Directive) Regulations, 2022

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,774, 27 ta’ Jannar, 2022 B 187

L.N. 22 of 2022

INVESTMENT SERVICES ACT

(CAP. 370)

Investment Services Act (Supervisory Review Investment Firms

Directive) Regulations, 2022

IN EXERCISE of the powers conferred by article 12 of the

Investment Services 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 Citation, scope

Services Act (Supervisory Review Investment Firms Directive) and

commencement.

Regulations, 2022.

(2) The scope of these regulations is to transpose Articles 7, 8,

13, 14, 15, 34, 36, 37, 38, 39, 40, 41, 42, 43, and 45 of Directive (EU)

2019/2034 of the European Parliament and of the Council of 27

November 2019 on the prudential supervision of investment firms

and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU,

2013/36/EU, 2014/59/EU and 2014/65/EU.

(3) These regulations shall come into force on such date as the

Minister may by notice in the Gazette establish.

SUPERVISORY POWERS

(Regulations 9, 10, 11(3), and 12)

(1) For the purposes of regulations 9, 10, 11(3), and 12 and the

application of the IFR, the competent authority shall have at least the

following powers

(a) to require investment firms to hold own funds in

excess of the requirements set out in Article 11 of the IFR, under

the conditions of the Investment Services Rules transposing the

requirements of Article 40 of the IFD or to adjust the own funds

and liquid assets required in case of material changes in the

business of those investment firms;

(b) to require the reinforcement of the arrangements,

processes, mechanisms and strategies implemented in

accordance with the Investment Services Rules transposing the

requirements of Articles 24 and 26 of the IFD;

(c) to require investment firms to present, within one

year, a plan to restore compliance with supervisory requirements

pursuant to the Act, regulations or Investment Services Rules

issued thereunder, the IFD, and to the IFR and set a deadline for

its implementation, including improvements to that plan

regarding scope and deadline;

(d) to require investment firms to apply a specific

provisioning policy or treatment of assets in terms of own funds

requirements;

(e) to restrict or limit the business, operations or network

of investment firms or to request the divestment of activities that

pose excessive risks to the soundness of an investment firm;

(f) to require the reduction of the risk inherent in the

activities, products and systems of investment firms;

(g) to require investment firms to limit variable

remuneration as a percentage of net revenues where it is

inconsistent with the maintenance of a sound capital base;

(h) to require investment firms to use net profits to

strengthen own funds;

(i) to restrict or prohibit distributions or interest

payments by an investment firm to shareholders, members or

holders of Additional Tier 1 instruments within the meaning of

the IFR, where the prohibition does not constitute an event of

default of the investment firm;

(j) to impose additional or more frequent reporting

requirements to those set in the IFD and the IFR, including

reporting on capital and liquidity positions;

(k) to impose specific liquidity

requirements

in

accordance with Article 42 of the IFD;

(l)

to require additional disclosures;

(m) to require investment firms to reduce the risks

posed to the security of investment firms’ network and

information systems to ensure confidentiality, integrity and

availability of their processes, data and assets

Provided that, the competent authority shall notify the

Resolution Committee of any additional own funds requirement

imposed pursuant to sub-paragraph (a) for an investment firm that falls

under the scope of the BRRD.

(2) For the purposes of paragraph (1)(j), the competent

authority may only impose additional or more frequent reporting

requirements on investment firms where the information to be reported

is not duplicative and one of the following conditions is met

(a) one of the cases referred to in paragraphs (a) and (b)

of regulation 11(1) applies;

(b) the competent authority considers it to be necessary

to gather the evidence referred to in paragraph (b) of regulation

11(1);

(c) the additional information is required for the purpose

of the supervisory review and evaluation process referred to in

regulation 9

Provided that, information shall be deemed to be

duplicative where the competent authority already has the same or

substantially the same information, where that information is capable

of being produced by the competent authority or of being obtained by

the same competent authority through other means than a requirement

on the investment firm to report it. The competent authority shall not

require additional information where the information is available to

the competent authority in a different format or level of granularity

than the additional information to be reported and that different format

or granularity does not prevent it from producing substantially similar

information.

