INVESTOR COMPENSATION SCHEME REGULATIONS

SUBSIDIARY LEGISLATION 370.09

INVESTOR COMPENSATION SCHEME

REGULATIONS

21st November, 2003

LEGAL NOTICE 368 of 2003, as amended by Legal Notices 36 of 2006,

425 of 2007, 228 of 2009, 62 of 2011,230 of 2017, 280 of 2023 and 186 of

2025.

The title of these regulations is the Investor Compensation

Scheme Regulations.

The objective of these regulations is to implement the

relevant provisions of Directive 97/9/EC of the European

Parliament and of the Council of 3rd March 1997 on investor-

compensation schemes, and these regulations shall be interpreted

and applied accordingly.

Substituted by

L.N. 36 of 2006.

Exclusions

(Regulation 2, 18)

The following are excluded from claiming under the Scheme

1. Persons carrying on investment services within the meaning of the

Investment Services Act, or equivalent or similar foreign legislation;

2. Credit institutions carrying on the business of banking within the meaning of

the Banking Act, or equivalent or similar foreign legislation;

3. Financial institutions within the meaning of the Financial Institutions Act,

or equivalent or similar foreign legislation;

4. Insurance undertakings carrying on the business of insurance within the

meaning of the Insurance Business Act and the Insurance Brokers and other

Intermediaries Act, or under equivalent or similar foreign legislation;

5. Collective investment schemes;

6. Pension and retirement funds;

7. Companies which are of such a size that they are not permitted to draw up

abridged balance sheets pursuant to the Companies Act, or under equivalent or

similar foreign legislation;

8. Governments and administrative authorities, national and international

institutions;

9. Local and municipal councils or authorities;

10. Debt securities issued by the same institution and liabilities arising out of

own acceptances and promissory notes;

11. Persons holding accounts which do not disclose the investor’s identity;

12. Companies and commercial partnerships in the same group as the licence

holder;

13. Directors and managers of the relevant licence holder and members of the

licence holder with personal liability, persons holding five percent or more of the

capital of such licence holder, the auditors of the licence holder and persons of the

same description with respect to a company forming part of the same group of

companies as the licence holder;

14. Close relatives, that is, ascendants, descendants or the spouse of the persons

referred to in paragraph 13;

15. Investors who have any responsibility for or have taken advantage of certain

facts relating to a licence holder which gave rise to the licence holder’s financial

difficulties or contributed to the deterioration of its financial situation;

16. Investors in respect of transactions in connection with which a criminal

conviction has been obtained for money laundering in terms of the Prevention of

Money Laundering Act, or under equivalent or similar foreign legislation;

17. Nominees, trustees or other third parties acting on behalf or in the interest of

the persons referred to in this Schedule to the extent of the funds held in such

capacity;

18. Other categories of professional and institutional investors as may be

INVESTOR COMPENSATION SCHEME

determined from time to time by the Management Committee.

In these regulations, unless the context otherwise requires -

"Act" means the Investment Services Act;

"branch" means a place of business which forms a legally

dependent part of a licence holder and from which some or all of

the activities for which the licence holder has been authorised is

conducted; all the places of business set up in any one country by a

licence holder whose head office is in Malta or in another country

shall be regarded as a single branch;

"competent authority" means the competent authority under the

Act;

"Financial Services Tribunal" means the tribunal established in

terms of the Malta Financial Services Authority Act;

"instruments" shall have the meaning assigned to the word in

article 2 of the Act;

"investor" means any person who has entrusted money or

instruments to a licence holder in connection with licensed

business, to the exclusion of persons listed in the First Schedule;

"EEA state" 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

17th March 1993, and as amended from time to time;

"licensed business" means the carrying out of any activity in

regard to which there is a licence under the Act;

"licence holder" means any person who holds a licence to carry

out investment services business in terms of the Act;

"Management Committee" means the Compensation Schemes

Management Committee established under regulations 3 and 5 and

referred to in the Depositor Compensation Scheme Regulations;

"Scheme" means the Investor Compensation Scheme established

under regulation 3;

"total revenue" means all gross income received or receivable

from the licence holderis business activities which are licensable

under the Act, whether actually licensed or not;

and the words and expressions which are also used in the Act shall

have the same meaning as in the Act.

Amended by

L.N. 36 of 2006.

Contributions in terms of regulation 12

Substituted by

L.N. 425 of 2007.

Amended by

L.N. 62 of 2011.

1. Contributions

(a) Licence holders shall, every year, be obliged to contribute to the

Scheme a Fixed Contribution and a Variable Contribution.

(b) The Fixed Contribution shall be paid to the Scheme annually, in every

calendar year.

2. Fixed Contribution

(a) Every licence holder which participates in the Scheme shall pay a Fixed

Contribution as follows

(i)

€2,911.72 in the case of Category 2 Investment Services Licence

Holders; and

(ii) €17,470.30 in the case of Category 3 Investment Services Licence

Holders.

