Regulations, 2017

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

Taqsima B

L.N. 401 of 2017

INVESTMENT SERVICES ACT

(CAP. 370)

BANKING ACT

(CAP. 371)

Investment Services Act and Banking Act (MiFID and MiFIR

Administrative Penalties, Measures and Investigatory Powers)

Regulations, 2017

IN EXERCISE of the powers conferred by article 12 of the

Investment Services Act and article 3(1) of the Banking 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 Investment Title, scope and

Services Act and Banking Act (MiFID and MiFIR Administrative commencement.

Penalties, Measures 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 apply to

(a)

Maltese investment firms;

(b) European investment firms which have established a

branch in Malta in terms of the European Passport Rights for S.L. 370.10

Investment Firms Regulations with respect to the matters to for

which the competent authority is responsible in terms of Article

35(8) of MIFID;

(c) Maltese credit institutions licensed under the Banking

Act insofar as these offer structured deposits as defined in Cap. 371.

regulation 2(1); and

(d)

persons to whom the provisions of MiFIR apply.

(4)

These regulations shall come into force on the 3rd January

2018.

(1)

In these regulations, unless the context otherwise

requires

"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 the competent authority or to

European regulatory authorities, as the case may be, or to ESMA

on behalf of investment firms;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority

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;

"deposit" means a credit balance which results from funds

left in an account or from temporary situations deriving from

normal banking transactions and which a credit institution is

required to repay under the legal and contractual conditions

applicable, including a fixed-term deposit and a savings deposit,

but excluding a credit balance where

(a) its existence can only be proven by a financial

instrument as defined herein unless it is a savings product

which is evidenced by a certificate of deposit made out to a

named person and which exists in a Member State on 2 July

2014;

(b)

its principal is not repayable at par;

(c) its principal is only repayable at par under a

particular guarantee or agreement provided by the credit

institution or a third party;

"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;

"European investment firm" means an investment firm as

defined in Article 4(1) of MiFID authorised by its European

regulatory authority within the meaning of Article 5 of MiFID or

authorised by a European regulatory authority in an EEA State";

"financial instrument" means an instrument included in the

Second Schedule to the Investment Services Act;

"Maltese credit institution" means a credit institution as

defined in point (1) of Article 4(1) of 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 which is licensed in terms of the Banking Cap. 371.

Act, whose head office is in Malta and who is entitled to carry on

an activity in a Member State other than Malta in exercise of a

European passport right as defined in the European Passport

Rights for Credit Institutions Regulations;

"Maltese investment firm" means a person licensed in

terms of the Investment Services Act, whose head office is in Cap. 370.

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

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

Right;

"European Right" means the entitlement of a person to

establish a branch, or provide services, in a Member State or

EEA State other than that in which it has its head office

(a) in accordance with the Treaty as applied in the

Member State or EEA State; and

(b) subject to the requirements of MIFID and

subject to any regulations made under the Act; and, or

Investment Services Rules and, or Conduct of Business

Rules issued by the competent authority in terms of article

6 of the Act; implementing such requirements as may be

applicable;

"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;

"structured deposit" means a deposit as defined in

paragraph (c) of the definition "deposit", and which is fully

repayable at maturity on terms under which interest or a

premium will be paid or is at risk, according to a formula

involving factors such as

(a) an index or combination of indices, excluding

variable rate deposits whose return is directly linked to an

interest rate index such as Euribor or Libor;

(b) a financial instrument or combination of

financial instruments;

(c) a commodity or combination of commodities or

other physical or non-physical non-fungible assets; or

(d) a foreign exchange rate or combination of

foreign exchange rates;

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

Investment Services Act or in the Banking Act shall have the same

meaning as in the respective Acts.

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 Investment Services Act or the Banking Act and any

regulations, Investment Services Rules and Conduct of Business Rules

issued by the competent authority and MiFIR, either directly or in

collaboration with European 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 are implemented.

(1) Without prejudice to article 16A of the Investment

Services Act, to any regulations made under article 6(2) of the

Investment Services Act and to article 35A of the Banking Act and 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 Investment Services Act and, or Cap. 370.

of regulations and, or Investment Services Rules and Conduct of

Business Rules issued by the competent authority transposing

the provisions of MiFID;

(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 supervisory Administrative

powers and its powers to take and impose at least the following penalties

other

administrative penalties and measures

administrative

measures for

breaches of

(a) a public statement which indicates the natural or legal MiFID

MiFIR.

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 Maltese investment firm, and in the

case of the following persons authorized in Malta

(i)

market makers authorized to operate an MTF or

OTF;

(ii)

an APA;

(iii) a CTP; and, or

(iv) an ARM;

withdrawal or suspension of the relative licence or authorisation in

accordance with the provisions of the Investment Services Act and Cap. 370.

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.