(3) The additional own funds requirements referred to in

paragraph (1)(a) shall be imposed by the competent authority only

where, on the basis of the reviews carried out in accordance with

regulations 9 and 10, it ascertains any of the following situations for

an investment firm

(a) the investment firm is exposed to risks or elements of

risks, or poses risks to others that are material and are not

covered or not sufficiently covered by the own funds

requirement, and especially K‐factor requirements, set out in

Parts Three or Four of the IFR;

(b) the investment firm does not meet the requirements

set out in Articles 24 and 26 of the IFD and other supervisory

measures are unlikely to sufficiently improve the arrangements,

processes, mechanisms and strategies within an appropriate

timeframe;

(c) the adjustments in relation to the prudent valuation of

the trading book are insufficient to enable the investment firm to

sell or hedge out its positions within a short period without

incurring material losses under normal market conditions;

(d) the review carried out in accordance with regulation

10 shows that non‐compliance with the requirements for the

application of the permitted internal models will likely lead to

inadequate levels of capital;

(e) the investment firm repeatedly fails to establish or

maintain an adequate level of additional own funds as set out in

Article 41 of the IFD.

(4) For the purposes of paragraph (3)(a), risks or elements of

risks shall be considered not to be covered or to be insufficiently

covered by the own funds requirements set out in Parts Three and Four

of the IFR only where the amounts, types and distribution of capital

considered adequate by the competent authority following the

supervisory review of the assessment carried out by investment firms

in accordance with Article 24(1) of the IFD are higher than the

investment firm’s own funds requirement set out in Parts Three or Four

of the IFR

Provided that, for the purposes of this paragraph, the capital

considered to be adequate may include risks or elements of risks that

are explicitly excluded from the own funds requirement set out in Parts

Three or Four of the IFR.

(5) The competent authority shall determine the level of the

additional own funds required pursuant to paragraph (1)(a) as the

difference between the capital considered adequate pursuant to

paragraph (4) and the own funds requirement set out in Parts Three or

Four of the IFR.

(6) The competent authority shall require investment firms to

meet the additional own funds requirement referred to in paragraph

(1)(a) with own funds subject to the following conditions

(a) at least three quarters of the additional own funds

requirement is met with Tier 1 capital as defined in the IFR;

(b) at least three quarters of the Tier 1 capital as defined

in the IFR is composed of Common Equity Tier 1 capital as

defined in the IFR;

(c)

those own funds are not used to meet any of the own

funds requirements set out in points (a), (b) and (c) of Article

11(1) of the IFR.

(7) The competent authority shall substantiate in writing its

decision to impose an additional own funds requirement as referred to

in paragraph (1)(a) by giving a clear account of the full assessment of

the elements referred to in paragraphs (3) to (6). In the case set out in

paragraph (3)(d), that includes a specific statement of why the level of

capital established in accordance with Article 41(1) of the IFR is no

longer considered sufficient.

(8) Competent authorities may impose an additional own funds

requirement in accordance with paragraphs (3) to (7) on investment

firms that meet the conditions for qualifying as small and

non‐interconnected investment firms set out in Article 12(1) of the IFR

on the basis of a case‐by‐case assessment and where the competent

authority deems it to be justified.

(9) Taking into account the principle of proportionality and

commensurate with the size, systemic importance, nature, scale and

complexity of activities of investment firms that do not meet the

conditions for qualifying as small and non‐interconnected investment

firms set out in Article 12(1) of the IFR, the competent authority may

require such investment firms to have levels of own funds which,

based on Article 24 of the IFD, are sufficiently above the requirements

set out in Part Three of the IFR and in the IFD, including the additional

own funds requirements referred to in paragraph (1)(a), to ensure that

cyclical economic fluctuations do not lead to a breach of those

requirements or threaten the ability of the investment firm to wind

down and cease activities in an orderly manner.

(10) The competent authority shall, where appropriate, review

the level of own funds that has been set by each investment firm that

does not meet the conditions for qualifying as a small and

non‐interconnected investment firm set out in Article 12(1) of the IFR,

in accordance with paragraph (9) and, where relevant, shall

communicate the conclusions of that review to the investment firm

concerned, including any expectation for adjustments to the level of

own funds established in accordance with paragraph (9). Such a

communication shall include the date by which the competent

authority requires the adjustment to be completed

Provided that, the competent authority shall notify the

Resolution Committee of any additional own funds requirement

imposed pursuant to paragraph (1)(a) for an investment firm that falls

under the scope of the BRRD and about any expectation for

adjustments pursuant to this paragraph.

