Measures and Investigatory Powers) Regulations, 2016

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,554, 5 ta’ April, 2016

L.N. 115 of 2016

INVESTMENT SERVICES ACT

(CAP. 370)

Investment Services Act (UCITS Administrative Penalties,

Measures and Investigatory Powers) Regulations, 2016

IN exercise of the powers conferred by article 12 of the

Investment Services 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 Investment Citation and

Services Act (UCITS Administrative Penalties, Measures and scope.

Investigatory Powers) Regulations, 2016.

(2) The objective of these regulations is to transpose Articles

99(6)(e), (f) and (g) and Articles 99a, 99b, 99c and 99d of the UCITS

Directive.

(1)

In these regulations, unless the context otherwise Interpretation.

requires

"the Act" shall mean the Investment Services Act;

"the competent authority" means the Malta Financial Services

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

"UCITS" means undertakings for collective investment in

transferable securities in terms of the UCITS Directive as defined

herein;

"UCITS Directive" means Directive 2009/65/EC of the

European Parliament and of the Council of 13 July 2009 on the

coordination of laws, regulations and administrative provisions

relating to undertakings for collective investment in transferable

securities (UCITS) (recast), as amended by Directive 2014/91/EU of

the European Parliament and of the Council of 23 July 2014 and

including the Delegated Acts which the Commission is empowered to

adopt to further supplement the provisions of Directive 2014/91/EU

relating to the custodians of UCITS.

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

have the same meaning as in the Act.

The competent authority shall impose administrative

penalties and other administrative measures in respect of breaches of

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

Services Rules made thereunder transposing the provisions of the

UCITS Directive.

The competent authority shall, exercise its supervisory

powers and its powers to impose penalties as follows

(a)

in the case of a legal person, the administrative

pecuniary sanction of up to a maximum of five million euro

(€5,000,000);

(b) in the case of a natural person, the administrative

pecuniary sanction of up to a maximum of five million euro

(€5,000,000);

(c)

as an alternative to paragraphs (a) and (b), the

maximum administrative pecuniary sanctions shall be

equivalent to at least twice the amount of the benefit derived

from the infringement where that benefit can be determined,

even if it exceeds the maximum amount of five million euro

(€5,000,000).

These regulations shall apply at least in any of the

following circumstances

(a)

the activities of the UCITS are pursued without

obtaining authorisation, in breach of article 4 of the Act;

(b) the business of the management company is carried

out without obtaining prior authorisation, in breach of article 3

of the Act;

(c)

the business of the investment company is carried

out without obtaining prior authorisation, in breach of article 4

of the Act;

(d) a qualifying holding in a management company is

acquired, directly or indirectly, or such a qualifying holding in a

management company is further increased so that the proportion

of the voting rights or of the capital held would reach or exceed

20%, 30% or 50% or so that the management company would

become its subsidiary (‘the proposed acquisition’), without

notifying in writing the competent authority in the case where

the management company is licensed in terms of the Act and

hence the acquirer is seeking to acquire or increase a qualifying

holding, in breach of article 10 of the Act;

(e)

a qualifying holding in a management company is

disposed of, directly or indirectly, or reduced so that the

proportion of the voting rights or of the capital held would fall

below 20%, 30% or 50% or so that the management company

would cease to be a subsidiary, without notifying in writing the

competent authority, in breach of article 10 of the Act;

(f)

a management company has obtained an

authorisation through false statement or any other irregular

means, in breach of article 7(2)(c) of the Act;

(g) an investment company has obtained an

authorisation through false statements or any other irregular

means, in breach of article 7(2)(c) of the Act;

(h) a management company, on becoming aware of any

acquisition or disposal of holdings in their capital that cause

holdings to exceed or fall below one of the thresholds referred

to in Article 11(1) of Directive 2014/65/EU fails to inform the

competent authority of those acquisitions or disposals, in breach

of article 10 of the Act;

(i)

a management company fails to inform the

competent authority, at least once a year, of the names of the

shareholders and members possessing qualifying holdings and

the sizes of such holdings, in breach of article 10 of the Act;

(j)

a management company fails to comply with

procedures and arrangements imposed in accordance with the

applicable sections of the Investment Services Rules for

Investment Services Providers;

(k) a management company fails to comply with

structural and organisational requirements imposed in

accordance with the applicable sections of the Investment

Services Rules for Investment Services Providers;

(l)

an investment company fails to comply with

procedures and arrangements imposed in accordance with the

applicable sections of the Investment Services Rules for Retail

Collective Investment Schemes;

(m) a management company or an investment company

fails to comply with the requirements related to delegation of its

functions to third parties imposed in accordance with the

Investment Services Rules for Investment Services Providers or

the Investment Services Rules for Retail Collective Investment

Schemes as the case may be;

(n) a management company or an investment company

fails to comply with the rules of conduct imposed in accordance

with the Investment Services Rules for Investment Services

Providers or the Investment Services Rules for Retail Collective

Investment Schemes as the case may be;

(o) a custodian fails to perform its tasks in accordance

with the provisions of regulations 6(1) to (3), 15(1), 17(1) and

(2) and 18(1) of the Investment Services Act (Custodians of

Collective Investment Schemes) Regulations, 2016;

(p) an investment company or, for each of the funds

managed, a management company, repeatedly fails to comply

with obligations concerning the investment policies of the

UCITS as laid down in the Investment Services Rules for

Investment Services Providers or the Investment Services Rules

for Retail Collective Investment Schemes as the case may be;

