MFSA’s Approach to Authorisation

When processing applications for a licence in terms of the Investment Services Act, the

Banking Act and the Financial Institutions Act, the MFSA takes account of:

i. the degree of protection to the investors;

ii. the protection of the reputation of Malta taking into account Malta’s international

commitments; and

iii. the promotion of competition and choice.

 MFSA recommends that the promoters arrange to meet representatives of the MFSA to describe their proposal. This preliminary meeting should take place well in advance of submitting an Application for a Licence.

 Although guidance will be given on the applicable regulatory requirements and on the completion of the Application documents, responsibility for the formulation of the proposal and the completion of the Application documents will remain with the Applicant.

 It is essential that the Applicant submits a comprehensive (written) description of the proposed activity before the meeting. The next stage is that the promoters submit an Application Form, together with supporting documents. The draft Application and the supporting documentation will be reviewed and comments provided to the Applicant. The MFSA may ask for more information and may make such further enquiries as it considers necessary.

 The “fit and proper” checks, which entail following up the information which has been provided in the Application documents, begin at this stage. Once the review of the Application and supporting documents has been completed and the ongoing requirements have been agreed, the MFSA will issue its “in principle” approval for the issue of a licence. At this stage, the Applicant will be required to finalise any outstanding matters, such as incorporation of Company, submission of signed copies of the revised Application form together with supporting documents in their final format, and any other issues raised during the Application process. The Licence will be issued as soon as all pre-licensing issues are resolved.

 The Applicant may also be required to satisfy a number of post-licensing matters prior to

formal commencement of business.

 The Fit and Proper Test

 The “fit and proper” test is one which an Applicant and a Licence Holder must satisfy on a continuing basis. Each case is assessed on the basis of the relevant circumstances. The onus of proving that it meets the required standards is on the Applicant and Licence Holder. It is not the task of the MFSA to prove that an Applicant is “fit and proper” either on licensing or thereafter.

The MFSA’s approach is cumulative, that is to say, the Authority may conclude that a Licence Holder has failed the test on the basis of considering several situations, each of which on its own would not lead to that conclusion.

 An open and honest relationship with the MFSA is essential. When arriving at its decision as to whether a Licence Holder is “fit and proper” the MFSA will take account both what is said and what is not said.

 In general terms, there are three criteria which must be met, to satisfy the “fit and proper” test:

i. integrity;

ii. competence; and

iii. solvency.

 Integrity involves the Licence Holder and its employees being of good repute and acting

honestly and in a trustworthy fashion in relation to its clients and other parties.

 Competence means that those people carrying on the business of the Licence Holder must be able to demonstrate an acceptable amount of knowledge, professional expertise and experience. The degree of competence required will naturally depend upon the job being performed.

 Solvency means ensuring that proper financial control and management of liquidity and capital is applied. The business should have sufficient internally generated funds to meet not only the financial demands on the business but also to satisfy the applicable MFSA requirements.

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