Investigatory Powers) Regulations, 2014

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,198, 24 ta’ Jannar, 2014

L.N. 32 of 2014

INVESTMENT SERVICES ACT

(CAP. 370)

CRD (Administrative Penalties, Measures and

Investigatory Powers) Regulations, 2014

IN exercise of the powers conferred by article 12 of the

Investment Services Act and article 20D of the Malta Financial

Services Authority Act, the Minister for Finance, acting on the advice

of the Malta Financial Services Authority, has made the following

regulations:-

(1)

The title of these regulations is the,. CRD Citation and

(Administrative Penalties, Measures and Investigatory Powers) purpose.

Regulations, 2014.

(2) The purpose of these regulations is to implement Articles

64(2), 65, 67, 68, 69, 70, 71 and 72 of the CRD.

(Regulation 5)

The provisions of regulation 5 shall apply at least in any of the following

circumstances

(a)

an investment firm fails to have in place governance

arrangements required by the competent authority in accordance with the

provisions of the Investment Services Act (Supervisory Review)

Regulations, 2013 which transpose the requirements of Article 74 of the

CRD;

(b)

an investment firm fails to report information or provide

incomplete or inaccurate information on compliance to meet own funds

requirements set out in Article 92 of the CRR to the competent authority, in

breach of Article 99(1) of the CRR;

(c)

an investment firm fails to report or provides incomplete or

inaccurate information to the competent authority in relation to the data

referred to in Article 101 of the CRR;

(d)

an investment firm fails to report information or provides

incomplete or inaccurate information about a large exposure to the competent

authority in breach of Article 394(1) of the CRR;

(e)

an investment firm fails to report or provides incomplete or

inaccurate information on liquidity to the competent authority in breach of

Article 415(1) and (2) of the CRR;

(f)

an investment firm fails to report information or provides

incomplete or inaccurate information on the leverage ratio to the competent

authority in breach of Article 430(1) of the CRR;

(g)

an investment firm repeatedly or persistently fails to hold liquid

assets in breach of Article 412 of the CRR;

(h)

an investment firm incurs exposure in excess of the limits set out

in Article 395 of the CRR;

(i)

an investment firm is exposed to the credit risk of a

securitisation position without satisfying the conditions set out in Article 405

of the CRR;

(j)

an investment firm fails to disclose information or provides

incomplete or inaccurate information in breach of Article 431(1), (2) and (3)

or Article 451(1) of the CRR;

(k)

an investment firm makes payments to holders of instruments

included in the own funds of the investment firm in breach of the Investment

Services Rules transposing Article 141 of the CRD or in cases where Articles

28, 51 or 63 of the CRR prohibit such payments to holders of instruments

included in own funds;

(l)

an investment firm is found liable for a serious breach of the

Prevention of Money Laundering Act and the regulations issued thereunder;

(m)

an investment firm allows one or more persons not complying

with Article 91 of the CRD to become or remain a member of the

management body.

€0.45

(1)

In these regulations, unless the context otherwise Interpretation.

requires -

"the Act" means the Investment Services Act;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act; Cap. 330.

"CRD" means Directive 2013/36/EU of the European

Parliament and of the Council of 26 June 2013 on access to the

activity of credit institutions and the prudential supervision of credit

institutions and investment firms amending Directive 2002/87/EC

and repealing Directives 2006/48/EC and 2006/49/EC, as amended

from time to time, and includes any implementing measures that have

been or may be issued thereunder;

"CRR" means Regulation (EU) No 575/2013 of the European

Parliament and of the Council of 26 June 2013 on prudential

requirements for credit institutions and investment firms and

amending Regulation (EU) No 648/2012, as amended from time to

time, and includes any implementing measures that have been or may

be issued thereunder;

"financial holding company" shall have the same meaning as

that assigned to it in point (20) of Article 4(1) of the CRR;

"investment firm" means a person who holds an investment

services licence issued by the competent authority under the Act and

which is subject to the requirements of the CRD and the CRR;

"mixed financial holding company" shall have the same

meaning as that assigned to it in point (32) of Article 4(1) of the CRR.

(2) Words and expressions which are also used in the Act shall

have the same meaning as in the Act.

The competent authority shall exercise its supervisory

powers and its powers to impose penalties, in such a way as to ensure

full and complete adherence to the requirements and obligations

arising out of the CRD and out of the CRR, either directly or in

collaboration with European regulatory authorities and with overseas

regulatory authorities, in terms of law and as warranted by the

relevant circumstances.

