Fit and Proper Requirements for Persons Associated with Ownership and Management of Securities Market Players Directive 2024

GOVERNMENT NOTICE NO. 38 FINANCIAL SERVICES ACT (CAP 44:05) FINANCIAL SERVICES (FIT AND PROPER REQUIREMENTS FOR PERSONS ASSOCIATED WITH OWNERSHIP AND MANAGEMENT OF SECURITIES MARKET PLAYERS) DIRECTIVE, 2024 IN EXERCISE of the powers conferred by section 34(2) (a) of the Financial Services Act, I, DR. WILSON TONINGA BANDA, Registrar of Financial Institutions, issue the following Directive__

1. This Directive may be cited as the Financial Services (Fit and Proper Requirements for Persons Associated with Ownership and Management of Securities Market Players) Directive, 2024.
2. In this Directive, unless the context otherwise requires__ “audit committee” means a permanent committee of the board of directors of a securities market player prescribed under paragraph 8; “credit facility” has the meaning ascribed to that term under the Banking Act; “securities market player” includes an exchange, operator of a collective investment scheme, a broker, dealer, portfolio manager, transfer secretary, investment adviser, and securities market intermediary; and “senior management official” means__ (a) an executive officer; (b) a head of department or function; and (c) an official who reports directly to— (i) the board of directors, a committee of the board of directors or an executive officer; or (ii) a branch manager declared by the Registrar to be a senior management official.
3. The objective of this Directive is to prescribe fit and proper requirements for shareholders, directors and management of securities market players. 4.(1) A securities market player that is not a public company shall seek prior approval of the Registrar in respect of a (a) new shareholder; (b) shareholder who may become a controlling party; or (c) change in the shareholding structure. (2)A securities market player that is a public company shall seek prior approval of the Registrar in respect of__ (a) a new shareholder who may become a controlling party; 226 24th May, 2024 Citation Interpretation Cap. 44.01 Objective Approval of shareholders

(b) an acquisition that increases the existing shareholding which may result in the new shareholder becoming a controlling party as a result of the acquisition; and (c) a change in shareholding structure that results in one of the shareholders ceasing to be a controlling party. (3) A securities market player shall submit an application for approval in respect of subparagraphs (1) and (2) to the Registrar, in Form A set out in the Schedule. (4) The Registrar may direct an existing shareholder or a proposed shareholder to__ (a) submit additional information as the Registrar may determine appropriate; or (b) appear before the Registrar for examination. 5.(1) A shareholder in a securities market player shall satisfy the fit and proper requirements prescribed under paragraph 13. (2) The Registrar shall review the fitness and propriety of a shareholder or controlling party on a regular basis. (3) The Registrar shall, where the assessment under subparagraph (2) shows that the shareholder or controlling party is not financially sound, direct the shareholder or controlling party to implement appropriate remedial measures to restore financial soundness within a prescribed period. 6. The Registrar shall, in determining whether a prospective controlling party satisfies the fit and proper requirements prescribed under paragraph 13, conduct a due diligence of the prospective controlling party. 7.(1) A person shall not serve as a director or senior management official of a securities market player unless__ (a) he satisfies the fit and proper requirements prescribed under paragraph 13; and (b) his appointment is approved by the Registrar. (2) A securities market player shall submit an application for approval of appointment of a director or senior management official to the Registrar, in Form B or Form C set out in the Schedule, respectively. (3) A securities market player shall not appoint more than one foreign national as a senior management official without approval of the Registrar. (4) The Registrar shall not approve the appointment of a foreign national as a senior management official of a securities market player unless the securities market player has demonstrated that it has failed to identify a person with similar skills from the local market. (5) A foreign national shall serve as a senior management official of a securities market player for a period not exceeding three years. (6) A securities market player who intends to appoint a foreign national as a senior management official shall comply with all legal requirements for recruitment of a foreign national. 24th May, 2024 227 Shareholders to satisfy fit and proper requirements Due diligence Appointment of directors and senior management officials

8. The Registrar shall verify the credentials and authenticity of academic and professional qualifications submitted by a director, executive officer or senior management official in support of an application under paragraph 7(2). 9.(1) The board of directors of a securities market player shall ensure that the securities market player has (a) an audit committee; (b) a designated second in command at a level of senior management; and (c) an independent risk management and compliance function. (2) The audit committee prescribed under sub-paragraph (1)(a) shall comprise at least three members who shall be independent directors. (3) Where the securities market player is not in a position to have an independent risk management and compliance function, the Registrar may approve an alternative arrangement for performance of the function. 10.(1) The Chairperson of a board of directors of a securities market player shall be an independent director. (2) A director of a securities market player shall not serve as a director of another securities market player except where the other securities market player is part of the securities market player group or its holding company in which he is already a director. (3) An employee in the public service shall not serve as a director of a securities market player or as an ex-officio member of a board of a securities market player except where the Government has direct shareholding interest in the securities market player. (4) Subject to subparagraph 3, an employee in the public service shall serve as a director or ex-officio member of a board of one securities market player at a time. (5) An employee in the public service shall not serve as a chairperson of a board of a securities market player. (6) A person who sits on a board of an institution that is a shareholder of a securities market player shall not serve as a director on a board of another securities market player. 11.(1) A head of the accounting or finance functions of a securities market player shall be— (a) an accredited member of a professional body in the accounting profession; and (b) registered with the Institute of Chartered Accountants in Malawi. (2) A head of the internal audit function of a securities market player shall be a registered member of the Institute of Internal Auditors in Malawi. 228 24th May, 2024 Verification of educational qualifications Board responsibility Restrictions on directors Qualifications and requirements for accounting, finance and audit functions