(b) The fixed contribution that shall be payable by a licence holder during

its first calendar year of participation, shall be calculated in accordance

with the following formula

contribution x days

"contribution" means the fixed contribution as provided for in

paragraph (a);

"days" means the number of days that elapse from the day when

the said licence holder obtains a Category 2 or a Category 3

licence, as the case may be, up to the end of that calendar year.

(c) The additional fixed contribution that shall be payable during the

calendar year in which a licence holder upgrades from a Category 2 to a

Category 3 licence, shall be calculated in accordance with the following

formula

difference x days

"difference" means the difference between the fixed contribution

for Category 3 and the fixed contribution for Category 2

investment services licence holders as provided for in paragraph

(a);

"days" means the number of days that elapse from the day when

the said licence holder upgrades to a Category 3 licence, up to the

end of that calendar year.

(d) Payment of the Fixed Contribution to the Scheme shall be made by the

30 April of each year or within thirty calendar days from the date when

the licence holder shall become liable to participate in and contribute to

the Scheme, as the case may be.

(e) A licence holder which has ceased to be a participant of the Scheme or

which has downgraded its licence at any time during a calendar year

shall not be entitled to a refund of any contributions paid to the Scheme.

3. Variable Contribution

(a) The Variable Contribution is calculated by applying a percentage rate to

the total revenue of the licence holder on an annual basis. The

percentage rate for the Variable Contribution is set at 0.1 per centum.

(b) The Variable Contribution shall be accounted for in the financial year

when the Fixed Contribution is paid.

(i)

Investor Compensation Scheme Reserve

The Variable Contribution shall be held by the licence holder in a

reserve so that the funds will be made available within 30

calendar days from the time when the Scheme makes a call on

such funds in terms of regulation 16.

Funds in this reserve, which shall be called the "Investor

Compensation Scheme Reserve" in all accounts and documents,

shall be invested by the licence holder with a third party approved

in writing by the Management Committee. Such third party shall

hold the funds on pledge in favour of the Scheme and shall

specifically acknowledge the rights of the Scheme as pledgee, and

shall notify the Scheme in writing accordingly.

At the end of every financial year, each licence holder shall

ensure that the current market value of the investments in which

the Variable Contribution is invested is at least equal to the higher

amount between 0.1% of the total revenue and the minimum

amount established in sub-paragraph (iv) of this title. If this

requirement is notsatisfied, the licence holder shall take

immediate steps to top up as necessary these investments within

one month of the financial year end.

(ii) Investment with Third Parties

Funds comprising the Investor Compensation Scheme Reserve

may only be invested with a third party as follows

(a) at least 25 per cent of the total amount shall be maintained in

an interest bearing bank account denominated in euro

(maximum maturity 30-day call) or invested in Malta

Treasury Bills denominated in euro; and

(b) not more than 75 per cent of the total amount shall be

invested as follows

(i) at least 50 per cent (in this case 37.5 per cent of the

total Reserve) shall beinvested in Malta Government

Stocks or in local SICAVs that invest principally in

Malta Government Stock; and

(ii) the balance may be invested in debt instruments issued

by local or international entities with an investment

grade of not lower than "A" by a reputable credit rating

INVESTOR COMPENSATION SCHEME

agency, which are quoted on an investment exchange

and which are in a dematerialised form.

A licence holder whose capital is denominated in a currency

which is not euro may, subject to approval by the Management

Committee, maintain the Variable Contribution in the currency of

that capital.

Deposits made by a licence holder shall not be placed with itself

or with a bank or other institution which is an associated or parent

company of the licence holder. For the purposes of this Schedule,

an associated company shall mean any subsidiary of the parent

company of the licence holder or any company over which the

parent company exercises direct or indirect control or in which

the parent company holds directly or indirectly more than 25 per

cent of the shareholding.

A licence holder may not switch from an investment which is

pledged in favour of the Scheme into another type of investment,

without the written consent of the Management Committee.

The above parameters may be changed by Guidelines issued by

the competent authority, upon consultation with the Management

Committee.

(iii) Payment on account against a potential claim on the Investor

Compensation Scheme

(a) The licence holder may deposit the entire amount of the

Variable Contribution directly with the Scheme, in which

case such deposit shall be on account of the licence holder’s

liabilities under regulation 16, and the provisions of this

Schedule, except for paragraph 3(b)(i) and (ii), shall also be

applicable to such deposit.

(b) No interest shall be payable by the Scheme to the licence

holder.

(iv) Minimum held as reserve

(a) When a Variable Contribution is higher than the Investor

Compensation Scheme Reserve, the licence holder shall be

required to make a Variable Contribution for the difference

to ensure that the higher amount is always on reserve.

(b) If the Investor Compensation Scheme Reserve exceeds the

Variable Contribution, no transfer to the Investor

Compensation Scheme Reserve shall be made.

