The Malta Financial Services Authority ("MFSA") has today issued a circular addressed to investment service licence holders and collective investment schemes falling within the scope of the Securities & Markets Supervision function on its revamped approval process of persons being proposed to hold committee positions with certain authorised entities.
1. Requirement to submit a Personal Questionnaire ("PQ")
The MFSA has announced that with effect from the date of the circular, individuals being appointed as members of:
- Investment Management Committees
- Investment Advisory Committees
- Risk Management Committees
- Internal Audit Committees
- Valuation Committees
in relation to Investment Services Licence Holders and self-managed Collective Investment Schemes will no longer be required to submit a PQ. Accordingly, such Committee positions will not be subject to a fitness and properness assessment by the MFSA and will no longer fall within the MFSA definition of Senior Management.
Notwithstanding the above, Licence Holders are still expected to treat members of committees as key function holders. Accordingly, such entities shall continue to be required to undertake internal due diligence (upon engagement) and ongoing due diligence checks, of any Committee members.
Licence Holders are also to note that the requirement of submitting a PQ Form will remain valid in the following scenarios:
1) For the most senior individual holding the following specific roles, or the equivalent (i.e. having the overall responsibility for the service or activity), including also those instances where the service or activity is to be provided on an individual basis, rather than through a Committee setup:
- Chief Investment Officer/ Lead Portfolio Manager;
- Chief/ Head/ Lead Investment Advisor;
- Chief Risk Officer/ Risk Manager;
- Internal Audit Manager.
2) Where the decisions relating to an activity or service are undertaken collectively via the Committee setup (rather than, for example, having an appointed Chief Investment Officer/ Portfolio Manager, day-to-day decisions within a Committee), then the Authority would require the submission of PQ Forms by all the Committee members.
Valuation Officers and Valuation Committee Members
Licence holders were further notified that individuals being appointed as Valuation Officers and/ or Valuation Committee members in relation to licence holders (where applicable), will also no longer fall under the shall still be considered as Senior Managers. Accordingly, unless the individual in question would also be holding another senior role within the same entity that requires MFSA regulatory approval, a PQ Form will no longer be required for such positions.
With regards to the valuation function and appointment of valuation officers even the most senior individual responsible for the activity shall not be subject to MFSA approval, but the appointment would be subject to a notification process upon appointment and resignation,
MFSA Notification process for appointments and resignations of Committee Members
With effect from the date of the Circular, the appointment of committee members (including Valuation Officers) with licence holders shall be notified to the Authority by means of a declaration signed by the governing body / legal representatives of the License Holder, who shall take full responsibility with respect to the appointment of the individual and his/her fitness and properness.
The declaration shall confirm that:
- the licence holder has carried out a due diligence assessment on the appointed individual and is satisfied that he/ she complies with the standards of fitness and properness required by the MFSA, and that the Licence Holder shall notify the MFSA should such individual cease to comply with the mentioned standards;
- the due diligence exercise undertaken has been fully documented, held at the registered office, and is available upon request by the MFSA; and
- the due diligence exercise carried out will be updated at periodical intervals as applicable and the updates will be documented and will be made available upon request by the MFSA.
Similarly, the MFSA will also need to be notified accordingly about the resignation of committee members holding the above-mentioned positions.
Terms of Reference of Committees
As a result of the removal of the fitness and properness assessment for committee members on part of the MFSA, it is hereby communicated that the terms of reference document of such committees will no longer be subject to the MFSA's approval.
However, the terms of reference document (and any changes thereto) should be submitted to the MFSA for notification purposes, both at application stage and thereafter, in case of updates effected to the document.
Committee Appointments that have been proposed and are currently pending MFSA approval
Any requests submitted to the MFSA for approval (either as part of a new application or otherwise in relation to an existing licence holder) of ccommittee members and/ or valuation officers, that have been submitted up to the date of the circular, shall continue to be processed to the MFSA approval, as per the previous procedure.
A copy of the MFSA circular can be obtained here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.