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

breach of one or more of any of the following by a Maltese investment

firm or a European investment firm which has established a branch in

Malta in terms of the European Passport Rights for Investment Firms

Regulations insofar as the enforcement of the provisions indicated

hereunder fall within the responsibility of the competent authority in

terms of Article 35(8) of MIFID, or by a Maltese credit institution

offering structured deposits, insofar as the provisions indicated

hereunder apply to the latter in terms of Article 1(4) of MIFID

(a) the provisions of article 6(1)(a),(d) and (e) 7(2)(b)

and (c), 10(1), (2) and (4) of the Investment Services Act;

(b) the provisions of the Investment Services Rules

transposing the provisions of Article 9 (1),(2), the second sub-

paragraph of sub article (3), (5) and (6) 11(1) and (3) and 16 (2),

(4), (5), (6), (7) and (10) of MiFID;

(c) the Conduct of Business Rules transposing the

provisions of the first and second sub-paragraphs of 9(3), 16(3),

23(1), (2) and (3), 24(1) to (5) and (7) to (10) and the first and

second sub-paragraphs of Article 24(11), Articles 25(1) to (6),

the second sentence of Article 26(1), Articles 26 (2) and (3), 27

(1) to (8), 28(1) and (2), the second sub-paragraph of Article

30(1), the first sentence of the second sub-paragraph of Article

30(3) of MiFID;

(d) the provisions of the Investment Services Act

(Control of Assets) Regulations transposing Article 16 (8), (9)

and second sub-paragraph of Article 16(11) of MiFID;

(e) the provisions of regulations 3 to 8 of the Algorithmic

Trading Regulations, 2017 transposing Article 17 of MiFID;

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

(3) and (5), 7(1),(3) and (4) of the Multilateral Trading Facilities

and Organised Trading Facilities Regulations, 2017;

(g) the provisions of regulations 3(2) and 4(2) of the

European Passport Rights for Persons Operating Multilateral

Trading Facilities Regulations or the Multilateral Trading

Facilities and Organised Trading Facilities Regulations, 2017;

(h) the provisions of regulations 3(2)(a), (4) and (5), 4(2)

and (5), 8(2), (8), (10) and (11), 10(2), (5) to (7) of the European

Passport Right for Investment Firms Regulations as well as those

provisions in the latter regulations, transposing Article 16(11) of

MiFID;

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

L.N. 387.

Central Counterparties Access Regulations, 2017;

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

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

Management Controls in Commodity Derivatives and Reporting

Regulations, 2017;

(k) the provisions of regulations 7(1) to (5), 8, 9, and 10

L.N. 391.

of the Data Reporting Services Regulations, 2017; and

(l) the provisions of the Investment Services Act (Tied L.N. 403.

Agents) Regulations, 2017 transposing the first sub-paragraph of

Article 29(2), the third sub-paragraph of Article 29(2), the first

sentence of Article 29(3), the first sub-paragraph of Article 29(4)

and Article 29(5) of MiFID.

(2) Without prejudice to sub-regulation (1), these regulations

shall also apply at least in the case of breach of one or more of the

following provisions of MiFIR by persons to whom the provisions of

MiFIR apply

(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 counterparty;

(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 also apply in cases where

(a) a Maltese investment firm does not abide by any

order exercised by ESMA by virtue of its temporary intervention

powers in terms of Article 40 of MiFIR;

(b) a Maltese credit institution offering structured

deposits does not abide by any order exercised by the EBA by

virtue of its temporary intervention powers in terms of Article 41

of MiFIR; and

(c) a Maltese investment firm or a Maltese credit

institution offering structured deposits does not abide by any

order exercised by the competent authority by virtue of the

product intervention powers in terms of Article 42 of MiFIR.

(4) The provision of investment services, in or from Malta,

without the required authorisation or approval in accordance with

(a) the provisions of the Investment Services Act

transposing Article 5 of MiFID;

(b) the provisions of the Investment Services Rules

transposing Article 6(2) of MiFID;

(c) the provisions of the European Passport Right for

Investment Firms Regulations transposing Articles 34 and 35 of

MiFID;

(d) the provisions of the European Passport Rights for

Persons Operating Multilateral Trading Facilities Regulations or

the Multilateral Trading Facilities and Organised Trading

Facilities Regulations, 2017 transposing Article 34 of MiFID;

(e) the provisions of the Investment Services Act

(Provision of Investment Services and Activities by Third

Country Firms) Regulations, 2017 transposing Article 39 of

MiFID;

(f) the provisions of the Data Reporting Services

Regulations, 2017 transposing Article 59 of MiFID

shall also be considered as an infringement of the MiFID and

therefore subject to the applicability of these regulations.

(5)

The provision of investment services, in or from Malta,

without the required authorisation or approval contrary to the

requirements prescribed in

(a) the provisions of Article 7(1) of MiFIR 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) of MiFIR 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 the 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.

A right of appeal to the Financial Services Tribunal shall lie Right of Appeal.

from the decisions which the competent authority shall take under

these regulations and the provisions of article 21 of the Malta Cap. 330.

Financial Services Authority Act shall apply mutatis mutandis.

€0.63