(c) The minimum amount held on reserve or deposited with the

Scheme shall never be less than €698.81.

(v) Reporting of the Variable Contribution by participants

Participants shall be required to insert a suitable note in their

annual financial statements as to the amount of Variable

Contribution held on reserve or deposited with the Scheme.

For amounts held on reserve, it would be appropriate to include

the nominal and market value of the instruments in which the

reserve has invested, together with a maturity schedule according

to the type of instrument.

The amount on reserve will be deducted in full as an illiquid

adjustment for the purposes of calculating the licence holder’s

financial resources in its financial return submitted in terms of its

INVESTOR COMPENSATION SCHEME

licence conditions.

4. Maximum limit of payment

Licence holders will be required to contribute to their Investor

Compensation Scheme Reserve each year until such time that aggregate fixed

contributions paid to the Scheme and accumulated reserves held by licence holders

by way of the Variable Contribution amount to €2,329,373.40.

(1)

There shall be established an Investor Compensation

Scheme.

(2) The Scheme shall be a body corporate having a distinct

legal personality and shall be capable, subject to the provisions of

the Act and of these regulations, of entering into contracts of

borrowing or otherwise incurring indebtedness for the purposes of

its functions, of acquiring, holding and disposing of any kind of

property for the purposes of its functions, of suing or being sued

and of doing all such things and entering into all such transactions

as are incidental or conducive to the exercise or performance of its

functions.

(3) The Scheme shall be managed and administered by and be

under the general control of the Management Committee appointed

in terms of regulation 5.

(4) The legal and judicial representation of the Scheme shall

vest in the chairperson of the Management Committee

Provided that, and without prejudice to the foregoing, the

Management Committee may vest any one or more of its members

or of the officers or agents of the Scheme with legal or judicial

representation.

(5) For the purpose of enabling the Scheme and the competent

authority to carry out their respective functions, the Scheme and the

competent authority may share and exchange information, and shall

otherwise consult and collaborate with one another.

(Regulation 36)

The Compensation Fund and the Select Committee established by Bye-laws

in terms of the Schedule to the Financial Markets Act shall cease to be in effect as

from the date of the coming into force of these regulations and the Compensation

Fund shall as from such date become absorbed as an integral part of the Scheme

subject to the following provisions of this paragraph

(1) The Bye-laws as in force immediately before the coming into force of these

regulations, shall mutatis mutandis continue to regulate any claim made by an

investor in terms of Bye-law 7.03 with reference to events occurring prior to 3rd

January, 2003 and any reference to the Council shall be deemed to be a reference to

the Management Committee established under these regulations.

(2) (a) The portion of the Compensation Fund comprising the payments made

by the Malta Stock Exchange in terms of Bye-law 7.12(b) shall be transferred back

to the Malta Stock Exchange

Provided that the Malta Stock Exchange shall keep such portion of the

Compensation Fund separate and distinct from any other funds or assets;

(b) The Malta Stock Exchange shall provide an indemnity in favour of the

Scheme, up to the amount of funds kept separate and distinct in accordance with the

proviso to the immediately preceding sub-regulation and in proportion to the

percentage of the funds constituting the Compensation Fund that have been

transferred back to it, and it shall remain responsible in accordance with the

provisions of the first proviso to paragraph (b) of subregulation (3), up till 3rd

January, 2008, for any claims that may arise with reference to events occurring prior

to 3rd January, 2003.

(3) (a) The portion of the Compensation Fund that had been paid by the

members of the Malta Stock Exchange in terms of Bye-law 7.12(a) and any other

remaining funds pertaining to the Compensation Fund shall be transferred to the

Scheme and shall become an integral part thereof

Provided that a moratorium shall be allowed in favour of members of the

Malta Stock Exchange who had paid such portion to the Compensation Fund as in

force immediately before the coming into force of these regulations, so that their

respective contributions to the Compensation Fund shall be set off against

contributions now due by them to the Scheme;

(b) The Scheme shall be responsible for claims made against the

Compensation Fund by investors in terms of Bye-law 7.03 and arising out of or with

reference to events occurring prior to 3rd January, 2003

INVESTOR COMPENSATION SCHEME

Provided that claims accepted for settlement by the Management Committee

shall be settled out of funds transferred from the Compensation Fund to the Scheme

and the Malta Stock Exchange pro rata

Provided further that the liability of the Scheme shall not exceed the amount

of funds transferred in accordance with the provisions of paragraph (a) of

subregulation 3, and the responsibility of the Scheme shall expire on 3rd January,

2008. (4) Any reference in any law to the Compensation Fund established by Bye-

laws in terms of the Schedule to the Financial Markets Act, shall henceforth be

deemed to be a reference to the Scheme.