(q) a management company or an investment company

fails to employ a risk-management process or a process for

accurate and independent assessment of the value of OTC

derivatives as laid down in the Investment Services Rules for

Investment Services Providers or the Investment Services Rules

for Retail Collective Investment Schemes as the case may be;

(r)

an investment company or, for each of the funds

managed, a management company, repeatedly fails to comply

with the obligations concerning information to be provided to

investors imposed in accordance with the Investment Services

Rules for Investment Services Providers or the Investment

Services Rules for Retail Collective Investment Schemes as the

case may be;

(s)

a management company or an investment company

marketing units of UCITS that it manages in a Member State

other than Malta, fails to comply with the notification

requirements prescribed in regulation 4(1) of the Investment

Services Act (Marketing of UCITS) Regulations, 2011.

(1) The competent authority shall publish any decision

against which there is no appeal imposing an administrative sanction

or measure for infringements of the provisions of the Act, the

regulations or Investment Services Rules issued thereunder on its

website without undue delay after the person on whom the sanction or

measure was imposed has been informed of that decision. The

publication referred to in this sub-regulation shall include at least

information on the type and nature of the infringement and the

identity of the persons responsible

Provided that this obligation does not apply to decisions

imposing measures that are of an investigatory nature.

(2) Where the publication of the identity of the legal persons

or of the personal data of the natural persons is considered by the

competent authority to be disproportionate following a case-by-case

assessment conducted on the proportionality of the publication of

such data, or where the publication jeopardises the stability of the

financial markets or an ongoing investigation, the competent

authority shall

(a) defer the publication of the decision to impose the

sanction or measure until the reasons for non-publication cease

to exist;

(b) publish the decision to impose the sanction or

measure on an anonymous basis in a manner which complies

with Maltese law, if such anonymous publication ensures

effective protection of the personal data concerned;

(c)

not publish the decision to impose a sanction or

measure in the event that the options laid down in paragraphs

(a) and (b) are considered to be insufficient to ensure

(i) that the stability of the financial markets

would not be put in jeopardy;

(ii) the proportionality of the publication of such

decisions with regard to measures which are deemed to be

of a minor nature.

(3) In the case of a decision to publish a sanction or measure

on an anonymous basis, the publication of the relevant data may be

postponed for a reasonable period of time if it is envisaged that within

that period the reasons for anonymous publication shall cease to exist.

(4) The competent authority shall inform ESMA of all

administrative sanctions imposed but not published in accordance

with sub-regulation (1)(c) including any appeal in relation thereto and

the outcome of such an appeal. The competent authority shall receive

information and the final judgement in relation to any criminal

sanction imposed and submit it to ESMA.

(5) Where the decision to impose a sanction or measure is

subject to appeal before the relevant judicial or other authorities, the

competent authority shall also publish immediately on its website

such information and any subsequent information on the outcome of

such an appeal. Any decision annulling a previous decision to impose

a sanction or a measure shall also be published.

(6) The competent authority shall ensure that any publication

in accordance with this regulation shall remain on its official website

for a period of at least five years from its publication. Personal data

contained in the publication shall be kept on the website of the

competent authority only for the period which is necessary in

accordance with the provisions of the Data Protection Act.

When determining the type of administrative penalties or

measures and the level of administrative pecuniary penalties, the

competent authority shall ensure that they are effective, proportionate

and dissuasive and take into account all relevant circumstances,

including where appropriate

(a)

the gravity and the duration of the infringement;

(b) the degree of responsibility

of

the

person

responsible for the infringement;

(c)

the financial strength of the person responsible for

the infringement, as indicated, for example, by its total turnover

in the case of a legal person or the annual income in the case of

a natural person;

(d) the importance of the profits gained or losses

avoided by the person responsible for the infringement, the

damage to other persons and, where applicable, the damage to

the functioning of markets or the wider economy, in so far as

they can be determined;

(e)

the level of cooperation with the competent

authority of the person responsible for the infringement;

(f)

previous infringements by the person responsible for

the infringement;

(g) measures taken after the infringement by the person

responsible for the infringement to prevent its repetition.

(1) In the exercise of its powers to impose penalties, the

competent authority shall cooperate closely with other European

regulatory authorities to ensure that the supervisory and investigative

powers and administrative penalties produce the results pursued by

these regulations.

(2) The competent authority shall also coordinate actions to

avoid possible duplication and overlap when applying supervisory

and investigative powers and administrative penalties and measures

to cross-border cases in accordance with articles 17, 17A and 17B of

the Act.

(1) The competent authority shall establish, in the Reporting of

applicable Investment Services Rules issued in terms of the Act, infringements.

effective and reliable mechanisms to encourage the reporting thereto

of potential or actual infringements of the provisions of the Act, the

regulations and the Rules issued thereunder, including secure

communication channels for reporting such infringements.

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

include at least

(a) specific procedures for the receipt of reports on

infringements and their follow-up;

(b) appropriate protection for employees of investment

companies, management companies and custodians who report

infringements committed within those entities, at least against

retaliation, discrimination and other types of unfair treatment;

(c)

protection of personal data concerning both the

person who reports the infringements and the natural person

who is allegedly responsible for an infringement, in accordance

with the Data Protection Act;

(d) clear rules that ensure that confidentiality is

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

infringement, unless disclosure is required by the provisions of

Maltese legislation in the context of further investigations or

subsequent judicial proceedings.

B

€0.36