Penalties, Measures and Investigatory Powers) Regulations, 2017

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 19,925, 22 ta’ Diċembru, 2017

Taqsima B

L.N. 392 of 2017

FINANCIAL MARKETS ACT

(CAP. 345)

MALTA FINANCIAL SERVICES AUTHORITY ACT

(CAP. 330)

Financial Markets Act (MiFID and MiFIR Administrative

Penalties, Measures and Investigatory Powers) Regulations, 2017

IN EXERCISE of the powers conferred by article 49 of the

Financial Markets Act and article 20A of the Malta Financial Services

Authority Act, the Minister responsible for the regulation of financial

services, acting on the advice of the Malta Financial Services

Authority, has made the following regulations

(1)

The title of these regulations is the Financial Title, scope and

Markets Act (MiFID and MiFIR Administrative Penalties, Measures commencement.

and Investigatory Powers) Regulations, 2017.

(2) The purpose of these regulations is to transpose and

implement Article 70(1), Article 70(3) to (6) and Article 71(1) to (5) of

MiFID, as herein defined and shall be interpreted and applied

accordingly.

(3) These regulations shall come into force on the 3rd January

2018.

(1)

In these regulations, unless the context otherwise Interpretation.

requires –

"the Acts" means the Financial Markets Act and the Malta Cap. 330.

Financial Services Authority Act;

"APA" or "approved publication arrangement" means a

person authorised under MiFID to provide the service of

publishing trade reports on behalf of investment firms pursuant

to Articles 20 and 21 of MiFIR;

"ARM" or "approved reporting mechanism" means a

person authorised under MiFID to provide the service of

reporting details of transactions to competent authorities or to

ESMA on behalf of investment firms;

"competent authority" means the Malta Financial Services

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

Act;

"CTP" or "consolidated tape provider" means a person

authorised under MiFID to provide the service of collecting

trade reports for financial instruments listed in Articles 6, 7, 10,

12, 13, 20 and 21 of MiFIR from regulated markets, MTFs,

OTFs and APAs and consolidating them into a continuous

electronic live data stream providing price and volume data per

financial instrument;

"ETF" means an ‘exchange-traded fund’ being a fund of

which at least one unit or share class is traded throughout the day

on at least one trading venue and with at least one market maker

which takes action to ensure that the price of its units or shares on

the trading venue does not vary significantly from its net asset

value and, where applicable, from its indicative net asset value;

"investment firm" means any person, other than persons to

whom MiFID does not apply in terms of Article 2 of the said

Directive, whose regular occupation or business is the provision

of any one or more investment services to third parties on a

professional basis;

"Maltese investment firm" means a person licensed in

terms of the Investment Services Act, whose head office is in

Malta and who is entitled to carry on activity in a Member State

or EEA State other than Malta in exercise of a European Right;

"MiFID" means Directive 2014/65/EU of the European

Parliament and of the Council of 15 May 2014 on markets in

financial instruments, as amended from time to time, and

includes any implementing measures that have been or may be

issued thereunder;

"MiFIR" means Regulation (EU) No 600/2014 of the

European Parliament and of the Council of 15 May, 2014 on

markets in financial instruments and amending Regulation (EU)

No 648/2012, as may be amended from time to time, and

includes any implementing measures, implementing technical

standards, regulatory technical standards, guidelines and similar

measures that have been or may be issued thereunder;

"multilateral trading facility" or "MTF" means a

multilateral system, operated by an investment firm or a market

operator, which brings together multiple third-party buying and

selling interests in financial instruments – in the system and in

accordance with non-discretionary rules – in a way that results

in a contract in accordance with Title II of MiFID;

"organised trading facility" or "OTF" means a multilateral

system which is not a regulated market or an MTF and in which

multiple third-party buying and selling interests in bonds,

structured finance products, emission allowances or derivatives

are able to interact in the system in a way that results in a

contract in accordance with Title II of MiFID.

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

shall have the same meaning as in the Acts.

The competent authority shall exercise its supervisory Supervisory

powers and its powers to impose administrative penalties and other powers

powers to

administrative measures, in such a way as to ensure full and complete impose

administrative

adherence to the requirements and obligations arising out of the Acts penalties and

and any regulations and Financial Market Rules issued thereunder other

administrative

and MiFIR, either directly or in collaboration with European measures.

regulatory authorities and with overseas regulatory authorities, in

terms of law as warranted by the relevant circumstances and shall

take all measures necessary to ensure that such administrative

penalties and administrative measures are implemented.

