INVESTMENT SERVICES ACT (EXEMPTION) REGULATIONS

SUBSIDIARY LEGISLATION 370.02

INVESTMENT SERVICES ACT (EXEMPTION)

REGULATIONS

1st November, 2007

LEGAL NOTICE 329 of 2007, as amended by Legal Notices 59 of 2010,

252 of 2013, 11 of 2015, 216 of 2016, 396 of 2017, 285 of 2021, 290 of

2023 and 217 of 2025.

(1) The title of these regulations is the Investment Services

Act (Exemption) Regulations.

(2) The objective of these regulations is, in part to implement

Article 4(1) paragraphs 22, 23 and 40, Article 2(1) paragraphs (d), (e),

(h), (j), (n), (o), (p) and Article 5(2) of MiFID, and Articles 2(3)(b),

(c), (e), (f) and (g) and Article 3(1) of the AIFM Directive, as herein

defined, and they shall be interpreted and applied accordingly.

(1)

In these regulations, unless the context otherwise

requires

"the Act" means the Investment Services Act;

"AIFM Directive" means Directive 2011/61/EU of the European

Parliament and of the Council of 8 June 2011 on Alternative

Investment Fund Managers and amending Directives 2003/41/EC

and 2009/65/EC and Regulations (EC) No 1060/ 2009 and (EU) No

1095/2010, as amended from time to time, and includes any

implementing measures that have been or may be issued

thereunder;

"alternative investment fund" or "AIF" means a collective

investment scheme, including subfunds thereof, which raises

capital from a number of investors, with a view to investing it in

accordance with a defined investment policy for the benefit of

those investors, and which does not qualify as a UCITS Scheme in

terms of the UCITS Directive;

"alternative investment fund manager" or "AIFM" means a legal

person whose regular business is managing one or more AIFs;

"CSD" means a legal person that operates a securities settlement

system as referred to in point (3) of Section A of the Annex to the

CSD Regulation and provides at least one other of the following

core services listed in Section A of the said Annex

(i)

initial recording of securities in a book-entry

system (‘notary service’);

(ii)

providing and maintaining securities accounts at

the top tier level (‘central maintenance service’);

"CSD Regulation" means Regulation (EU) No 909/2014 of the

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

improving securities settlement in the European Union and on

central securities depositories and amending Directives 98/28/EC

and MiFID and Regulation (EU) No 236/2012, as may be amended

from time to time, and includes any implementing measures that

have been or may be issued there under;

"Directive 2003/87/EC" means Directive 2003/87/EC of the

European Parliament and of the Council of 13 October 2003

establishing a scheme for greenhouse gas emission allowance

trading within the Community and amending Council Directive 96/

61/EC;

"Directive 2009/72/EC" means Directive 2009/72/EC of the

European Parliament and of the Council of 13 July 2009

concerning common rules for the internal market in electricity and

repealing Directive 2003/54/EC;

"Directive 2009/73/EC means Directive 2009/73/EC of the

European Parliament and of the Council of 13 July 2009

concerning common rules for the internal market in natural gas and

repealing Directive 2003/55/EC;

"Directive 2013/36/EU" 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 and Maltese investment firms, amending Directive

2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC;

"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;

"high-frequency algorithmic trading technique" means an

algorithmic trading technique characterised by

(i)

infrastructure intended to minimise network and

other types of latencies, including at least one of

the following facilities for algorithmic order

entry: co-location, proximity hosting or high-

speed direct electronic access;

(ii) system-determination

of

order

initiation

generation, routing or execution without human

intervention for individual trades or orders; and

(iii) high message intraday rates which constitute

orders, quotes or cancellations;

"List of Notified AIFs" shall be understood as referring to the List

of Notified AIFs in good standing which is held by the competent

authority on its website in terms of the Investment Services Act (List

of Notified AIFs) Regulations;

"List of Notified PIFs" shall be construed as a reference to the List

of Notified PIFs which is held by the competent authority on its

website in terms of the Investment Services Act (Notified CISs)