(1) Without prejudice to any other power or function

conferred on it by these regulations or by any other law, it shall be

the function of the Scheme -

(a) to maintain a fund or funds out of which payments

shall be made to investors and to meet such other

payments or expenses as may be paid out of the fund

or funds in accordance with these regulations;

(b) to establish and maintain, after consultations with the

competent authority, arrangements for the making of

payments to investors in accordance with these

regulations;

(c) to process claims for compensation by investors as

expeditiously as possible and to ensure that

compensation is paid out without undue delay; and

(d) to advise the competent authority on matters relating

to compensation of investors.

(2) The objective of the Scheme is to provide a means of

protection for private investors within the framework of these

regulations. All the members of the Management Committee shall

work in the best interest of the Scheme and shall pursue and

promote its objective.

(1) The Management Committee shall be appointed by the

competent authority and shall consist of a chairperson and seven

(7) other members as follows

(a)

two (2) officers performing duties with the

competent authority;

(b)

one (1) officer nominated by, and performing

duties with, the Central Bank of Malta;

(c)

one (1) person nominated by the Minister;

(d)

one (1) person nominated by an association or

associations or other bodies representing persons holding a

licence under the Act who participates in, and contributes to the

Scheme in accordance with these regulations, and which

association or associations or other bodies are recognised for

such purpose by the competent authority. The person nominated

shall not be an officer or employee of, or in any other way hold

any position with, a holder of a licence under the Act falling

within the scope of these regulations;

(e)

one (1) person nominated by an association or

associations or other bodies representing credit institutions who

participates in, and contributes to the Depositor Compensation

Scheme established under the Depositor Compensation Scheme

Regulations, and which association or associations or other

bodies are recognised for such purpose by the competent

authority. The person nominated shall not be an officer or

employee of, or in any other way hold any position with, a

credit institution falling within the scope of the Depositor

Compensation Scheme in accordance with the Depositor

Compensation Scheme Regulations;

(f)

one (1) officer nominated by, and performing

duties with the Malta Competition and Consumer Affairs

Authority established under article 3 of the Malta Competition

and Consumer Affairs Authority Act and such person shall

represent the point of view of consumers

Provided that the chairperson of the Management

Committee shall also be an officer performing duties with the

competent authority

Provided further that an officer nominated and appointed

under paragraphs (a), (b) and (f) shall remain a member of the

Committee throughout the term of appointment only to the extent that

such officer continues to be an officer of the competent authority, the

Central Bank of Malta or the Malta Competition and Consumer Affairs

Authority, as the case may be

Provided further that whenever, for any reason whatsoever, the

associations or other bodies representing licence holders or credit

institutions referred to in paragraphs (d) and (e) fail to nominate the

person they are required to nominate within the period of time

established by the competent authority, such person shall be appointed

by the competent authority at its discretion.

(2) The members of the Management Committee shall be

appointed from among persons who, in the view of the competent

authority, have proven knowledge, expertise and experience in

financial services or management, or otherwise possess any other

relevant professional or commercial knowledge and expertise.

(3) A person shall not be eligible for appointment as a member of

the Management Committee in accordance with sub-regulation (1) if

such person has a financial or other interest as is likely to adversely

affect the discharge by such person of his functions under these

regulations. In addition, the members of the Management Committee

appointed under paragraphs (d) and (e) of sub-regulation (1) shall

serve in their personal capacity and shall not represent or receive

directives or instructions from an association, entity or other body

nominating them, however the Management Committee may expressly

and in writing, authorise any such member to share specific

information with the said association, entity or other body.

(4) Every member of the Management Committee shall hold

office for such period and upon such terms and conditions as may

be determined by the competent authority and indicated in the letter

of appointment. Such term of office shall be of not less than three

years and not more than five years. Every member of the

Management Committee, including the chairperson, shall be

eligible for re-appointment.

(5) A member of the Management Committee may be relieved

of office by the competent authority on the grounds of inability to

perform the functions of his office, whether due to infirmity of

mind or of body, or of misbehaviour; and for the purposes of this

subregulation repeated and unjustified non-attendance of meetings

of the Management Committee may be deemed to amount to

misbehaviour.

(6) A member of the Management Committee may resign from

office by means of a letter addressed to the competent authority.

(7) The competent authority may fill any vacancy occurring in

the Management Committee for any reason whatsoever, having

regard to the provisions of subregulation (1).

(8) Notice of the names of the members of the Management

Committee (and any resignation, dismissal and new appointment)

shall be published in the Gazette.

(9) The competent authority shall establish any remuneration to

be paid to the members of the Management Committee.

(10) The competent authority shall appoint one of its officers to

serve as secretary to the Management Committee with such

administrative functions and responsibilities as may be assigned to

him by the Management Committee.

(11) For the purpose of the second proviso to sub-regulation (1),

sub-regulation (2), the first sentence of sub-regulation (3), and sub-

regulations (4), (5), (6), (8) and (9), "member" shall include the

chairperson.

(12) Where the chairperson is absent or is unable to exercise the

functions and powers of his office, and the competent authority has not

appointed any other person to act as chairperson during the said

period, the other members of the Management Committee shall

designate one (1) of the said other members to carry out the functions

of the chairperson during such period.

