INVESTMENT SERVICES ACT (UCITS ADMINISTRATIVE PENALTIES, MEASURES AND INVESTIGATORY POWERS) REGULATIONS

SUBSIDIARY LEGISLATION 370.33

INVESTMENT SERVICES ACT (UCITS

ADMINISTRATIVE PENALTIES, MEASURES AND

INVESTIGATORY POWERS) REGULATIONS

5th April, 2016

LEGAL NOTICE 115 of 2016, as amended by Legal Notice 222 of 2016.

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

Act (UCITS Administrative Penalties, Measures and Investigatory

Powers) Regulations.

(2) The objective of these regulations is to transpose Articles

99(6)(e), (f) and (g) and Articles 99a, 99b, 99c and 99d of the

UCITS Directive.

(1) In these regulations, unless the context otherwise

requires

"the Act" shall mean the Investment Services Act;

"the competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority

Act;

"UCITS" means undertakings for collective investment in

transferable securities in terms of the UCITS Directive as defined

herein;

"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 by Directive 2014/91/EU of the

European Parliament and of the Council of 23 July 2014 and

including the Delegated Acts which the Commission is empowered

to adopt to further supplement the provisions of Directive 2014/91/

EU relating to the custodians of UCITS.

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

have the same meaning as in the Act.

The competent authority shall impose administrative

penalties and other administrative measures in respect of breaches

o f th e p r o v i s i o n s o f t h e A c t a nd , o r of r e g u l a t io n s an d , o r

Investment Services Rules made thereunder transposing the

provisions of the UCITS Directive.

The competent authority shall, exercise its supervisory

powers and its powers to impose penalties as follows

(a) in the case of a legal person, the administrative

pecuniary sanction of up to a maximum of 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

INVESTMENT SERVICES ACT (UCITS ADMINISTRATIVE

PENALTIES, MEASURES AND INVESTIGATORY POWERS)

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;

(b) in the case of a natural person, the administrative

pecuniary sanction of up to a maximum of five million

euro (€5,000,000);

(c) as an alternative to paragraphs (a) and (b), the

maximum administrative pecuniary sanctions shall be

equivalent to at least twice the amount of the benefit

derived from the infringement where that benefit can

be determined, even if it exceeds the maximum

amount of five million euro (€5,000,000).

These regulations shall apply at least in any of the

following circumstances

(a) the activities of the UCITS are pursued without

obtaining authorisation, in breach of article 4 of the

Act;

(b) the business of the management company is carried

out without obtaining prior authorisation, in breach of

article 3 of the Act;

(c) the business of the investment company is carried out

without obtaining prior authorisation, in breach of

article 4 of the Act;

(d) a qualifying holding in a management company is

acquired, directly or indirectly, or such a qualifying

holding in a management company is further increased

so that the proportion of the voting rights or of the

capital held would reach or exceed 20%, 30% or 50%

or so that the management company would become its

subsidiary (‘the proposed acquisition’), without

notifying in writing the competent authority in the case

where the management company is licensed in terms

of the Act and hence the acquirer is seeking to acquire

or increase a qualifying holding, in breach of article 10

of the Act;

(e) a qualifying holding in a management company is

disposed of, directly or indirectly, or reduced so that

the proportion of the voting rights or of the capital

held would fall below 20%, 30% or 50% or so that the

management company would cease to be a subsidiary,

without notifying in writing the competent authority,

in breach of article 10 of the Act;

(f)

a management company has obtained an authorisation

through false statement or any other irregular means,

in breach of article 7(2)(c) of the Act;

(g) an investment company has obtained an authorisation

through false statements or any other irregular means,

in breach of article 7(2)(c) of the Act;

(h) a management company, on becoming aware of any

acquisition or disposal of holdings in their capital that

cause holdings to exceed or fall below one of the

thresholds referred to in Article 11(1) of Directive

2014/65/EU fails to inform the competent authority of

those acquisitions or disposals, in breach of article 10

of the Act;

(i)

a management company fails to inform the competent

authority, at least once a year, of the names of the

shareholders and members possessing qualifying

holdings and the sizes of such holdings, in breach of

article 10 of the Act;

(j)

a management company fails to comply with

procedures and arrangements imposed in accordance

with the applicable sections of the Investment Services

Rules for Investment Services Providers;

(k) a management company fails to comply with structural

and

organisational

requirements

imposed

in

accordance with the applicable sections of the

Investment Services Rules for Investment Services

Providers;

(l)

an investment company fails to comply with

procedures and arrangements imposed in accordance

with the applicable sections of the Investment Services

Rules for Retail Collective Investment Schemes;

(m) a management company or an investment company

fails to comply with the requirements related to

delegation of its functions to third parties imposed in

accordance with the Investment Services Rules for

Investment Services Providers or the Investment

Services Rules for Retail Collective Investment

Schemes as the case may be;

(n) a management company or an investment company

fails to comply with the rules of conduct imposed in

accordance with the Investment Services Rules for

Investment Services Providers or the Investment

Services Rules for Retail Collective Investment

Schemes as the case may be;

(o) a custodian fails to perform its tasks in accordance

with the provisions of regulations 6(1) to (3), 15(1),

17(1) and (2) and 18(1) of the Investment Services Act

(Custodians of Collective Investment Schemes)

Regulations, 2016;

(p) an investment company or, for each of the funds

managed, a management company, repeatedly fails to

comply with obligations concerning the investment

policies of the UCITS as laid down in the Investment

Services Rules for Investment Services Providers or

the Investment Services Rules for Retail Collective

Investment Schemes as the case may be;

(q) a management company or an investment company

fails to employ a risk-management process or a

process for accurate and independent assessment of the

value of OTC derivatives as laid down in the

Investment Services Rules for Investment Services

Providers or the Investment Services Rules for Retail

Collective Investment Schemes as the case may be;

(r) an investment company or, for each of the funds

managed, a management company, repeatedly fails to

comply with the obligations concerning information to

be provided to investors imposed in accordance with

the Investment Services Rules for Investment Services

Providers or the Investment Services Rules for Retail

Collective Investment Schemes as the case may be;

(s) a management company or an investment company

marketing units of UCITS that it manages in a Member

State other than Malta, fails to comply with the

notification requirements prescribed in regulation 4(1)

of the Investment Services Act (Marketing of UCITS)

Regulations, 2011.