(1)

In these regulations, unless the context otherwise Interpretation.

requires

"the Act" means the Investment Services Act;

"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, 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;

"credit institution" means a person licensed in terms of the

Banking Act, whose head office is in Malta or an undertaking Cap. 371.

whose business is to receive deposits or other repayable funds

from the public and to grant credits for its own account,

authorised by a European regulatory authority in terms of the

CRD or authorised by a European regulatory authority in an EEA

Member State;

"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 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;

"EBA" means the European Banking Authority established

by Regulation (EU) No 1093/2010;

"EIOPA" means the European Insurance and Occupational

Pensions Authority as established by Regulation (EU) No 1094/

2010 of the European Parliament and of the Council of 24

November 2010 establishing a European Supervisory Authority

(European Insurance and Occupational Pensions Authority),

amending Decision No 716/2009/EC and repealing Commission

Decision 2009/79/EC;

"ESCB central banks" shall have the same meaning as that

assigned to it in point 45 of Article 4(1) of the CRR;

"ESFS" means the European System of Financial

Supervision;

"ESRB" means the European Systemic Risk Board

established by Regulation (EU) No 1092/2010;

"European investment firm" means a firm as defined in

Article 4(22) of the IFR, authorised by its European regulatory

authority within the meaning of Article 5 of the MiFID, or

authorised by a European regulatory authority in an EEA State;

"home member state" means

(a) in the case of an investment firm, within the

meaning of these regulations, Malta;

(b) in the case of a "European investment firm",

within the meaning of these regulations, the Member State

where such European investment Firm is authorised by its

European regulatory authority;

"host member state" means a Member State or an EEA

State where an investment firm has established a branch or

provides services on a cross border basis in terms of the

European Passport Rights for Investment Firms Regulations;

"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 IFD;

"the IFR" means Regulation 2019/2033 of the European

Parliament and of the Council of 27 November 2019 on the

prudential requirements of investment firms and amending

Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No

600/2014 and (EU) No 806/2014, as amended from time to

time, and includes any implementing measures that have been or

may be issued thereunder;

"the IFD" means Directive 2019/2034 of the European

Parliament and of the Council of 27 November 2019 on the

prudential supervision of investment firms and amending

Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/

EU, 2014/59/EU and w2014/65/EU, as amended from time to

time, and includes any implementing measures that have been

or may be issued thereunder;

"Resolution Committee" means the Resolution Committee

appointed in terms of article 7B(2) of the Malta Financial Cap. 330.

Services Authority Act;

"third country" means a country which is not a Member

State or an EEA State.

(2) Words and expressions used in these regulations shall have

the same meaning as that assigned to them as in the Act.

BODIES WITH WHOM THE COMPETENT AUTHORITY MAY

EXCHANGE INFORMATION

(Regulation 6)

The competent authority may exchange information with

(1) Other European regulatory authorities and may transmit

information to the ESRB, EBA, ESMA, central banks of the Member

States, the European System of Central Banks (ESCB) and the

European Central Bank in their capacity as monetary authorities and,

where appropriate, public authorities responsible for overseeing

payment and settlement systems, with confidential information where

that information is necessary for the performance of their tasks, and in

accordance with the IFD and the IFR.

(2) Bodies or authorities responsible for supervising the

entities governed by and listed in points (1) and (2) of Article 2(1) of

Directive (EU) 2015/849 of the European Parliament and of the

Council of 20 May 2015 on the prevention of the use of the financial

system for the purposes of money laundering or terrorist financing,

amending Regulation (EU) No 648/2012 of the European Parliament

and of the Council, and repealing Directive 2005/60/EC of the

European Parliament and of the Council and Commission Directive

2006/70/EC, for compliance with the said Directive (EU) 2015/849.

€0.72

(1) The Malta Financial Services Authority established by Designation and

the Malta Financial Services Authority Act shall be the designated powers

competent

competent authority in Malta for the purposes of implementing the authority.

relevant provisions of the IFD and the IFR and any reference in these

regulations to the competent authority shall be read and construed

accordingly.

(2) The competent authority shall exercise all the functions,

obligations and powers pursuant to the IFD and the IFR and shall

satisfy all the requirements imposed on competent authorities by the

IFD and the IFR.

In the exercise of its duties, the competent authority shall Co-operation

take into account the convergence in respect of supervisory tools and within

European

supervisory practices in the application of the laws, regulations and system

financial

administrative requirements adopted pursuant to the IFD and the IFR. supervision.