(1) The Management Committee shall have the power to

enter into such reasonable administrative and other expenses as

may be necessary to enable it to fulfil its functions under these

regulations.

(2) The Management Committee may place contributions made

by licence holders in terms of regulation 11 and any other funds

managed and administered by it on deposit or may invest such

contributions, having regard to the need for prudence.

(3) For the purposes of being able to exercise its functions and

objectives in accordance with regulation 4, the Management

Committee may, on behalf of the Scheme, after consulting with the

competent authority, take out insurance policies, borrow or otherwise

incur indebtedness and obtain funding guarantees, as it may consider

appropriate to establish additional sources of funding for the Scheme.

For the purposes of this sub-regulation, the term "guarantees" shall

include guarantees obtained from credit institutions construed in

accordance with item 4 of the First Schedule to the Banking Act.

(4) The Management Committee shall cause proper books of

account to be kept so that the financial position of the Scheme can

be ascertained with reasonable accuracy at any time.

(5) In exercising its powers and duties, the Management

Committee shall be bound to safeguard and take into account the

general in terest s o f in vesto rs entitl ed to claim under these

regulations.

Without prejudice to regulation 6(1), the Management

Committee shall enter into such investment management and

administrative support agreements as may be approved by the

competent authority.

(1) The Management Committee shall prepare annual

forecast statements of the expected costs and revenues of the

Scheme, and shall make available such forecast statements to all

participants upon request.

(2) The Management Committee shall submit to the competent

authority an annual report on the discharge of its functions and on

the operation of the Scheme within seven (7) months from the

financial year end of the Scheme. Such annual report shall include,

inter alia -

(a) a statement showing the payments in and payments out

of the Scheme during its immediate previous financial

year; and

(b) annual audited financial statements prepared in

accordance with Intemational Accounting Standards.

(3) The annual report shall be made available on the website of

the competent authority.

(4) The books of accounts shall be kept at such place as the

Management Committee thinks fit.

(1) The meetings of the Management Committee shall be

held as often as may be required but not less than once every three

calendar months.

(2) Meetings of the Management Committee shall be convened

by the chairperson either on his own initiative or at the written

request of any two members of the Management Committee.

(3) The Management Committee shall only hold the meeting if at

least five (5) members are present, which members shall include the

chairperson or, in his absence, the person designated to carry out the

function of chairperson in accordance with regulation 5(12).

(4) For the purpose of decisions of the Management

Committee, each member shall have one vote. Voting shall be by

simple majority of the members present. In the event of an equality

of votes, the chairperson shall have a second or casting vote.

(5) Subject to the foregoing provisions of this regulation, the

Management Committee shall have power to regulate its own

proceedings and may also establish such procedures or make such

rules as it may deem appropriate for the better fulfilment of its

purposes.

(6) The Management Committee may invite any person who in

its opinion possesses specialised knowledge or expertise on a

particular subject, to attend any meeting and take part in the

discussions.

(7) Save where otherwise provided in subregulation (3), the

Management Committee may act notwithstanding any vacancy in

its membership, and any proceeding thereof or decision taken

thereat shall be valid notwithstanding that the appointment of any

person is not made.

(1) In terms of regulation 4, the Scheme shall establish

and maintain a fund or a number of funds out of which payments to

investors shall be made in accordance with these regulations.

(2)

The sources of funding shall include

(a) contributions levied from participants of the Scheme

by the Management Committee;

(b) money paid as administrative fees by all participants,

as may be prescribed;

(c) money received as income from the investment of the

assets of the fund;

(d) money borrowed by the Management Committee for

the purposes of the Scheme;

(e) money received by the Management Committee on any

insurance policy it takes out; and

(f)

any other money required to be paid in to the fund or

funds, received or recovered by the Management

Committee for the purposes of the Scheme.

(3)

There shall be paid out of the fund or funds

(a) money determined by the Management Committee as

compensation for investors;

(b) money required for the repayment of (or interest on or

charges in connection with) any money borrowed or

for the payment of premia on any insurance policies

taken out, for the purposes of the Scheme;

(c) the costs incurred in administering and managing the

Scheme; and

(d) any other money paid out by the Management

Committee for the purposes of the Scheme.

(4) The Management Committee shall hold, manage and apply

the fund or funds in accordance with these regulations.

(1) Every licence holder in possession of a Category 2 or

Category 3 licence in terms of the Investment Services Act

(Licence and Other Fees) Regulations shall participate in and

contribute to the Scheme

Provided that licence holders licensed to provide

investment services solely and exclusively to persons who do not

fall within the definition of "investor" in terms of regulation 2 shall

not be required to participate in and contribute to the Scheme

Provided further that a branch of a licence holder operating

in Malta which is licensed in a non-EEA state shall participate in

and contribute to the Scheme, unless the Scheme has in force an

agreement with the authority responsible for the management and

administration of the scheme in that other state stipulating, inter

alia, that the level or scope of cover provided for investors in that

state is equal or exceeds the level or scope of cover in Malta

Provided further that a branch of a licence holder operating

in Malta which is licensed in an EEA state may at its own option,

participate in and contribute to the Scheme, only where the level or

scope of the Scheme in Malta exceeds the level or scope of cover

provided in the EEA state in which it is licensed.