(1)

Without prejudice to the supervisory powers of the

competent authority referred in regulation 3, the competent authority

shall impose administrative penalties and other administrative

measures in respect of breaches of

(a)

the provisions of the Act and, or of regulations and,

or Investment Services Rules made thereunder transposing the

provisions of the CRD, and, or

(b)

the provisions of the CRR.

(2) The administrative penalties and other administrative

measures taken pursuant to sub-regulation (1) shall be effective,

proportionate and dissuasive.

(3) The competent authority may apply administrative

penalties or other administrative measures relating to breaches of the

provisions of the Act and any regulations and Investment Services

Rules issued thereunder transposing the requirements of the CRD,

and of the CRR applicable to financial holding companies and mixed

financial holding companies, to the members of the management

body of such companies and to other natural persons who under

Maltese law are responsible for the breach.

(4) The competent authority may impose administrative

penalties or other administrative measures, in terms of these

regulations, aiming to end identified breaches or causes of such

breaches, on financial holding companies, mixed financial holding

companies and mixed activity holding companies or their effective

managers which are responsible for the breach of the provisions of

the Act and any regulations and Investment Services Rules issued

thereunder transposing the requirements of Chapter 3 of Title VII of

The competent authority shall have all the information Investigatory

gathering powers and investigatory powers which are necessary for and

gathering

the exercise of its functions. Without prejudice to other relevant powers

competent

provisions laid down in the Act, the CRD and in the CRR these authority.

powers shall include

(a)

the power to require the following natural or legal

persons to provide all information that is necessary in order to

carry out the tasks of the competent authority, including

information to be provided at recurring intervals and in

specified formats for supervisory and related statistical

(i)

investment firms established in Malta;

(ii) financial holding companies established in

Malta;

(iii) mixed

financial

holding

companies

established in Malta;

(iv) mixed-activity holding companies established

in Malta;

(v) persons belonging to the entities referred to in

sub-paragraphs (i) to (iv);

(vi) third parties to whom the entities referred to

in sub-paragraphs (i) to (iv) have outsourced operational

functions or activities;

(b)

the power to conduct all necessary investigations of

any person referred in paragraph (a)(i) to (iv) established or

located in Malta where necessary to carry out the tasks of the

competent authority including

(i) the right to require the submission of

documents;

(ii) the right to examine the books and records of

the persons referred to in paragraph (a)(i) to (iv) and the

right to take copies or extracts from such books and

records;

(iii) the right to obtain written or oral explanations

from amy person referred to in paragraph (a)(i) to (iv) or

their representatives or staff; and

(iv) the right to interview any other person who

consents to be interviewed for the purpose of collecting

information relating to the subject matter of an

investigation.

Where an investment firm is found by the competent

authority to have committed any of the breaches referred to in the

Schedule, the administrative penalties and other administrative

measures which the competent authority may apply on such

investment shall include at least the following

(a)

a public statement which identifies the natural

person, investment firm, financial holding company or mixed

financial holding company and the nature of the breach;

(c)

the withdrawal of the investment firm’s investment

services licence, in accordance with article 7 of the Act;

(d)

subject to the provisions of regulation 4(3), a

temporary ban against a member of the investment firm’s

management body or any other natural person, who is held

responsible, from exercising functions within investment firms;

(e)

in the case of a legal person, administrative

pecuniary penalties of up to 10% of the total annual net turnover

including the gross income consisting of interest receivable and

similar income, income from shares and other variable or fixed-

yield securities, and commissions or fees receivable in

accordance with Article 316 of the CRR, of that legal person in

the preceding business year

Provided that where the investment firm subject to

the administrative pecuniary penalty is a subsidiary of a parent

undertaking, the relevant gross income shall be the gross

income resulting from the consolidated account of the ultimate

parent undertaking in the preceding business year;

(f)

in the case of a natural person, administrative

pecuniary penalties of up to EUR 5,000,000; and

(g)

administrative pecuniary penalties of up to twice

the amount of the profits gained or losses avoided because of

the breach, where those can be determined.