(1)

Without prejudice to article 39A of the Financial Administrative

Markets Act, to any regulations made under the Financial Markets penalties

other

Act and to the supervisory powers of the competent authority referred administrative

measures.

in regulation 3, the competent authority shall impose administrative Cap. 345.

penalties and other administrative measures in respect of breaches of

(a)

the provisions of the Financial Markets Act and, or Cap. 345.

of regulations and, or Financial Market Rules issued thereunder

transposing the provisions of MiFID; and

(b)

the provisions of MiFIR.

(2) The administrative penalties and other measures taken

pursuant to sub-regulation (1) shall be effective, proportionate and

dissuasive.

(1)

The competent authority shall exercise its Administrative

supervisory powers and its powers to the following administrative penalties

other

penalties and measures

administrative

measures for

breaches of

(a)

a public statement which indicates the natural or MiFID

MiFIR.

legal person and the nature of the infringement;

(b)

an order requiring the natural or legal person to

cease the conduct and to desist from a repetition of that conduct;

(c)

in the case of a market operator authorised to

operate an MTF or OTF, a regulated market, an APA, a CTP and

an ARM, withdrawal or suspension of the authorisation of the

institution in accordance with the provisions of the Financial

Markets Act and the regulations issued thereunder;

(d)

a temporary ban on any Maltese investment firm

being a member of or participant in regulated markets or MTFs

or any client of OTFs;

(e)

in the case of a legal person, maximum

administrative fines of up to five million euro (€5,000,000), or

10% of the total annual turnover of the legal person according to

the last available accounts approved by the management body

Provided that where the legal person is a parent

undertaking or a subsidiary of the parent undertaking which has

to prepare consolidated financial accounts in accordance with

Directive 2013/34/EU of the European Parliament and of the

Council, the relevant total annual turnover shall be the total

annual turnover or the corresponding type of income in

accordance with the relevant Union law in the area of

accounting, according to the last available consolidated

accounts approved by the management body of the ultimate

parent undertaking;

(f)

in the case of a natural person, maximum

administrative fines of up to five million euro (€5,000,000);

(g)

maximum administrative fines of up to twice the

amount of the benefit derived from the infringement where that

benefit can be determined, even if that exceeds the maximum

amounts specified in paragraphs (e) and (f) above.

(1)

The competent authority shall publish any decision

imposing an administrative penalty or measure which it shall take

under these regulations on its official website, without undue delay

after the person on whom the penalty or measure was imposed has

been informed of that decision. The publication shall include at least

information on the type and nature of the infringement and the

identity of the persons responsible

Provided that this obligation shall not apply to decisions

imposing measures that are of an investigatory nature.

(2) Notwithstanding sub-regulation (1), 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

publication jeopardises the stability of financial markets or an on-

going investigation, the competent authority shall either

(a)

defer the publication of the decision to impose the

administrative penalty or measure until the moment where the

reasons for non- publication cease to exist;

(b)

publish the decision to impose the administrative

penalty or measure on an anonymous basis in a manner which

complies with Maltese law, if such anonymous publication

ensures an effective protection of the personal data concerned;

or

(c)

not publish the decision to impose an

administrative penalty or measure at all in the event that the

options set out in points (a) and (b) are considered to be

insufficient to ensure

(i)

that the stability of financial markets would

not be put in jeopardy;

(ii) the proportionality of the publication of such

decisions with regard to administrative penalties or

measures which are deemed to be of a minor nature.

(3) In the case of a decision to publish an administrative

penalty or measure on an anonymous basis in accordance with sub-

regulation (2), 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) Where the decision to impose an administrative penalty or

measure is subject to appeal in terms of regulation 8, the competent

authority shall also publish, immediately, on its official website such

information and any subsequent information on the outcome of such

appeal. Moreover, any decision annulling a previous decision to

impose an administrative penalty or a measure shall also be

published.

(5) 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 after its publication

Provided that personal data contained in the publication

shall only be kept on the official website of the competent authority

for the period which is necessary in accordance with the applicable

data protection laws.

(6) This regulation shall be without prejudice to article 16(8)

of the Malta Financial Services Authority Act.