(2) The Scheme may enter into a bilateral agreement with any

authority responsible for the management and administration of a

scheme set up in any other country stipulating, inter alia, the level

or scope of cover as well as the rules and procedures to be followed

for the payment of compensation to investors, and in any such case,

the guiding principles set out in Annex II of the Directive 97/9/EC

of the European Parliament and of the Council of 3rd March 1997

on investor-compensation schemes shall, where appropriate, apply.

(3) Participation in the Scheme does not exclude the possibility

that particular licence holders may have to participate also in

another compensation or similar schemes set up under a different

law and governed by another competent authority or other body.

(4) When a licence holder becomes a participant in the Scheme

after the coming into force of these regulations, the Management

C ommittee shall determine all the rel ati ve obl ig ati ons and

conditions of the new participant in terms of these regulations.

(1) Participants shall pay such contributions to the

Scheme as prescribed in the Second Schedule, and such

contributions shall not be refundable.

(2) Participants may be requested to pay to the Scheme such

reasonable administrative fees as may from time to time be

prescribed by the Management Committee.

(1) Where -

(a) it appears to the competent authority that a participant

is unable, for the time being, for reasons which are

directly related to its financial circumstances to meet

its obligations arising from claims by its investors and

to have no early or foreseeable prospect of being able

to do so, or has otherwise suspended payment; or

(b) in respect of a participant which has its head office in

Malta an order has been made by the Courts in Malta

for its winding-up or liquidation under the laws of

Malta;

whichever is the earlier, the competent authority shall, as soon as

practicable, make a determination to that effect.

(2) The competent authority may, by way of guidelines,

establish those circumstances or criteria which it may consider in

arriving at a decision as to whether it will make a determination in

terms of subregulation (1).

(3) As soon as practicable after a determination is made, the

competent authority shall inform the Management Committee in

writing of such determination. The Management Committee may

take additional measures it deems necessary or appropriate within

its powers under these regulations.

(4) The competent authority shall, as soon as possible, inform

any other compensation scheme relating to financial services

activities, as may be established under any other law and regulated

by other competent authority or other body, which it believes may

be effected by such determination.

(5) In making a determination in accordance with subregulation

(1), the competent authority shall have regard to any report of an

officer or officers authorised by it on the state of affairs of the

licence holder, and any other information in its possession.

(1) On being informed by the competent authority that a

determination has been made under regulation 13(1), the

Management Committee shall publish a notice in at least two local

newspapers, informing investors of the licence holder concerned of

such determination and of the manner in which claims supported by

documentary evidence are to be submitted.

(2) The right of an investor for compensation shall not be

forfeited if the investor is able to prove that he was unable to assert

his right to compensation within any prescribed time-limits as may

be provided by the Management Committee.

(3) The Management Committee may, following an application

for compensation being made to it by an investor, accept or refuse

to provide compensation in accordance with these regulations.

(4) The Management Committee shall proceed to pay

compensation for verified claims within three months of the date of

the determination given in terms of regulation 13(1)

Provided that the Management Committee may, in

exceptional circumstances, apply to the competent authority for an

extension of this period by a further period of up to three months,

and up to two further periods of up to three months each thereafter.

(1) The Management Committee shall make its own

administrative arrangements for verifying claims. These

arrangements shall include

(a) providing an application form for claimants both in

English and in Maltese;

(b) providing for the exercise of the Management

Committee’s right of subrogation under regulation 22;

and

(c) requiring claimants to give

(i)

their identity and address;

(ii)

the capacity in which they claim;

(iii)

evidence of the investments; and

(iv)

any other information as may be required by the

Management Committee.

(2) The Management Committee may refuse to make a payment

for compensation until the claimant informs the Management

Committee as to the capacity in which he is the beneficial owner of

the investment and provides satisfactory documentary evidence and

information to allow the Management Committee to determine the

amount of compensation payable.

(3) The Management Committee may decide to delay payment

to a claimant until determination of any criminal charge brought

against the claim ant, in vestor, or any perso n ent itl ed to or

interested in respect of an investment under the provisions of the

Prevention of Money Laundering Act or a corresponding law of a

country outside Malta.

(4) Where in the opinion of the Management Committee

circumstances so warrant, the Management Committee may effect

part payments to claimants eligible for compensation under these

regulations.

