The Malta Financial Services Authority has issued a circular on investment firms that are subject to a lighter regulatory framework because they only deal on own account and have no third party clients.

This will be particularly welcome to market makers currently pursuing an application for licencing by the MFSA on the back of looming Brexit concerns.

The circular focuses on the applicability of the Regulation on prudential requirements for credit institutions and investment firms (Regulation (EU) 575/2013, the “CRR”) and the applicability of Directive 2013/36/EU (the “CRD”) to local firms.

Local firms, being firms dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such firms is assumed by clearing members of the same market, qualify as MiFID Investment Firms. Such firms will require a Category 3 Investment Services Licence but will be required to have initial capital of EUR 50,000 in order to continue to meet their regulatory financial resources requirements.

In addition, on the basis that Local Firms do not have any external clients, any rules and obligations relative to clients and/or the holding of client moneys or assets will not apply to such firms.

For further information, please contact our Financial Services Team.