Regulations, 2022

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,774, 27 ta’ Jannar, 2022 B 211

L.N. 24 of 2022

INVESTMENT SERVICES ACT

(CAP. 370)

Supervisory Consolidation (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 Supervisory Citation, scope

and

Consolidation (Investment Firms Directive) Regulations, 2022.

commencement.

(2) The scope of these regulations is to transpose Articles 46,

47, 48, 49, and 55 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.

(1)

In these regulations, unless the context otherwise Interpretation.

requires -

"the Act" the Investment Services Act;

"ancillary services undertaking" shall have the same

meaning as that assigned to it in point (1) of Article 3 of the IFR;

"consolidated basis" shall have the same meaning as that

assigned to it in point (12) of Article 4(1) of the IFR;

"consolidated situation" shall have the same meaning as

that assigned to it in point (11) of Article 4(1) of the IFR;

"the competent authority" means the Malta Financial Cap. 330.

Services Authority established by article 3 of the Malta Financial

Services Authority Act;

"consolidating supervisor" shall have the same meaning as

that assigned to it in point (41) of Article 4(1) of the CRR;

"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;

"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 as

established by Regulation (EU) No 1093/2010;

"EEA" means a State which is a contracting party to the

Agreement on the European Economic Area signed at Oporto on

the 2nd May, 1992 as amended by the protocol signed at Brussels

on the 17th March, 1993 and as amended by any subsequent Act;

"ESRB" means the European Systemic Risk Board

established by Regulation (EU) No 1092/2010;

"EU investment firm" means a firm as defined in point (1)

of Article 4(1) of MIFID;

"European regulatory authority" means an authority which

is situated in a country or territory outside Malta that is a

Member State and is empowered by law or regulation to

supervise investment firms;

"financial holding company" shall have the same meaning

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

"financial institution" shall have the same meaning as that

assigned to it in point (14) of Article 4(1) of the IFR

"home Member State" shall have the same meaning as that

assigned to it in point (55)(a) of Article 4(1) of the MIFID;

"host Member State" shall have the same meaning as that

assigned to it in point (56) of Article 4(1) of the MIFID ;

"investment firm" means a person who holds an investment

services licence issued by the competent authority under the

Investment Services Act and which is subject to the requirements

of the IFD and IFR;

"Member State" means a Member State of the European

Union and includes an EEA State;

"mixed financial holding company" shall have the same

meaning as that assigned to it in point (40) of Article 4(1) of the

IFR;

"parent financial holding company in a Member State"

shall have the same meaning as that assigned to it in point (30) of

Article 4(1) of the CRR;

''parent institution in Malta" means an institution in Malta

which has an institution or a financial institution as a subsidiary

or which holds a participation in such an institution or financial

institution, and which is not itself a subsidiary of another

institution authorised in Malta, or of a financial holding

company or mixed financial holding company set up in Malta;

"parent mixed financial holding company in a Member

State" shall have the same meaning as that assigned to it in point

(32) of Article 4(1) of the CRR;

"parent undertaking" shall have the same meaning as that

assigned to it in point (42) of Article 4(1) of the IFR;

"participation" shall have the same meaning as that

assigned to it in point (35) of Article 4(1) of the CRR;

"Rules" means Rules for investment firms issued by the

competent authority in terms of the Investment Services Act;

"subsidiary" shall have the same meaning as that assigned

to it in point (51) of Article 4(1) of the IFR;

"third country" means a country that is not a Member State;

"third country regulatory authority" means an authority

which is in a country or territory that is not a Member State and

is empowered by law or regulation to supervise investment

firms.

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

same meaning as that assigned to them in the Act.

(1)

The competent authority shall exercise supervision

on a consolidated basis

(a) where the parent undertaking is a parent institution in

Malta or an EU parent institution, licensed in terms of the Act;

(b) where the parent of an investment firm licensed in

terms of the Act is a parent financial holding company or a

parent mixed financial holding company in a Member State or an

EU parent financial holding company or an EU parent mixed

financial holding company;

(c) where investment firms authorised in two or more

Member States, and one of the investment firms is an investment

firm licensed in terms of the Act, have as their parent the same

parent financial holding company, the same parent mixed

financial holding company in a Member State, the same EU

parent financial holding company or the same EU parent mixed

financial holding company established in Malta;

(d) where investment firms authorised in two or more

Member States, one of which is Malta, have as their parent more

than one financial holding company or mixed financial holding

company with head offices in different Member States, one of

which is Malta and the investment firm which is licensed in

Malta has the largest balance sheet total;

(e) where the parent financial holding company or parent

mixed financial holding company is established in a Member

State other than Malta and it has more than one investment firm

authorised in the European Union other than the Member State

where the financial holding company is set up, one of which is

licensed in Malta, and the investment firm licensed in Malta has

the largest balance sheet total. That investment firm shall be

considered to be controlled by an EU parent financial holding

company or an EU parent mixed financial holding company.