Regulations;

"Maltese investment firm" means a person licensed in terms of the

Act, whose head office is in 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;

"market maker" means a person who holds himself out on the

financial markets on a continuous basis as being willing to deal on

own account by buying and selling instruments against his or her

proprietary capital at prices defined by him or her;

"market operator" shall have the same meaning as that assigned

to it by the Financial Markets Act;

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

and of the Council of 15 May 2014 on markets in financial instruments

and amending Directive 2002/92/EC and Directive 2011/61/EU, as

amended from time to time, and includes any implementing measures

that have been or may be issued there under;

"multilateral trading facility" or "MTF" means a multilateral system

operated by a Maltese 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 the provisions of Title II of MiFID;

"Occupational Pensions Directive" means Directive 2003/41/EC

of the European Parliament and of the Council of the 3rd June,

2003 on the activities and supervision of institutions for

occupational retirement provision as may be amended from time to

time and includes any implementing measures that may be issued

thereunder;

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

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 the provisions of Title II of MiFID;

"parent company" shall have the same meaning as that assigned

to it under the Companies Act;

"private company" shall have the same meaning as that assigned

to it by the Companies Act;

""professional investor fund"" or ""PIF"" means a collective

investment scheme which qualifies as a professional investor fund in

terms of the Investment Services Rules;

"Regulation (EC) No 714/2009" means Regulation (EC) No 714/

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

2009 on conditions for access to the network for cross-border

exchanges in electricity and repealing Regulation (EC) No 1228/

2003, as amended from time to time;

"Regulation (EC) No 715/2009" means Regulation (EC) No 715/

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

2009 on conditions for access to the natural gas transmission

netw orks an d r epeal ing Reg ulat ion ( EC ) No 177 5/2 005 , as

amended from time to time;"

"retail investor" means an investor who is not a professional

investor;

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

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

of laws, regulations and administrative provisions relating to

undertakings for collective investment in transferable securities

(UCITS) (recast), as amended from time to time, and includes any

implementing measures that have been or may be issued

thereunder.

(2) Words and expressions used in these regulations which are

also used in the Act but which are not defined herein shall have the

same meaning as in the Act.

(1) The following persons are hereby being exempted for

the purposes of the requirement for a licence for investment

services in terms of article 3 of the Act

(a) the Central Bank of Malta and the members of the ESCB

and other national bodies performing similar functions in

the Union, other public bodies charged with or

intervening in the management of the public debt in the

Union and international financial institutions established

by two or more Member States which have the purpose of

mobilizing funding and providing financial assistance to

the benefit of their members that are experiencing or

threatened by severe financing problems;

(b) the competent authority and any person who is

appointed thereby in the course and for the purpose of

its regulatory and supervisory functions;

(c) a liquidator or a curator in bankruptcy acting in the

course of the liquidation or bankruptcy;

(d) persons dealing on own account in financial

instruments other than commodity derivatives or

emission allowances or derivatives thereof and not

providing any other investment services or performing

any other investment activities in financial instruments

other than commodity derivatives or emission

allowances or derivatives thereof unless such persons

(i)

are market makers;

(ii)

are members of or participants in a regulated

market or an MTF, except for non-financial entities

that execute transactions on a trading venue where

such transactions are part of liquidity management

or are objectively measurable as reducing risks

directly relating to the commercial activity or

treasury financing activity of those non-financial

entities or their groups ;

(iii) apply a high-frequency algorithmic trading

technique; or

(iv) deal on own account when executing client

orders;

Persons exempt under point (p) are not required to meet

the conditions laid down in this point in order to be

exempt.