(7) The competent authority shall inform ESMA of all

administrative penalties imposed but not published in accordance

with point (c) of sub-regulation (2) including any appeal in relation

thereto and the outcome thereof.

(8) The competent authority shall provide ESMA annually

with aggregated information regarding all sanctions and measures

imposed in accordance with sub-regulations (1) to (4)

Provided that this obligation does not apply to measures of

an investigatory nature.

(9) Where the competent authority has disclosed an

administrative measure, penalty or criminal sanction to the public, it

shall, at the same time, report that fact to ESMA.

These regulations shall apply at least in the case of

breach of any of the following

(a)

the provisions of regulations 3 to 8 of the

Algorithmic Trading Regulations, 2017;

(b)

the provisions of regulations 3(1) to (6), 4, 5, and

6(1) to (3) and (5) of the Multilateral Trading Facilities and

Organised Trading Facilities Regulations;

(c)

the provisions of Articles 4(1) and (2), 4B(1) and

(4), 4C(1), (2)and (3), 4E, 4F, 4G(1), 4H, 7, 8(2)(d), 10B(2),

17(1)(b), (d), (e) and (g) of the FMA;

(d)

the provisions of regulation 4(1) of the Financial

Markets Act (SME Growth Market) Regulations, 2017;

(e)

the provisions of regulation 5(1) and 8 of the

Financial Markets Act (Membership and Access) Regulations;

(f)

the provisions of regulation 3(1), (2) and (4) of the

Central Counterparties Access Regulations, 2017;

(g)

the provisions of regulations 3, 8 and paragraphs 2,

3, 4, 5 of the Schedule of the Regulated Markets (Authorisation

Requirements) Regulations;

(h)

the provisions of regulations 3(3) and 4(3) of the

European Rights for Regulated Markets Regulations;

(i)

the provisions of regulations 3(1) to (3), (5), (15),

(17) and (19) and regulation 4(1) to (7) of the Position Limits L.N. 389.

and Position Management Controls in Commodity Derivatives

and Reporting Regulations, 2017; and

(j)

the provisions of regulations 7(1) to (5), 8, 9, and

L.N. 391.

10 of the Data Reporting Services Regulations, 2017.

(2) These regulations shall apply at least in the case of breach

of the following provisions of MiFIR

(a)

the provisions of Article 3(1) and (3) on pre-trade

transparency requirements for trading venues in respect of

shares, depositary receipts, ETFs, certificates and other

financial instruments;

(b)

the provisions of the first paragraph of Article 4(3)

on waivers for equity instruments;

(c)

the provisions of Article 6 on post-trade

transparency requirements for trading venues in respect of

shares, depositary receipts, ETFs, certificates and other similar

financial instruments;

(d)

the provisions of the third paragraph of Article 7(1)

on the requirement to obtain the competent authority’s prior

approval of proposed arrangements for deferred trade

publication;

(e)

the provisions of Article 8(1), (3) and (4) on pre-

trade transparency requirements for trading venues in respect of

bonds, structured finance products, emission allowances and

derivatives;

(f)

the provisions of Article 10 on post-trade

transparency requirements for trading venues in respect of

bonds, structured finance products, emission allowances and

derivatives;

(g)

the provisions of the third paragraph of Article

11(1) and the third paragraph of Article 11(3) on authorisation

of deferred publication;

(h)

the provisions of Article 12(1) on the obligation to

make pre-trade and post-trade data available separately;

(i)

the provisions of Article 13(1) on the obligation to

make pre-trade and post-trade data available on a reasonable

commercial basis;

(j)

the provisions of Article 14(1), the first sentence of

sub-article (2), the second to the fourth sentence of sub-article

(3) on the obligation for systematic internalisers to make public

firm quotes in respect of shares, depositary receipts, ETFs,

certificates and other financial instruments and on the

requirement applicable to systematic internaliser on the size and

sizes at which they quote;

(k)

the provisions of the first paragraph of Article

15(1), the first and third sentence of the second paragraph of

sub-article (2) and the second sentence of sub-article (4) on

execution of client orders;

(l)

the provisions of the second sentence of Article

17(1) on the requirement of clear standards governing access to

quotes of systematic internalisers;