For that purpose, the competent authority

(a) shall co-operate with trust and full mutual respect, as

party to the ESFS, in particular when ensuring the exchange of

appropriate, reliable and exhaustive information between them

and other parties to the ESFS;

(b) shall participate in the activities of the EBA and, as

appropriate, in the colleges of supervisors referred to in Article

48 of the IFD and in Article 116 of the CRD;

(c) shall make every effort to comply with those

guidelines and recommendations issued by the EBA in

accordance with Article 16 of Regulation (EU) No 1093/2010

and to respond to the warnings and recommendations issued by

the ESRB pursuant to Article 16 of Regulation (EU) No 1092/

2010;

(d)

shall co-operate closely with the ESRB;

(e) shall not be inhibited by other national legislative

provisions in the performance of its duties as member of the

EBA and the ESRB, or its duties under the IFD and the IFR.

The competent authority shall, in the exercise of its general

duties, duly consider the potential impact of its decisions on the

stability of the financial system in the other Member States concerned

as well as in the Union as a whole and, in particular, in emergency

situations, based on the information available at the relevant time.

(1) The competent authority shall collaborate closely

with European regulatory authorities, as detailed in Schedule II, for the

purpose of its duties pursuant to the IFD and the IFR, and Directive

(EU) 2018/843 of the European Parliament and of the Council of 30

May 2018 amending Directive (EU) 2015/849 on the prevention of the

use of the financial system for the purposes of money laundering or

terrorist financing, and amending Directives 2009/138/EC and 2013/

36/EU, in particular by exchanging information about European

investment firms without delay, including

(a) all information concerning the management and

ownership structure of the investment firm;

(b) all information concerning compliance with own

funds requirements by the investment firm;

(c) all information concerning compliance with the

concentration risk requirements and

liquidity requirements

of the investment firm;

(d) all information concerning the administrative and

accounting procedures and internal control mechanisms of the

investment firm;

(e) any other relevant factors that may influence the risk

posed by the investment firm.

(2) Where Malta is the home Member State, the competent

authority shall provide the European regulatory authorities of the host

Member State immediately with any information and findings about

any potential problems and risks posed by a European investment firm

to the protection of clients or the stability of the financial system in the

host Member State which it has identified when supervising the

activities of a European investment firm.

(3) Where Malta is the home Member State of the investment

firm, the competent authority shall act upon information provided by

the European regulatory authorities of the host Member State by taking

all measures necessary to avert or remedy the potential problems and

risks referred to in sub-regulation (2). The competent authority, if so

requested by the European regulatory authorities of the host Member

State, shall explain in detail how it has taken into account the

information and findings.

(4) (a) Where Malta is the home Member State of an

investment firm, and following the communication of the information

and findings referred to in sub-regulation (2), the European regulatory

authorities of the host Member State consider that the competent

authority has not taken the necessary measures referred to in sub-

regulation (3), the European regulatory authorities of the host Member

State may, after having informed the competent authority, EBA and

ESMA, take appropriate measures to protect clients to whom services

are provided or to protect the stability of the financial system.

(b) Where Malta is the host Member State of a

European Investment Firm, and following the communication

of the information and findings equivalent to those referred to

in sub-regulation (2) to the European regulatory authority, and

the competent authority considers that the European regulatory

authority has not taken the necessary measures equivalent to

those referred to in sub-regulation (3), the competent authority

may, after having informed the European regulatory authority,

EBA and ESMA, take appropriate measures to protect clients

to whom services are provided or to protect the stability of the

financial system.

(5)

The competent authority may refer to the EBA situations

where a request for collaboration to a European regulatory authority, in

particular to exchange information, has been rejected or has not been

acted upon within a reasonable time.

(6) Where the competent authority disagrees with the

measures to be taken by the European regulatory authority of the

host Member State in relation to the information and findings

referred to in sub-regulation (2), the competent authority may refer

the matter to the EBA and request its assistance in accordance with

Article 19 of the IFR.

(7) Where Malta is the home Member State of the investment

firm, for the purpose of assessing the condition in point (c) of the first

sub-paragraph of Article 23(1) of the IFR, the competent authority

may request the competent authority of a Maltese clearing member to

provide information relating to the margin model and parameters used

for the calculation of the margin requirement of the relevant

investment firm.

(8) The competent authority may exchange information with

the bodies listed and in the manner specified in Schedule V for the

better carrying out of its supervisory functions in accordance with the

IFD and the IFR

Provided that the information received or exchanged by the

competent authority or by its officers, employees or agents as well as

inspectors, auditors and experts engaged by the competent authority,

from the bodies listed in the said Schedule, shall be treated as

confidential and protected by the duty of professional secrecy.