(e) a person, receiving and transmitting orders on behalf

of a client, executing orders on behalf of a client,

providing investment advice or placing instruments

without a firm commitment basis, in terms of

paragraphs 1, 2, 6 and 8 of the First Schedule to the

Act, as long as such person does not do any of the

following

(i)

receive, directly or indirectly, any remuneration

or other benefit for the service;

(ii) hold himself out as providing an investment

service; or

(iii) solicit members of the public to take such

services;

(f)

persons which provide investment services exclusively

for their parent companies, for their subsidiaries or for

other subsidiaries of their parent undertakings;

(g) persons providing investment services consisting

exclusively in the administration of employee-

participation schemes;

(h) a person resident outside Malta

(i)

acting as trustee or custodian in terms of

paragraph 5(c) of the First Schedule to the Act,

in relation to a collective investment scheme

licensed under the Act and qualifying as a

Professional Investor Fund in terms of the

Investment Services Rules, where the competent

authority is satisfied that such person is of

sufficient standing and repute; or

(ia) acting as trustee or custodian in terms of

paragraph 5(c) of the First Schedule to the Act, in

relation to a collective investment scheme

established as a professional investor fund that has

been included by the competent authority on the

List of Notified PIFs in terms of the Investment

Services Act (Notified CISs) Regulations, where

the competent authority is satisfied that such

person is of sufficient standing and repute; or

(ii) providing the services of management of

investments and, or investment advice, in terms

of paragraphs 4 and, or 6 of the First Schedule to

the Act to a collective investment scheme

licensed under the Act and qualifying as a

Professional Investor Fund in terms of the

Investment Services Rules, where the competent

authority is satisfied that such person is of

sufficient standing and repute; or

INVESTMENT SERVICES ACT (EXEMPTION)

(iia) providing the services of management of

investments and, or investment advice, in terms of

paragraphs 4 and, or 6 of the First Schedule to the

Act to a collective investment scheme established

as a professional investor fund that has been

included by the competent authority on the List of

Notified PIFs in terms of the Investment Services

Act (Notified CISs) Regulations, where the

competent authority is satisfied that such person

is of sufficient standing and repute; or

(iii) providing the services of management of

investments and, or investment advice, in terms

of paragraphs 4 and, or 6 of the First Schedule to

the Act to a collective investment scheme

licensed under the Act and which does not

qualify as a Professional Investor Fund in terms

of the Investment Services Rules, provided that

such person is adequately regulated in its

country of residence to the satisfaction of the

competent authority and is considered by the

competent authority to be of sufficient standing

and repute;

(iv) providing the services of acting as trustee or

custodian in terms of paragraph 5(c) of the First

Schedule to the Act, in relation to a collective

investment scheme licensed under the Act which

does not qualify as a Professional Investor Fund

in terms of the Investment Services Rules, or a

collective investment scheme which has been

included by the Competent Authority in the List of

Notified AIFs in terms of the Investment Services

Act (Notified CISs) Regulations, provided that

(a) such person is authorised in a Member

State or EEA State to provide the services

of custodian to collective investment

schemes and considered by the competent

authority to be of sufficient standing and

repute and is either -

(i) authorised in a Member State or

EEA State as a credit institution

under Directives 2006/48/EC and

2006/49/EC of the European

Parliament and of the Council of the

14 June 2006 relating to the taking

up and pursuit of the business of

credit institutions; or

(ii) forms part of a group of companies

which also includes an entity which

is authorised as a credit institution

under Directives 2006/48/EC and

2006/49/EC of the European

Parliament and of the Council of the

INVESTMENT SERVICES ACT (EXEMPTION)

14 June 2006 relating to the taking

up and pursuit of the business of

credit institutions and satisfies any

additional criteria which may be set

by the competent authority; and

(b) the collective investment scheme to which

such person acts as trustee or custodian is

of the closed ended type;

(i)

a person authorised as a credit institution under

Directives 2006/48/EC and 2006/49/EC of the

European Parliament and of the Council of the 14 June

2006 relating to the taking up and pursuit of the

business of credit institutions which replace Directive

2000/12/EC of the European Parliament and of the

Council of the 20 March 2000 relating to the pursuit

and taking up of the business of credit institutions, or a

person licensed under the Financial Institutions Act, to

the extent that the investment service provided by such

person is that of underwriting instruments, and, or

placing instruments on a firm commitment basis or

that of arranging for another person to underwrite

instruments and, or to place instruments on a firm

commitment basis, in terms of paragraph 7 of the First

Schedule to the Act;

