SUPERVISORY CONSOLIDATION (INVESTMENT FIRMS DIRECTIVE) REGULATIONS

(INVESTMENT FIRMS DIRECTIVE)

SUBSIDIARY LEGISLATION 370.49

SUPERVISORY CONSOLIDATION

(INVESTMENT FIRMS DIRECTIVE) REGULATIONS

11th February 2022 *

LEGAL NOTICE 24 of 2022, as amended by Legal Notices 75 of

2023 and 152 of 2025.

(1)

The title of these regulations is the Supervisory

Consolidation (Investment Firms Directive) Regulations.

(2)

The scope of these regulations is to transpose Articles 3,

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.

(1)

In these regulations, unless the context otherwise

requires -

"the Act" the Investment Services Act;

"ancillary services undertaking" shall have the same meaning as

assigned to it in point (1) of Article 4 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 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)

* See Legal Notice 61 of 2022.

(INVESTMENT FIRMS DIRECTIVE)

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 parent investment firm" shall have the same meaning as that

assigned to "Union Parent Investment Firm" in point (56) of Article

4(1) of the IFR;

"EU parent investment holding company" shall have the same

meaning as that assigned to "Union parent investment holding

company" in point (57) of Article 4(1) of the IFR;

"EU parent mixed financial holding company" shall have the

same meaning as that assigned to "Union parent mixed financial

holding company" in point (58) of Article 4(1) of the IFR;

"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

"group supervisor" means a competent authority responsible for

the supervision of compliance with the group capital test of EU

parent investment firms and investment firms controlled by EU

parent investment holding companies or EU parent mixed financial

holding companies;

"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 ;

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"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 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 or supervision of compliance with

the group capital test

(a)

where the parent undertaking is a parent

institution in Malta or an EU parent investment firm, licensed in

terms of the Act;

(b)

where the parent of an investment firm licensed in

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terms of the Act is an EU parent investment holding company

or an EU parent mixed financial holding company;

(c)

where two (2) or more investment firms

authorised in two (2) or more Member States, at least one of

which is licensed in accordance with the Act, have as their

parent the same EU parent investment holding company or the

same EU mixed financial holding company which is established

in Malta;

(d)

where two (2) or more investment firms are

authorised in two (2) or more Member States, one of which is

licensed in accordance with the Act, having parent undertakings

comprise more than one EU investment holding company or EU

mixed financial holding company with head offices in different

Member States and there being an investment firm in each of

those Member States, and the investment firm with the largest

balance sheet total is that licensed in terms of the Act; and

(e)

where two (2) or more investment firms, one of

which is licensed in accordance with the Act, having the same

EU parent investment holding company or EU parent mixed

financial holding company and none of those investment firms

have been authorised in the Member State in which the EU

parent investment holding company or EU parent mixed

financial holding company are set up, and the investment firm

licensed in terms of the Act has the largest balance sheet total.

(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 for the effective supervision on a

consolidated basis or supervision of compliance with the group capital

test, taking into account the investment firms and the relative

importance of their activities in the relevant European Member States,

and designate another European regulatory authority to exercise

supervision on a consolidated basis or supervision of compliance with

the group capital test. In these cases, before taking its decision, the

competent authority shall give the EU parent investment holding

company, EU parent mixed financial holding company or the

investment firm 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, a college of supervisors may be

established to exercise supervision on a consolidated basis where

subsidiaries of an investment firm group headed by an investment firm

authorised in a Member State, an EU parent investment holding

company, or an EU parent mixed financial holding company, are

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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).

(1)

In addition to the obligations imposed by the

provisions of the Act and any regulations or Rules made thereunder

transposing the requirements of the IFD, and by the IFR, the college of

supervisors shall provide a framework to the competent authority, as

consolidating supervisor to carry out the following tasks

(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.

(INVESTMENT FIRMS DIRECTIVE)

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 an investment

firm group have been authorised and where the competent authority is

the group supervisor in accordance with regulation 3(1) and (2), 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 group

supervisor as determined in regulation 3, it may, if appropriate,

establish a college of supervisors to facilitate the tasks under Article

48 of the IFD as transposed in Maltese legislation and to ensure

coordination and cooperation with third-country supervisory

authorities in particular where this is needed for the purpose of

applying Article 23(1)(c) and (2) of the IFR, to exchange and update

relevant information on the margin model with the supervisory

authorities of qualifying central counterparties (QCCPs).

(1a) The competent authority shall also 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 established 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 group supervisor,

as determined in Regulation 3, it shall chair the meetings of the college

and adopt decisions. Such decisions shall take into account the

relevance of the supervisory activity to be planned or co-ordinated by

the authorities as referred to in regulation (1a)(a) and (b), the potential

impact on the stability of the financial system in the Member States

(INVESTMENT FIRMS DIRECTIVE)

concerned and, in particular, in emergency situations, based on the

information available at the relevant time.

(4)

The competent authority, as group 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 the competent authorities listed in regulation 6(1) and shall

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

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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 group 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 and the group supervisor may

refer to the EBA, in accordance with Article 19(1) of Regulation (EU)

No 1093/2010, in any of the following situations

(a)

where a European regulatory authority has not

communicated essential information in accordance with sub-

regulation (1) and (2), without undue delay;

(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.

(INVESTMENT FIRMS DIRECTIVE)

(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.