) of the

apply to pledges of shares provided in

Companies Act.

accordance with these regulations.".

Regulation 4 of the principal regulations shall be amended Amends

regulation 4 of

as follows

the principal

regulations.

(a)

for paragraphs (b) to (g) of subregulation (1)

B

thereof, there shall be substituted the following

"(b) a central bank, the European

Central Bank, the Bank for International

Settlements, a multilateral development

bank as referred to in Annex VI, Part 1,

Section 4 of Directive 2006/48/EC of the

European Parliament and of the Council of

14 June 2006 on the taking up and pursuit of

the business of credit institutions (recast),

the International Monetary Fund and the

European Investment Bank;

(c) a bank or credit institution licensed

under the Banking Act, or otherwise

licensed or authorised by a foreign authority

in a recognised jurisdiction or a credit

institution within the meaning of article 4(1)

of Directive 2006/48/EC including the

institutions listed in article 2(1) of that

Directive;

(d) an investment services licence

holder under the Investment Services Act,

or otherwise licensed or authorised by a

foreign authority in a recognised

jurisdiction or an investment firm within the

meaning of Article 4(1) of Directive 2004/

39/EC of the European Parliament and of

the Council of 21 April 2004 on markets in

financial instruments;

(e) a financial institution licensed in

terms of the Financial Institutions Act or a

financial institution within the meaning of

Article 4 of Directive 2006/48/EC;

(f) an insurance company with head

office in Malta authorised in terms of article

7 of the Insurance Business Act to carry on

business of insurance or an insurance

undertaking as defined in Article 1(a) of

Council Directive 92/49/EEC of the 18

June, 1992 on the coordination of laws,

regulations and administrative provisions

relating to direct insurance other than life

insurance, an assurance undertaking as

defined in Article 1(1)(a) of Council

Directive 2002/83/EC of 5th November,

2002 concerning life assurance;

(g) an undertaking for collective

investment in transferable securities

(UCITS) as defined in article 1(2) of

Council Directive 85/611/EEC of the 20th

December, 1985 on the coordination of

laws, regulations and administrative

provisions relating to undertakings for

collective investment in transferable

securities (UCITS) whether licensed in

terms of the Investment Services Act or

authorised in a Member State or EEA

State."; and

(b) in paragraph (i) thereof, for the words, "any other

collective investment scheme which is licensed or recognised",

there shall be substituted the words "any other collective

investment scheme and management company of such scheme

which are licensed or recognised", and for the words "by a

competent authority" there shall be substituted the words "by a

foreign authority".

Regulation 5 of the principal regulations shall be amended Amends

regulation 5 of

as follows

the principal

regulations.

(a)

subregulation (2) thereof shall be renumbered as

subregulation (5);

(b) immediately after subregulation (1) thereof, there

shall be inserted the following new subregulations

"(2) Without prejudice to the provisions

of regulation 3, when credit claims are

provided as financial collateral the creation,

validity, perfection, priority, enforceability

or admissibility in evidence of such

financial collateral between the parties is

not dependent on the performance of any

formal act such as the registration or the

notification of the debtor of the credit

claims provided as collateral.

B B 1766

(3) When credit claims are provided as

financial collateral, and without prejudice to

the foregoing subregulation, insofar as

validity and enforceability of the financial

collateral arrangement against debtors or

third parties is concerned, notice of the

financial collateral arrangement shall be

given to the debtor by the collateral taker or

the collateral provider. The notice shall not

be necessary if the debtor has acknowledged

the financial collateral arrangement.

(4) Notice for the purposes of this

regulation shall be made by

(a)

notification to the debtor

in writing; and

(b) on the publication of a

notice as follows

(i) in a daily newspaper

circulating wholly or mainly in

Malta, and

(ii) where it appears

that the majority of the debtors

reside outside Malta, in a daily

newspaper circulating wholly or

mainly in such other jurisdiction

outside Malta; and

(c)

where there is doubt as to

where the majority of the debtors

reside, in a daily newspaper which has

wide international circulation

Provided that such notification shall be

effective for all the purposes and effects of

the Civil Code with regard to third parties,

including the debtor, as follows

(i) when notification is

made in terms of article 187 of

the Code of Organization and

Civil Procedure, on the date of

service and the provisions of the

said Code of Organization and

Civil Procedure shall determine

such date of service;

(ii) when notification is

made by mail, two days after

dispatch by mail by the collateral

provider or collateral taker of the

notice in writing to the debtor’s

last known address;

(iii) when notification is

made by publication in a

newspaper, the time of the

opening of business in the place

of publication of the notice in the

newspaper, and

(iv) when notification is

made by any electronic means,

one day after dispatch of the

electronic notification,

as the case may be, unless the said

notice expressly mentions a later date

for the effects to commence."; and

(c)

immediately after subregulation (5) thereof, as

renumbered, there shall be inserted the following new

subregulation (6)

"(6) Without

prejudice

to

the

provisions on unfair terms in consumer

contracts in the Consumer Affairs Act,

debtors of credit claims may validly waive,

in writing

(a)

their rights of set-off

against the creditors of the credit

claim and against persons to whom the

creditor

assigned,

pledged

or

otherwise mobilised the credit claim

as collateral; and

(b) their rights arising from

article 34 of the Banking Act and

article 3 of the Professional Secrecy

Act in relation to confidentiality and

professional secrecy that would

otherwise prevent or restrict the ability

of the creditor of the credit claim to

provide information on the credit

claim or the debtor for the purposes of

using the credit claim as collateral.".

(1) Regulation 6 of the principal regulations shall be

amended as follows

(a)

in subregulation (1) thereof -

(i) in paragraph (b) thereof, for the word

"obligations." there shall be substituted the words

"obligations; or"; and

(ii) immediately after paragraph (b) thereof, there

shall be added the following new paragraph

"(c) in relation to credit claims, by sale or

appropriation and by setting off their value against,

or applying their value in discharge of, the relevant

financial obligations."; and

(b) in subregulation (2) thereof, for the words "of the

instruments." there shall be substituted the words "of the

instruments and the credit claims.".

Immediately after subregulation (4) of regulation 7 of the

principal regulations, there shall be added the following new

subregulation

"(5) The provisions of this regulation do not apply to

credit claims.".

Subregulation (1) of regulation 9 of the principal

regulations shall be amended as follows

(a)

for the words "Notwithstanding the provisions of

article 122(7) of the Companies Act, on the occurrence of a

specified event," there shall be substituted the words "On the

occurrence of a specified event,"; and

(b) for the words "so as to ensure fair treatment to the

collateral provider." there shall be substituted the words "so as

to ensure fair treatment to the collateral provider and the

provisions of articles 122(6) to 122(9) of the Companies Act

shall not apply.".

B

B

€0.54