(j)

a person authorised as a credit institution under

Directives 2006/48/EC and 2006/49/EC of the

European Parliament and of the Council of the 14 June

2006 relating to the taking up and pursuit of the

business of credit institutions which replace Directive

2000/12/EC of the European Parliament and of the

Council of the 20 March 2000 relating to the pursuit

and taking up of the business of credit institutions, or a

person licensed the Financial Institutions Act, to the

extent that, in the course of the business that the

person is authorised or licensed to carry out, that

person is a party to the purchase and sale of securities

to third parties, in a transaction which involves the

sale of securities to be repurchased or the purchase of

securities to be resold, at an agreed future date and

(k) a person, being an individual, who manages

investments, in terms of paragraph 4 of the First

Schedule to the Act, in relation to a portfolio which

includes instruments, for his spouse, descendants and

ascendants in the direct line and their relative spouses,

or his brothers and sisters, as long as such portfolio is

owned by the person to whom such services are

provided and does not constitute a collective

investment scheme, and as long as the person

providing the service does not do any of the following

(i)

receive, directly or indirectly, any remuneration

or other benefit for the service;

INVESTMENT SERVICES ACT (EXEMPTION)

(ii) hold himself out as providing an investment

service; or

(iii) solicit members of the public to take such

services;

(l)

a person who acts as manager, in terms of paragraph 4

of the First Schedule to the Act, of a portfolio which

includes instruments belonging to him and to no other

person, as long as

(i)

such portfolio has not been established for

investment purposes in the interest of other

beneficiaries where such interest is legally

enforceable; and

(ii) such portfolio does not constitute a collective

investment scheme;

(m) a person providing an investment service where that

service is provided in an incidental manner in the

course of a professional activity and that activity is

regulated by legal or regulatory provisions or a code of

ethics governing the profession which do not exclude

the provision of that service

Provided that for the purposes of this paragraph,

an investment service shall be deemed to be

provided in an incidental manner in the course of

a professional activity where the following

conditions are satisfied

(i)

a close and factual connection exists between the

professional activity and the provision of the

investment service to the same client, such that

the investment service can be regarded as

accessory to the main professional activity;

(ii) the provision of investment services to the

clients of the main professional activity does not

aim to provide a systematic source of income to

the person providing the professional activity;

and

(iii) the person providing the professional activity

does not market or otherwise promote his ability

to provide investment services, except where

these are disclosed to clients as being accessory

to the main professional activity.

(n) a person whose main business consists of dealing on

own account, in terms of paragraph 3 of the First

Schedule to the Act, in commodities and, or

commodity derivatives. This exemption shall not apply

where the person that deals on own account in

commodities and, or commodity derivatives is part of

a group, the main business of which is the provision of

other investment services within the meaning of the

Directive or of any service which a credit institution is

authorised to provide under Directives 2006/48/EC

and 2006/49/EC of the European Parliament and of the

Council of the 14 June 2006 relating to the taking up

and pursuit of the business of credit institutions which

replace Directive 2000/12/EC of the European

Parliament and of the Council of the 20 March 2000

relating to the pursuit and taking up of the business of

credit institutions;

(o) deleted by Legal Notice 285 of 2021.