(1) The competent authority shall publish any decision

against which there is no appeal imposing an administrative

sanction or measure for infringements of the provisions of the Act,

the regulations or Investment Services Rules issued thereunder on

its website without undue delay after the person on whom the

sanction or measure was imposed has been informed of that

decision. The publication referred to in this sub-regulation shall

include at least information on the type and nature of the

infringement and the identity of the persons responsible

Provided that this obligation does not apply to decisions

imposing measures that are of an investigatory nature.

(2) 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 the publication jeopardises the stability of

the financial markets or an ongoing investigation, the competent

authority shall

(a) defer the publication of the decision to impose the

sanction or measure until the reasons for non-

publication cease to exist;

(b) publish the decision to impose the sanction or measure

on an anonymous basis in a manner which complies

with Maltese law, if such anonymous publication

ensures effective protection of the personal data

concerned;

(c) not publish the decision to impose a sanction or

measure in the event that the options laid down in

paragraphs (a) and (b) are considered to be insufficient

to ensure

(i)

that the stability of the financial markets would

not be put in jeopardy;

(ii) the proportionality of the publication of such

decisions with regard to measures which are

deemed to be of a minor nature.

(3) In the case of a decision to publish a sanction or measure on

an anonymous basis, 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) The competent authority shall inform ESMA of all

administrative sanctions imposed but not published in accordance

with sub-regulation (1)(c) including any appeal in relation thereto

and the outcome of such an appeal. The competent authority shall

receive information and the final judgement in relation to any

criminal sanction imposed and submit it to ESMA.

(5) Where the decision to impose a sanction or measure is

subject to appeal before the relevant judicial or other authorities,

the competent authority shall also publish immediately on its

website such information and any subsequent information on the

outcome of such an appeal. Any decision annulling a previous

decision to impose a sanction or a measure shall also be published.

(6) 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 from its publication.

Personal data contained in the publication shall be kept on the

website of the competent authority only for the period which is

necessary in accordance with the provisions of the Data Protection

Act.

When determining the type of administrative penalties or

measures and the level of administrative pecuniary penalties, the

c o m p e t e n t a u t h o r i t y s h a l l e n s u r e t h a t t h e y a r e e ff e c t i v e ,

proportionate and dissuasive and take into account all relevant

circumstances, including where appropriate

(a) the gravity and the duration of the infringement;

(b) the degree of responsibility of the person responsible

for the infringement;

(c) the financial strength of the person responsible for the

infringement, as indicated, for example, by its total

turnover in the case of a legal person or the annual

income in the case of a natural person;

(d) the importance of the profits gained or losses avoided

by the person responsible for the infringement, the

damage to other persons and, where applicable, the

damage to the functioning of markets or the wider

economy, in so far as they can be determined;

(e) the level of cooperation with the competent authority

of the person responsible for the infringement;

(f)

previous infringements by the person responsible for

the infringement;

(g) measures taken after the infringement by the person

responsible for the infringement to prevent its

repetition.

(1) In the exercise of its powers to impose penalties, the

competent authority shall cooperate closely with other European

regulatory authorities to ensure that the supervisory and

investigative powers and administrative penalties produce the

results pursued by these regulations.

(2) The competent authority shall also coordinate actions to

avoid possible duplication and overlap when applying supervisory

and investigative powers and administrative penalties and measures

to cross-border cases in accordance with articles 17, 17A and 17B

of the Act.

(1) The competent authority shall establish, in the

applicable Investment Services Rules issued in terms of the Act,

effective and reliable mechanisms to encourage the reporting

thereto of potential or actual infringements of the provisions of the

Act, the regulations and the Rules issued thereunder, including

secure communication channels for reporting such infringements.

(2) The mechanisms referred to in sub-regulation (1) shall

include at least

(a) specific procedures for the receipt of reports on

infringements and their follow-up;

(b) appropriate protection for employees of investment

companies, management companies and custodians

who report infringements committed within those

entities, at least against retaliation, discrimination and

other types of unfair treatment;

(c) protection of personal data concerning both the person

who reports the infringements and the natural person

who is allegedly responsible for an infringement, in

accordance with the Data Protection Act;

(d) clear rules that ensure that confidentiality is

guaranteed in all cases in relation to the person who

reports an infringement, unless disclosure is required

by the provisions of Maltese legislation in the context

of further investigations or subsequent judicial

proceedings.

(3) The reporting by employees of investment companies,

management companies and custodians referred in sub-regulation

(1) shall not be considered to be an infringement of any restriction

on disclosure of information imposed by contract or by any law,

regulation or administrative provision, and shall not subject the

person reporting to liability of any kind relating to such reporting.

(4) Management companies, investment companies and

custodians shall have in place appropriate procedures for their

employees to report infringements internally through a specific,

independent and autonomous channel.