(2) In particular cases, the competent authority may, by

common agreement with other European regulatory authorities, waive

the criteria referred to in sub-regulation (1)(c), (d) and (e) if their

application would be inappropriate, taking into account the investment

firms and the relative importance of their activities in different

countries, and appoint a European regulatory authority to exercise

supervision on a consolidated basis. In these cases, before taking its

decision, the competent authority shall give the EU parent institution,

EU parent financial holding company, EU parent mixed financial

holding company or the institution with the largest balance sheet total,

as appropriate, an opportunity to state its opinion on that decision. The

competent authority shall notify the Commission and the EBA of any

such agreement.

(3) Where appropriate, the competent authority may exercise

supervision on a consolidated basis where subsidiaries of an

investment firm group headed by an investment firm authorised in a

Member State, parent investment holding company authorised in a

Member State, or parent mixed financial holding company authorised

in a Member State, are located in a third country.

(4) Where appropriate, the competent authority may exercise

supervision on a consolidated basis to facilitate the exercise of the

tasks referred to in this regulation and to ensure co-ordination and co-

operation with relevant third‐country supervisory authorities in

particular where this is needed for the purpose of applying point (c) of

the first sub-paragraph of Article 23(1) and Article 23(2) of the IFR to

exchange and update relevant information on the margin model with

the supervisory authorities of the qualifying central counterparties

(QCCPs).

4 . (1) In addition to the obligations imposed by the Functions of

provisions of the Act and any regulations or Rules made thereunder the

authority with

transposing the requirements of the IFD, and by the IFR, the respect to

competent authority acting as consolidating supervisor, shall carry out supervision

on a

the following tasks

consolidated

basis.

(a)

those referred to in regulation 5;

(b) the co-ordination of information requests where this

is necessary for facilitating supervision on a consolidated basis,

in accordance with Article 7 of the IFR;

(c) the co-ordination of information requests, in cases

where several competent authorities of investment firms that are

part of the same group need to request either from the competent

authority of a clearing member’s home Member State or from the

competent authority of the qualifying central counterparties

information relating to the margin model and parameters used for

the calculation of the margin requirement of the relevant

investment firms;

(d) the exchange of information between all competent

authorities and with the EBA in accordance with Article 21 of

Regulation (EU) No 1093/2010 and with the ESMA in

accordance with Article 21 of Regulation (EU) No 1095/2010;

(e) reaching an agreement on the voluntary delegation

between competent authorities of tasks and responsibilities,

where appropriate;

(f) increasing the efficiency of supervision by seeking to

avoid the unnecessary duplication of supervisory requirements.

Where an emergency situation, including a situation as

described in article 18 of Regulation (EU) No 1093/2010 or a situation

of adverse developments in markets arises, which potentially

jeopardises the market liquidity and the stability of the financial

system in any of the Member States where entities of a group have

been authorised and where the competent authority is the consolidating

supervisor, it shall, subject to confidentiality requirements in the Malta

Financial Services Authority Act and any other applicable law, alert as

soon as is practicable the EBA, ESRB and any relevant competent

authorities and it shall communicate to the said authorities all the

information that is essential for the pursuance of their tasks.

(1) Where the competent authority is the consolidating

supervisor, it shall establish a college of supervisors and ensure that

the following are members of the college of supervisors

(a) the competent authorities responsible for the

supervision of subsidiaries of an investment firm group headed

by an EU investment firm, EU parent investment holding

company or EU parent mixed financial holding company;

(b) where appropriate, third‐country supervisory

authorities, subject to confidentiality requirements that are

equivalent in the opinion of all competent authorities to the

requirements laid down in Section 2 of Chapter I of Title IV of

the IFD.

