The Conduct Supervisory Unit was established within the MFSA with effect from 1st January 2015 with the objectives of (i) setting up a regulatory framework that secures appropriate consumer protection in financial services; (ii) having a pre-emptive supervisory regime which addresses potential or emerging risks for financial consumers; and (iii) setting up an operational regime to strengthen the responsibilities of regulated persons in treating customers fairly.
As advised in previous communications, the Conduct Supervisory Unit will supervise regulated entities on a cross sectorial basis and in this regard, the MFSA has decided to adopt a staggered approach to the transfer of conduct supervision from the various supervisory units to the Conduct Supervisory Unit. In this regard, the Conduct Supervisory Unit has been responsible for the supervision of trustees and company service providers since the 1st February 2015 and will as from the 1st September 2016, assume responsibility for the supervision of the conduct of business of investment services licence holders excluding custodians but including Fund Managers, initially, pending necessary resourcing, only to the extent that these are selling investment products/instruments directly to retail clients.
In this context, as from the abovementioned date the Conduct Supervisory Unit will be responsible for the supervision of investment firms' conduct in the following areas: client disclosures and reporting (including investment advertisements); conflicts of interest and inducements; selling processes and practices; contractual agreements with retail clients; execution of clients' orders and governance of regulated persons – primarily to ensure that customers are treated fairly.
The legislative framework which the Conduct of Business will rely upon in effecting its supervisory duties remains the one currently in force, namely the Investment Services Act, 1994 and the Investment Services Rules for Investment Services Providers until such time as the proposed Conduct of Business Rulebook comes into force.
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