(1) Where a European investment firm carries out its

activities through a branch in Malta, the competent authority may

permit the European regulatory authority of the home Member State

concerned, after it has notified the competent authority, to carry out,

itself or through an intermediary appointed for that purpose, on-the-

spot checks of the information referred to in regulation 6 and

inspections of such branches.

(2) The competent authority may carry out, on a case-by-case

basis, on-the-spot checks and inspections of the activities carried out

by branches of European investment firms in Malta and require

information from a branch about its activities and for supervisory

purposes, where it considers it relevant for reasons of stability of the

financial system in Malta. Before carrying out such checks and

inspections, the competent authority shall consult the European

regulatory authority of the home Member State concerned.

(3) On-the-spot checks and inspections of branches when

carried out in Malta shall be conducted in accordance with the laws of

Malta.

(4) As soon as possible, following completion of those checks

and inspections, the competent authority shall communicate to the

European regulatory authority of the home Member State, the

information obtained and findings that are relevant for the risk

assessment of the investment firm concerned.

(1) The competent authority shall collect the information Oversight of

disclosed publicly by investment firms in relation to Article 51 of the remuneration.

IFR as well as the information provided by investment firms on the

gender pay gap and shall use it to benchmark remuneration trends and

practices and shall provide this information to the EBA.

(2) The competent authority shall collect information on the

number of natural persons per investment firm that are remunerated €1

million or more per financial year, in pay brackets of €1 million,

including data on their work responsibilities, the business area

involved and the main elements of their salary, including bonuses,

long-service awards and pension contributions.

(3) The competent authority can demand investment firms to

provide it with the total remuneration figures for each member of the

management body or senior management.

(4) The competent authority shall forward the information

contained in sub-regulations (2) and (3) to the EBA.

(1) The competent authority shall review, to the extent Supervisory

relevant and necessary, taking into account the investment firm’s size, review

evaluation.

risk profile and business model, the arrangements, strategies,

processes and mechanisms implemented by the investment firm to

comply with the IFD and IFR and evaluate the following as

appropriate and relevant, so as to ensure a sound management and

coverage of its risks

(a)

the risks referred to in Article 29 of the IFD;

(b) the geographical location of an investment firm’s

exposures;

(c)

the business model of the investment firm;

(d) the assessment of systemic risk, taking into account

the identification and measurement of systemic risk under

Article 23 of the IFR or recommendations of the ESRB;

(e) the risks posed to the security of investment firms’

network and information systems to ensure confidentiality,

integrity and availability of their processes, data and assets;

(f) the exposure of investment firms to the interest rate

risk arising from non‐trading book activities;

(g) governance arrangements of investment firms and the

ability of members of the management body to perform their

duties

Provided that for the purposes of this sub-regulation, the

competent authority shall duly take into account whether the

investment firm holds a professional indemnity insurance.

(2) The competent authority shall establish the frequency and

intensity of the review and evaluation referred to in sub-regulation (1)

having regard to the size, systemic importance, nature, scale and

complexity of the activities of the investment firm concerned and

taking into account the principle of proportionality. The provisions of

the Investment Services Act (Control of Assets) Regulations must be

taken into consideration.

(3) The competent authority shall decide on a case‐by‐case

basis whether and in which form the review and evaluation is to be

carried out with regard to investment firms that meet the conditions for

qualifying as small and non‐interconnected investment firms set out in

Article 12(1) of the IFR, only where it deems it to be necessary due to

the size, nature, scale and complexity of the activities of those

investment firms.

(4) When conducting the review and evaluation referred to in

paragraph (g) of sub-regulation (1), the competent authority shall have

access to agendas, minutes and supporting documents for meetings of

the management body and its committees, and the results of the

internal or external evaluation of the performance of the management

body.

(1) The competent authority shall review on a regular

basis, and at least every three years, investment firms’ compliance

with the requirements for the permission to use internal models as

referred to in Article 22 of the IFR. It shall in particular have regard to

changes in an investment firm’s business and to the implementation of

those internal models to new products, and review and assess whether

the investment firm uses well‐developed and up‐to‐date techniques

and practices for those internal models. The competent authority shall

ensure that material deficiencies identified in the coverage of risk by

an investment firm’s internal models are rectified, or take steps to

mitigate their consequences, including by imposing capital add‐ons or

higher multiplication factors.

(2) Where for an internal market risk model numerous

overshootings as referred to in Article 366 of the CRR indicate that the

model is not or is no longer sufficiently accurate, the competent

authority shall revoke the permission for using the internal model or

impose appropriate measures to ensure that the model is improved

promptly within a set timeframe.