(2) Where the competent authority is the consolidating

supervisor in terms of these regulations, it shall establish and manage

the colleges of supervisors based on written arrangements referred to

in regulation 6, determined after consultation with European

regulatory authorities and third country regulatory authorities

concerned.

(3) Where the competent authority is the consolidating

supervisor, it shall chair the meetings of the college and shall decide

which European regulatory authorities and third country regulatory

authorities, where relevant, participate in a meeting or in an activity of

the college. The decision shall take into account the relevance of the

supervisory activity to be planned or co-ordinated for those authorities,

and in particular, the potential impact on the stability of the financial

system in the Member States concerned and, in particular, in

emergency situations, based on the information available at the

relevant time and the obligations referred to in regulation 14(6) and

(7).

(4) The competent authority, as consolidating supervisor, shall

keep all members of the college fully informed, in advance, of the

organisation of the meetings of the college, about the main issues to be

discussed and the activities to be considered and shall also keep all the

members of the college fully informed, in a timely manner, of the

actions taken in those meetings or the measures carried out.

(5) In the case of disagreement between the competent

authorities on the functioning of the supervisory colleges, the

competent authority may refer the matter to the EBA and request its

assistance in accordance with Article 19 of Regulation (EU) No 1093/

2010.

(1) The competent authority shall co-operate closely with Co-operation

the competent authorities listed in regulation 6(1) and shall with

authorities.

communicate on request all relevant information and shall

communicate on its own initiative all relevant information.

(2) For the purpose of sub-regulation (1) relevant information

shall include, in particular, the following items

(a) identification of the investment group’s legal

structure and the governance structure including organisational

structure, covering all regulated entities, non-regulated entities,

non-regulated subsidiaries, and the parent undertakings, and of

the competent authorities of the regulated entities in the

investment firm group;

(b) procedures for the collection of information from the

investment firms in a group and the verification of that

information;

(c) any adverse developments in investment firms or in

other entities of a group, which could seriously affect the

investment firms;

(d) significant penalties and exceptional measures taken

by the competent authority in accordance with the IFD; and

(e) the imposition of a specific own funds requirement

under Article 39 of the IFD.

(3)

The competent authority shall consult with European

regulatory authorities concerned before taking a decision that may be

important for other competent authorities’ supervisory tasks

(a) changes in the shareholder, organisational or

management structure of investment firms in the group, which

require the approval or authorisation of the competent authority;

and

(b) significant penalties or exceptional measures taken by

the competent authority, including the imposition of a specific

own funds requirement under the Investment Services Act

(Supervisory Review) Regulations, and specific own funds

requirements imposed in accordance with Article 39 of the IFD

Provided that the competent authority shall always consult

the consolidating supervisor for the purposes of paragraph (b) and may

decide not to consult European regulatory authorities in cases of

urgency or where such consultation could jeopardise the effectiveness

of its decision. In such cases, the competent authority shall, without

delay, inform the European regulatory authorities after taking its

decision.

(4) The competent authority may refer to the EBA any of the

following situations

(a) where a European regulatory authority has not

communicated essential information;

(b) where a request for co-operation, in particular to

exchange relevant information, has been rejected or has not been

acted upon within a reasonable time.

(1) Where an investment firm licensed in terms of the

Act, the parent undertaking of which is an investment firm or a

financial holding company or mixed financial holding company, the

head office of which is established in a third country, is not subject to

consolidated supervision, the competent authority shall assess whether

the investment firm is subject to consolidated supervision by a third

country regulatory authority which is equivalent to that governed by

the principles laid down in this regulation and the requirements of Part

One of the IFR.

(2) Where the assessment referred to in sub-regulation (1)

concludes that no such equivalent supervision applies, the competent

authority shall apply appropriate supervisory techniques which

achieve the objectives of supervision in accordance with Articles 7 or

8 of the IFR. Those supervisory techniques shall be decided by the

competent authority which would be the group supervisor had the

parent undertaking been established in the Union, after consulting the

other competent authorities involved. Any measures taken pursuant to

this paragraph shall be notified to the other competent authorities

involved, to the EBA and to the Commission.

(3) The competent authority which would be the group

supervisor had the parent undertaking been established in a Member

State may, in particular, require the establishment of an investment

holding company or mixed financial holding company in a Member

State and apply Articles 7 or 8 of the IFR to that investment holding

company or mixed financial holding company.

€0.45