(1)

The competent authority shall publish on its Publication of

official website any administrative penalties and sanctions which are administrative

penalties.

imposed for breaches of the Act, regulations and Investment Services

Rules issued thereunder transposing the requirements of the CRD,

and of the CRR. Such publication shall include information on the

type and nature of the breach and the identity of the natural or legal

person on whom the penalty is imposed, without undue delay after

that person is informed of those penalties

Provided that in cases where an appeal has been filed by

the person on whom such administrative penalties have been

imposed, the competent authority shall, without undue delay, also

publish on its official website information on the status of the appeal

and the outcome thereof.

(2) The competent authority shall publish the penalties

imposed in terms of these regulations, on an anonymous basis, in any

of the following circumstances

(a)

where the penalty is imposed on a natural person

and, following an obligatory prior assessment, the publication

of personal data is found to be disproportionate;

(b)

where publication would jeopardise the stability of

financial markets or an ongoing criminal investigation; or

(c)

where publication would cause, insofar as it can be

determined, disproportionate damage to the investment firms, or

natural persons involved

Provided that, where the circumstances referred to in

paragraph (a) are likely to cease within a reasonable period of time,

publication in terms of sub-regulation (1) may be postponed for such

period of time.

(3) Information published in terms of this regulation shall

remain on the official website of the competent authority for a period

of not less than five years. Personal data shall be retained on the

official website of the competent authority only for the period

necessary, in accordance with the provisions of Maltese legislation on

data protection.

(1)

Subject to the professional secrecy requirements Exchange of

referred to in the article 26 of the Act, the competent authority shall information

penalties.

inform the EBA of all administrative penalties and sanctions it

imposes under these regulations, including all permanent prohibitions

imposed under regulations 4 and 6. It shall also provide information

regarding any appeal in relation thereto and the outcome therefrom

for the purpose of publication on the EBA database of sanctions

which the competent authority shall consult where appropriate in the

carrying out of its functions and duties.

(2) In the event of a change of status or a successful appeal

from a penalty imposed by the competent authority in terms of these

regulations, the competent authority shall request the EBA to delete

or update the relevant entries in the database held by the EBA in

terms of Article 69 of the CRD.

(3) Where the competent authority assesses good repute for

the purposes of the Investment Services Rules transposing the

requirements of Articles 91(1) and 121 of the CRD, it shall consult

the EBA database of administrative penalties

Provided that the competent authority shall check, the

existence of a relevant conviction in the criminal record of the person

concerned. For these purposes, information shall be exchanged in

accordance with Decision 2009/316/JHA and Framework Decision

2009/315/JHA.

When determining the type of administrative penalties or

other administrative measures and the level of administrative

pecuniary penalties to be imposed on investment firms in terms of

these regulations, the competent authority shall take into account all

relevant circumstances including, where appropriate

(a)

the gravity and the duration of the breach;

(b)

the degree of responsibility of the natural or legal

person responsible for the breach;

(c)

the financial strength of the natural or legal person

responsible for the breach, as indicated, for example, by the

total turnover of a legal person or the annual income of a natural

person;

(d)

the importance of profits gained or loses avoided

by the natural or legal person responsible for the breach, insofar

as they can be determined;

(e)

the losses for third parties caused by the breach,

insofar as they can be determined;

(f)

the level of co-operation of the natural or legal

person responsible for the breach with the competent authority;

(g)

previous breaches by the natural or legal person

responsible for the breach;

(h)

any potential systemic consequence of the breach.

(1)

The competent authority shall establish effective Reporting of

and reliable mechanisms to encourage the reporting to it of potential breaches.

or actual breaches of the provisions of the Act, regulations and

Investment Services Rules issued thereunder transposing the

requirements of the CRD, and of the provisions of the CRR.

(2) The mechanisms referred to in sub-regulation (1) shall

include at least

(a)

specific procedures for the receipt of reports on

breaches and their follow-up;

(b)

appropriate protection for employees of an

investment firm who report breaches committed within the

investment firm itself against retaliation, discrimination or other

types of unfair treatment at a minimum;

(c)

protection of personal data concerning both the

person who reports the breaches and the natural person who is

allegedly responsible for a breach, in accordance with the

Maltese legislation on data protection;

(d)

clear rules that ensure that confidentiality is

guaranteed in all cases in relation to the person who reports the

breaches committed within the investment firm, unless

disclosure is required by national law in the context of further

investigations or subsequent judicial proceedings.

Subject to the provisions of the Act, any person in respect Right of appeal.

of whom a decision is taken by the competent authority under these

regulations may appeal to the Financial Services Tribunal in terms of

article 19 of the Malta Financial Services Authority Act.