Whenever it appears to the Management Committee that

the funds for the time being held by the Scheme are inadequate for

the Management Committee to exercise its functions, the

Management Committee may require a contribution to be made to

the Scheme by licence holders out of, but not exceeding, funds

reserved for this purpose by the licence holder in accordance with

the Second Schedule. Such further contributions shall be provided

to the Scheme within thirty calendar days of their being requested.

(1) The total amount of compensation that may be paid out

to an investor shall be the lesser of ninety per cent (90%) in respect

of all claims which have been made by such investor, or up to

20,000 euro.

(2) In calculating the amount of compensation to be paid out in

terms of subregulation (1), all computations shall be made in the

currency of the investment and all payments of compensation shall

be made in the same currency as the investment.

(1) Only persons falling within the definition of "investor"

in regulation 2 may make a claim against the Scheme in terms of

these regulations. An investor may only submit one claim in respect

of all his investments, taken in aggregate, with the licence holder

concerned.

(2) The categories listed in the First Schedule are excluded

from claiming under the Scheme.

(3) An investor may not claim against more than one scheme in

respect of a single claim. Where a claim has been made under two

or more compensation schemes, the Management Committee shall

conclusively determine under which scheme the claimant is eligible

for compensation.

(4) Claims shall be made in such form, and shall be

accompanied by such documentation or information, as the

Management Committee may determine and make public from time

to time.

(1) After a determination is made, in terms of regulation 13,

the Scheme shall provide for the payment of compensation in respect

of claims arising out of a licence holder’s inability to

(a) repay money owed to or belonging to investors and

held on their behalf in connection with licensed

business; or

(b) return to investors any instruments belonging to them

and held, administered or managed on their behalf in

connection with licensed business or, where this is not

possible, their monetary equivalent or value.

(2) Notwithstanding the provisions of regulation 17, the

Scheme shall also, in accordance with the provisions of article

26(3)(e) of the Arbiter for Financial Services Act, settle any

judgment or arbitration award for up to twenty thousand euro (EUR

20,000), in respect of any civil liability which is obtained by an

investor against a participant with regard to licensed business in

respect of which there is a determination, and such payment shall

be made within ten (10) working days from the day when the

judgement or arbitration award becomes res judicata

Provided that following the settlement of any such amount

by the Scheme, the maximum compensation sum payable to each

investor in terms of regulation 17(1) shall be reduced by the

amount settled by the Scheme in accordance with this sub-

regulation.

(3) The amount of an investoris claim shall be calculated by the

Management Committee after taking into account any or all of the

following factors

(a) legal and contractual conditions;

(b) counterclaims;

(c) market value; and

(d) surrender value.

Where the Management Committee is of the opinion that

an investor is not eligible for compensation in whole or in part in

terms of these regulations, the Management Committee shall give

notice in writing to such investor of that opinion and the reasons

therefor.

(1) In considering compensation to any investor for any

payment under these regulations, the Management Committee shall

take into account any payments made under a policy of professional

indemnity insurance, if any, held by the licence holder or any

payments made under any other law or arrangement in respect of

the same losses.

(2) The Management Committee shall deduct such amount of

compensation paid from the amount of compensation that may be

payable to the investor in respect of any or all of the circumstances

arising from this regulation.

(1) Where the Scheme has made a payment to a claimant,

the Scheme shall be subrogated to the rights and remedies of that

claimant against the licence holder.

(2) Prior to payment, investors shall confirm in writing to the

Management Committee that

(a) they have not received any payment from any other

scheme or from the licence holder concerned in respect

of the same loss;

(b) they will provide any assistance the Management

Committee may require to enable the Management

Committee to exercise its rights and remedies against

the licence holder; and

(c) their rights in respect of any money or instruments

comprising the claim shall be subrogated in favour of

the Management Committee.

(1) Where two or more persons are jointly entitled to an

investment account, each of these persons shall be treated as having

a separate account of an amount produced by dividing the amount

of the investment to which such persons are jointly entitled by the

number of persons so entitled, unless there exists specific evidence

or special contractual provisions determining the particular

entitlements of such persons in which case such evidence shall be

taken into account in determining their entitlements.

(2) Where a person is acting as trustee or nominee for one or

more persons under a deed of trust or other similar agreement, the

amount comprising the claim shall be deemed to belong to the

beneficial owners equally, unless there exists specific evidence or

special contractual provisions determining the beneficial interests

of such persons in which case such evidence shall be taken into

account in determining their entitlements, and provided in any

event that ownership is proved to the entire satisfaction of the

Management Committee.

The Management Committee shall ensure that the general

public is adequately informed about the operation of the Scheme

arrangements.

(1) Licence holders shall make available to actual and

intending investors adequate and clear information concerning the

applicability of the Scheme together with such other particulars as

may from time to time be specified by the competent authority in a

manner and form specified by the competent authority

Provided that a licence holder shall not advertise or cause

to be advertised the fact that money or instruments placed with a

licence holder are protected by or through the Scheme except with

the prior written consent of the competent authority.

