Late in January 2021, the Malta Financial Services Authority published amendments to the Conduct of Business Rulebook (the “Rulebook”) targeting the securities sector. The amendments may be summarised as follows:
i. Transactions by retail clients involving subordinated eligible liabilities:
With respect to subordinated eligible liabilities issued on or after the 28th of December 2020, prior to offering such instruments to retail clients, MiFID firms must conduct a suitability test, and this, irrespective of the type of investment service and irrespective of the nature of the transaction in question. This suitability assessment needs to be done in line with the standard set forth in MiFID II and also needs to be documented by the respective MiFID firm.
MiFID firms are also encouraged to note that, in the event that it is deemed that a specific product is suitable for a retail client, if the financial instrument portfolio of that retail Client does not, at the time of the purchase, exceed EUR 500,000, the MiFID firm shall ensure, on the basis of the information provided by the client, that at the time of the purchase, the initial investment amount invested in one or more liabilities instruments considered as Subordinated Eligible liabilities, is at least EUR 10,000. When noting the value of the portfolio, MiFID firms shall include cash deposits and financial instruments but shall exclude and financial instruments that have been given as collateral.
ii. Competence and knowledge of staff
New rules have been introduced which oblige MiFID firms to ensure that members of staff which provide investment advice and information on investment products possess an adequate level of knowledge and competence in order to be able to provide such advice and/or information in an appropriate manner. The benchmarks set forth in the Rulebook generally require a licence holder to ensure that the respective members of staff understand, inter alia, the nature of the product/instrument in question, understands the costs and charges which are associated with the transaction, understand how financial markets function and the nature of the service which the firm has been engaged to provide and understand issues pertaining to market abuse and anti money laundering. MiFID firms are also obliged to ensure that members of staff are continuously trained in an appropriate manner and that such members of staff are aware of procedures pertaining to the #mitigation, handling of and resolution of matters relevant to conflicts of interest and inducements.
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.