(3) If an investment firm has received permission from the

competent authority to apply an internal model but no longer meets the

requirements for applying those internal models, the competent

authority shall require the investment firm to either demonstrate to the

satisfaction of the competent authority that the effect of non-

compliance is immaterial or present a plan and a deadline to comply

with the requirements. The competent authority shall require

improvements to that plan if it is unlikely to result in full compliance

or if the deadline is inappropriate. If the investment firm is unlikely to

be able to restore compliance within an appropriate deadline or has not

satisfactorily demonstrated that the effect of non-compliance is

immaterial, the permission to use the approach shall be revoked or

limited to compliant areas or those where compliance can be achieved

within an appropriate deadline.

(4) The competent authority shall take into account the

analysis carried out by the EBA in terms of Article 37 of the IFD and

the guidelines containing benchmarks on the basis of that analysis

issued by the EBA, for the review of the permissions it grants to

investment firms to use internal models.

(1) The competent authority shall require an investment Supervisory

firm to take the necessary measures at an early stage to address measures.

relevant problems in circumstances where

(a) the investment firm does not meet the requirements of

the Act, regulations or Investment Services Rules issued

thereunder, transposing the requirements of the IFD or of the

IFR;

(b) the competent authority has evidence that the

investment firm is likely to breach the Act, regulations or

Investment Services Rules issued thereunder, or the provisions

of the IFR, within the following twelve months.

(2)

For the purposes of sub-regulation (1), the powers of the

competent authority shall include those contained in Schedule I.

(3) The competent authority has the supervisory powers to

intervene in the exercise of its functions into the activity of investment

firms in an effective and proportionate way.

(4) For the purposes of regulations 10, 11(3), 12 and of the

application of the IFR, the competent authority shall have the

powers as designated in Schedule I below.

(1) The competent authority shall impose the specific

liquidity requirements referred to in paragraph (1)(k) of Schedule I

only where, on the basis of the reviews carried out in accordance with

regulations 9 and 10, it concludes that an investment firm that does not

meet the conditions for qualifying as a small and non‐interconnected

investment firm set out in Article 12(1) of the IFR or that meets the

conditions set out in Article 12(1) of the IFR but has not been

exempted from liquidity requirement in accordance with Article 43(1)

of the IFR is in one of the following situations

(a) the investment firm is exposed to liquidity risk or

elements of liquidity risk that are material and are not covered or

not sufficiently covered by the liquidity requirement set out in

Part Five of the IFR;

(b) the investment firm does not meet the requirements

set out in Articles 24 and 26 of the IFD and other administrative

measures are unlikely to sufficiently improve the arrangements,

processes, mechanisms and strategies within an appropriate

timeframe.

(2) For the purposes of paragraph (a) of regulation 18(1),

liquidity risk or elements of liquidity risk shall be considered not to

be covered or to be insufficiently covered by the liquidity

requirement set out in Part Five of the IFR only where the amounts

and types of liquidity considered adequate by the competent

authority following the supervisory review of the assessment carried

out by investment firms in accordance with Article 24(1) of the IFD

are higher than the investment firm’s liquidity requirement set out in

Part Five of the IFR.

(3) The competent authority shall determine the level of the

specific liquidity required pursuant to paragraph (1)(k) of Schedule I

as the difference between the liquidity considered adequate pursuant to

sub-regulation (2) and the liquidity requirement set out in Part Five of

the IFR.

(4)

The competent authority shall require investment firms to

meet the specific liquidity requirements referred to in paragraph (1)(k)

of Schedule I with liquid assets as set out in Article 43 of the IFR.

(5) The competent authority shall substantiate in writing its

decision to impose a specific liquidity requirement as referred to in

paragraph (1)(k) of Schedule I by giving a clear account of the full

assessment of the elements referred to in sub-regulations (1) to (3).

The competent authority shall inform the EBA of

Notification to

EBA by the

competent

(a) its review and evaluation process referred to in

authority.

regulation 9;

(b) the methodology used for decisions referred to in

regulation 12 and Schedule I;

(c) the level of administrative sanctions laid down by

Member States, referred to in Article 18 of the IFD.

The competent authority, when processing personal data for Data protection.

the purposes of the IFD, shall do so in accordance with Regulation

(EU) 2016/679 of the European Parliament and of the Council of 27

April 2016 on the protection of natural persons with regard to the

processing of personal data and on the free movement of such data,

and repealing Directive 95/46/EC (General Data Protection

Regulation).