(p) persons

(i)

dealing on own account, including market

makers, in commodity derivatives or emission

allowances or derivatives thereof, excluding

persons who deal on own account when

executing client orders; or

(ii) providing investment services, other than

dealing on own account, in commodity

derivatives or emission allowances or

derivatives thereof to the customers or suppliers

of their main business;

Provided that

a.

for each of those cases individually and on an

aggregate basis, the activity is ancillary to their

main business, when considered on a group

basis;

b.

those persons are not part of a group the main

business of which is the provision of investment

services within the meaning of MiFID, the

performance of any activity listed in Annex I to

Directive 2013/36/EU, or acting as a market

maker for commodity derivatives;

c.

those persons do not apply a high-frequency

algorithmic trading technique, and

d.

those persons notify annually the competent

authority that they make use of this exemption and

upon request report to the competent authority the

basis on which they consider that their activity

under sub-paragraphs (i) and (ii) is ancillary to

their main business

Provided further that persons exempt under this

paragraph are not required to meet the conditions laid

down in paragraph (d) in order to be exempt;

(q) a person who manages and, or operates the business of a

regulated market or which is a regulated market in terms

of MiFID, and who operates a MTF or an OTF in terms

of the First Schedule to the Act, subject to the

verification by the competent authority of such person’s

compliance with the requirements which the competent

authority may determine from time to time;

(r) a person providing investment advice in terms of

paragraph 6 of the First Schedule to the Act, in the

course of providing another professional activity not

INVESTMENT SERVICES ACT (EXEMPTION)

covered by "MiFID" provided that the provision of

such advice is not specifically remunerated;

(s) a person dealing on his own account, in terms of

paragraph 3 of the First Schedule to the Act, as long as

he does not hold himself out as being in the business of

buying instruments with a view to selling them, nor

solicits members of the public to deal with him on the

basis of, or consequent to, such representations;

(t)

an AIFM in so far as it manages one or more AIFs

whose only investors are the AIFM or the parent

undertakings or the subsidiaries of the AIFM or other

subsidiaries of those parent undertakings

Provided that this exemption shall apply solely for the

said activity, and only as long as none of the said

investors is itself an AIF;

(u) institutions for occupational retirement provision

which are covered by the Occupational Pensions

Directive, including, where applicable, the licensed

entities responsible for managing such institutions and

acting on their behalf referred to in Article 2(1) of the

said Directive or the investment managers appointed

pursuant to Article 19(1) of the said Directive, in so

far as they do not manage AIFs;

(v) supranational institutions, such as the European

Central Bank, the European Investment Bank, the

European

Investment

Fund,

the

European

Development Finance Institutions and bilateral

development banks, the World Bank, the International

Monetary Fund and other supranational institutions

and similar international organisations, in the event

that such institutions or organisations manage AIFs

and in so far as those AIFs act in the public interest;

(w) national, regional and local governments and bodies or

other institutions which manage collective investment

schemes supporting social security and pension

systems;

(x) Deleted by Legal Notice 396 of 2017.

(y) securitisation special purpose entities;

(z) a person providing any investment service in terms of

the First Schedule to the Act, as long as such service is

provided solely to a retirement scheme or to a

retirement fund licensed under the Retirement

Pensions Act and as long as such person is duly

licensed under the Retirement Pensions Act in relation

to the service;

(aa)

operators with compliance obligations under

Directive 2003/87/EC who, when dealing in

emission allowances, do not execute client orders

and who do not provide any investment services or

perform any investment activities other than

dealing on own account, provided that those

persons do not apply a high-frequency algorithmic

trading technique;

(bb) persons providing investment services which only

involve both the administration of employee-

participation schemes and the provision of

investment services exclusively for their parent

undertakings, for their subsidiaries or for other

subsidiaries of their parent undertakings;

(cc)

transmission system operators as defined in Article

2(4) of Directive 2009/72/EC or Article 2(4) of

Directive 2009/73/EC when carrying out their tasks

under these Directives, under Regulation (EC) No

714/2009, under Regulation (EC) No 715/2009 or

under network codes or guidelines adopted

pursuant to those Regulations, any persons acting

as service providers on their behalf to carry out

their task under those legislative acts or under

network codes or guidelines adopted pursuant to

those Regulations, and any operator or

administrator of an energy balancing mechanism,

pipeline network or system to keep in balance the

supplies and uses of energy when carrying out such

tasks

Provided that this exemption shall apply to persons

engaged in the activities set out in this point only

where they perform investment activities or provide

investment services relating to commodity

derivatives in order to carry out those activities and

shall not apply with regard to the operation of a

secondary market, including a platform for secondary

trading in financial transmission rights;