(m)

the provisions of Article 18(1), (2), (4) [first

sentence], (5) [first sentence], the first paragraph of sub-article

(6) and sub-articles (8) and (9) on the obligation for systematic

internalisers to make public firm quotes in respect of bonds,

structured finance products, emission allowances and

derivatives;

(n)

the provisions of Article 20(1) and (2) (first

sentence) on the post-trade disclosure by investment firms,

including systematic internalisers, in respect of shares,

depositary receipts, ETFs, certificates and other similar

financial instruments and the requirement for the information

which is made public and the time limits within which it is

published to comply with the requirement adopted pursuant to

Article 6 and the regulatory technical standards adopted in

accordance with Article 7(2)(a);

(o)

the provisions of Article 21(1) to (3) on post-trade

disclosure by investment firms including systematic

internalisers, in respect of bonds, structured finance products,

emission allowances and derivatives;

(p)

the provisions of Article 22(2) on the provision of

information for the purposes of transparency and other

calculations and the requirement of trading venues, APAs and

CTPs to store the necessary data for a sufficient period of time;

(q)

the provisions of Article 23(1) and (2) on the

trading obligation of investment firms;

(r)

the provisions of Article 25(1) and (20 on the

obligation to maintain records;

(s)

the provisions of the first paragraph of Article

26(1), (2) to (5), the first paragraph to sub-article (6) and the

first, fifth and eighth paragraphs to sub-article (7) on the

obligation to report transactions;

(t)

the provisions of Article 27(1) on the obligation of

trading venues and systematic internalisers to provide the

competent authority with identifying reference data for the

purpose of reporting under Article 26;

(u)

the provisions of Article 28(1) and the first

paragraph of sub-article (2) on the obligation to trade on

regulated markets, MTFs or OTFs;

(v)

the provisions of Article 29(1) and (2) on the

clearing obligation for derivatives traded on regulated markets

and timing of acceptance for clearing;

(w)

the provisions of Article 30(1) on indirect clearing

arrangements;

(x)

the provisions of Article 31(2) and 3) on the

requirement of investment firms and market operators providing

portfolio compression to make public through an APA, the

volumes of transactions and the time they were concluded in

terms of Article 10 and the requirement to keep complete and

accurate records;

(y)

the provisions of Article 35(1) to (3) on non-

discriminatory access to a central counter-party;

(z)

the provision of Article 36(1) to (3) on non-

discriminatory access to a trading venue; and

(aa)

the provisions of Article 37(1) and (3) on non-

discriminatory access to and obligation to licence benchmarks.

(3) These regulations shall apply in the following instances

related to product monitoring and intervention

(a)

exercise by ESMA of its temporary intervention

powers in terms of Article 40 of MiFIR;

(b)

exercise by the EBA of its temporary intervention

powers in terms of Article 41 of MiFIR; and

(c)

exercise of the product intervention powers by the

competent authority in terms of Article 42 of MiFIR.

(4) The provision of investment services without the required

authorisation or approval in accordance with

(a)

the provisions of the Financial Markets Act;

(b)

the provisions of the Regulated

Markets

(Authorisation Requirements) Regulations;

(c)

the provisions of the Data Reporting Services

Regulations, 2017;

shall also be considered as an infringement of MiFID and of the

Financial Markets Act and thereafter subject to the applicability of

these regulations.

(5) The provision of investment services without the required

authorisation or approval contrary to the requirements prescribed in

(a)

the provisions of Article 7(1) on the requirement of

market operators and investment firms operating a trading

venue to obtain the competent authority’s prior approval of the

proposed arrangement for deferred trade publication and to

disclose these arrangements to the market participants and to the

public; and

(b)

the provisions of Article 11(1) on the requirement

applicable to market operators and investment firms operating a

trading venue to obtain authorisation from the competent

authority for deferred publication of the details of transactions

based on the size and type of the transaction

shall also be considered as an infringement of MiFIR and

thereafter subject to the applicability of these regulations.

(6) Failure to cooperate or comply in an investigation or with

an inspection or request covered by Article 69 of MiFID shall also be

considered an infringement and subject to the applicability of these

regulations.

Subject to the provisions of the Acts, 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 21 of the Malta Financial Services Act and article 42 of the Cap. 330.

Financial Markets Act and Part VI of the Financial Markets Act shall Cap. 345.

apply mutatis mutandis to appeals that may be brought before the

Tribunal under this regulation.

€0.54