(2) The competent authority may, from time to time, specify

the information that licence holders are to provide to investors

regarding the Scheme and its operations, as well as the manner and

form in which such information should be provided.

(1) The Management Committee may request participants,

either directly or through the competent authority, to provide such

information which the Management Committee may consider

relevant for the proper administration of the Scheme, within a

period of time as may be established by the Management

Committee. The request may be addressed to the participant or to

any of its directors or officials who are in possession of such

information.

(2) Without prejudice to any provision of these regulations, a

participant or any director or official thereof, who fails to comply

with the Management Committeeis request for information within

the period of time established by the Management Committee in

terms of subregulation (1), or who knowingly or recklessly

furnishes information, or makes a statement which is inaccurate,

false or misleading in any material respect, shall be liable to an

administrative penalty not exceeding two thousand and three

hundred and twenty-nine euro and thirty-seven cents (2,329.37) as

may be imposed by the competent authority by means of a notice in

writing and without recourse to a court hearing.

(3)

Where an administrative penalty has been imposed by the

competent authority in terms of subregulation (2), an appeal shall

lie to the Financial Services Tribunal in accordance with articles 6

and 19 of the Act.

(1) Members of the Management Committee and persons

appointed under regulation 6(1) shall be subject to the provisions of

the Professional Secrecy Act and shall keep confidential any

information obtained by them in the course of performing their

duties under these regulations, and shall not reveal any information

to any person, credit institution, association or entity except as may

be allowed by these regulations or any other law or by Court order.

(2) The duty of confidentiality shall not be contravened in the

case of

(a) exchange of information between the Management

Committee and competent authorities in other

countries, or the competent authorities for the

management and administration of corresponding

schemes in other countries, provided that the relevant

information is necessary for the discharge of their

duties under these regulations; and

(b) any use or disclosure as may be required to enable the

Management Committee and its officers or agents to

perform their duties and carry out their functions under

these regulations.

(1) Where a licence holder fails to comply with its

obligations under these regulations, the Management Committee

shall notify and consult with the competent authority and shall

agree on the appropriate measures to be taken by the competent

authority, including the imposition of penalties, to ensure that the

licence holder complies with such obligations.

(2) If these measures fail to secure compliance on the part of

the licence holder, the Management Committee shall report the

matter to the competent authority for any further measure to be

taken at law, including the possible restriction or withdrawal of the

licence holderis licence.

(3) After the restriction or withdrawal of a licence, cover shall

continue to be provided in respect of licensed business up to the

date of restriction or withdrawal of the licence.

The Scheme shall establish and maintain adequate internal

procedures to investigate complaints against it by licence holders

and by investors.

(1) The competent authorit ma issue guidelines to licence

holders for the purposes of these regulations.

(2) Such

guidelines

may

contain

such

incidental,

supplementary and consequential provisions as appear to the

competent authority to be expedient for the purpose of these

regulations.

The Management Committee and officers and agents of the

Scheme shall not be liable in damages for anything done or omitted

in the discharge of functions under these regulations unless it is

shown that the act or omission was in bad faith.

The financial year end of the Scheme shall be an

accounting period of twelve months ending on the thirty-first day

of December of each year.

The accounts of the Scheme shall be audited in accordance

with International Standards on Auditing by auditors appointed by

the Management Committee from among persons who are qualified

to be appointed as auditors of a company under the law for the time

being in force in Malta.

The competent authority and the Management Committee

shall consult the relevant competent authorities and the persons

responsible for compensation schemes in other countries outside

Malta and seek to reach agreement with those authorities and

persons about

(a) the procedures to be followed if a participant defaults;

(b) the amounts of compensation payable, after deductions

if any, under each scheme; and

(c) any other aspect which is deemed appropriate for the

proper management and administration of the

schemes.

(1) The Management Committee established under

regulation 3 of the Depositor Compensation Scheme Regulations

and the Management Committee referred to in these regulations are

one and the same. The Management Committee established under

regulation 3 of these regulations shall continue in the personality of

the Management Committee established immediately before the

coming into force of these regulations and accordingly shall

succeed to all its rights and obligations.

(2) All appointments, decisions, contributions, claims,

payments or other acts made or taken under the Investor

Compensation Scheme Regulations, 2003, before the coming into

force of these regulations, shall continue in force and shall be

deemed to have been made or taken under these regulations, and

any reference in any law to the Management Committee shall be

deemed to be a reference to the Management Committee

established under regulation 3.

The Compensation Fund established by bye-laws in terms

of the Schedule to the Financial Markets Act shall become

absorbed as an integral part of the Scheme in accordance with the

provisions of the Third Schedule.

Notwithstanding the provisions of regulation 5(4), the term of

office of the members of the Management Committee sitting on the

said Committee on 2nd September 2025, shall be deemed to be

terminated on the said date.

INVESTOR COMPENSATION SCHEME

INVESTOR COMPENSATION SCHEME