(dd)

CSDs that are regulated as such under the Financial

Markets Act, to the extent that they are regulated

under the Financial Markets Act; and

(ee)

crowdfunding service providers as defined in

paragraph (e) of Article 2(1) of Regulation (EU)

2020/1503 of the European Parliament and of the

Council of 7 October 2020 on European

crowdfunding service providers for business, and

amending Regulation (EU) 2017/1129 and

Directive (EU) 2019/1937.

(2) The exemptions laid down in paragraphs paragraphs (h), (l),

(q) and (z) s h a l l n o t b e a u t o m a t i c a l l y o p e r a t i v e b u t t h e i r

applicability shall be subject to a determination in writing by the

competent authority that the requested exemption applies.

(1) A person resident outside Malta, providing

administrative services to a collective investment scheme licensed

under the Act, shall be exempted from the requirement of

recognition in terms of article 9A of the Act when providing such

services to

(a) a collective investment scheme licensed under the Act

and qualifying as a Professional Investor Fund in

terms of the Investment Services Rules, where the

competent authority is satisfied that such person is of

sufficient standing and repute; or

(b) a collective investment scheme licensed under the Act

and which does not qualify as a Professional Investor

Fund in terms of the Investment Services Rules,

provided that such person is adequately regulated in its

country of residence to the satisfaction of the

competent authority and is considered by the

competent authority to be of sufficient standing and

repute.

(2) The exemptions laid down in this regulation shall not be

automatically operative but their applicability shall be subject to a

determination in writing by the competent authority that the

requested exemption applies.

(1) The following collective investment schemes are

hereby being exempted for the purposes of the requirement for a

licence for collective investment schemes in terms of article 4 of

the Act

(a) a scheme involving participants, each of which carries

on a business other than that which constitutes an

investment service and enters into the arrangement for

commercial purposes related to that business;

(b) a scheme which operates according to the principle of

risk spreading or in respect of which the contributions

of the participants and the profits or income out of

which payments are to be made to them are pooled, but

only if the general purpose of the scheme is

commercial and not for investment purposes;

(c) a scheme operated by a company for its own

employees, former employees and their dependants, or

for employees, former employees, or their dependants,

of companies in the same group, in instruments issued

by the company or other companies in the group and

any other instruments as may be approved by the

competent authority;

(d) a scheme established as an alternative investment fund

and managed by an alternative investment fund manager

that has been included by the competent authority on the

List of Notified AIFs in terms of the Investment Services

Act (Notified CISs) Regulations;

(da) a scheme established as a professional investor fund that

has been included by the competent authority on the List

of Notified PIFs in terms of the Investment Services Act

(Notified CISs) Regulations;

(e) investment undertakings, such as family office

vehicles, which invest the private wealth of investors

without raising external capital;

(f)

a retirement scheme or retirement fund licensed under

the Retirement Pensions Act.

(2) The exemptions laid down in this regulation shall not be

automatically operative but their applicability shall be subject to a

determination in writing by the competent authority that the

requested exemption applies.

(1) The following collective investment schemes are

hereby being exempted from the requirement to operate according

to the principle of risk spreading

(a) alternative investment funds marketed to professional

investors;

(b) a collective investment scheme licensed as a

professional investor fund targeting qualifying

investors in terms of the Investment Services Rules;

(c) a collective investment scheme licensed as a

professional investor fund targeting extraordinary

investors in terms of the Investment Services Rules;

(d) a collective investment scheme established as a

professional investor fund that has been included by the

competent authority on the List of Notified PIFs in terms

of the Investment Services Act (Notified CISs)

Regulations.

(2) The competent authority may from time to time prescribe

the requirements and conditions for granting such exemption in the

Investment Services Rules.