(3) The Registrar shall not approve a person as head of the accounting or finance function of a securities market player, or a head of the internal audit function of a securities market player, as a fit and proper person, unless the securities market player provides written attestation from the Institute of Chartered Accountants in Malawi or the Institute of Internal Auditors in Malawi that the person satisfies the requirements of subparagraphs (1) and (2). 12.(1)A compliance officer of a securities market player shall be accountable to a board committee responsible for risk management for the securities market player. (2)An internal auditor of a securities market player shall not qualify as a compliance officer. (3)A compliance officer shall possess the relevant qualification and experience. 13.(1) A person satisfies the fit and proper requirement if the person has relevant qualifications or experience in banking, economics, business administration, finance, law, risk management, accounting or any other relevant field as determined by the Registrar. (2) A person does not satisfy, or ceases to satisfy, the fit and proper requirement if the person__ (a) is declared insolvent or adjudged bankrupt by a competent court of law and has not been discharged from the insolvency or bankruptcy; (b) is convicted of a felony, including corruption, fraud, forgery, perjury, money laundering, or any other material breach of a financial service law; (c) is removed as a shareholder, director, senior management official or trustee in accordance with a financial services law in Malawi or any other country; (d) is directed to disinvest or his investment is wound up or closed by the Registrar or any other competent supervisory authority; (e) is disqualified or suspended from practicing any profession on the ground of professional misconduct; (f) holds or has held, in Malawi or a foreign country, the position of__ (i) head of state or deputy head of state; (ii) cabinet minister; (iii) member of parliament; (iv) councilor; or (v) senior official in a local or international organization which is in a position to influence Government policy or decisions; (g) is a child or spouse of a person listed in subparagraph 2(f); (h) is an employee of another securities market player, unless he relinquishes his position in the other securities market player before the appointment; 24th May, 2024 229 Compliance officer Fit and proper criteria

(i) is a director, or employee of the Reserve Bank of Malawi; (j) is a minor; (k) is a member of a governing body of a political party, any organ of a political party or organization whose objectives or activities are political in nature: Provided that the person may be eligible to be appointed or serve as a shareholder, director or senior management official of a securities market player upon expiry of seven years from the time the person ceases to be a member of a governing body of a political party, organ of a political party or organization whose objectives or activities are political in nature; (l) is not able to perform daily functions of the office by reason of physical or mental infirmity; (m) is responsible for a loss suffered by a licensed institution in Malawi or in another country; (n) has a bad professional reputation or his professional background does not demonstrate integrity; (o) has been a controlling party, shareholder, director, executive officer or senior management official of a securities market player or other financial institution– (i) that is or was subject to formal remedial measures for operating in an unlawful or unsound manner; (ii) for which a statutory manager or liquidator has been appointed; (iii) whose licence was revoked; or (iv) which has been wound-up; (p) in the case of a director, has a non performing credit facility or a party related to him has a non performing credit facility; (q) in the case of an executive officer and senior management official, is not resident in Malawi, unless his absence from Malawi is approved in writing by the Registrar; (r) in the case of a financial institution in Malawi or any other country, the institution has__ (i) failed to take reasonable steps to secure compliance with the Act or any other financial services law; (ii) been convicted of an offence under the Financial Crimes Act or any law similar to the Financial Crimes Act in a foreign country; (iii) failed to take reasonable steps to ensure the accuracy and completeness of information submitted to the Registrar or competent supervisory authority in the other country; (iv) failed or delayed to provide any information to the Registrar or competent supervisory authority in the other country in compliance with a statutory obligation or on demand by the Registrar or competent supervisory authority; or 230 24th May, 2024 Cap.7:07

(v) obstructed or endeavored to obstruct, an inspection by an officer or any other person appointed by the Registrar or competent supervisory authority in the other country. (s) has been responsible for failure to disclose material interest in a credit or any other transaction; (t) has supplied false or misleading information to the Registrar; (u) was dismissed from another securities market player or licensed institution on ground of misconduct; and (v) is determined by the Registrar to be ineligible based on any assessment conducted by the Registrar. (3) For purposes of this paragraph__ “competent supervisory authority” means the competent regulatory authority that supervises institutions engaged in securities marketing in the country where the head office of a foreign firm is located; and “member of the immediate family” means parent, spouse, child and spouse of a child. 14. A securities market player shall, from time to time, assess the fitness and probity of its directors and senior management officials. 15.(1) A securities market player shall (a) within ten days of terminating the appointment of a director; or (b) immediately, after suspending or terminating the appointment of an executive officer, notify the termination of appointment or suspension to the Registrar in writing. (2) A notification submitted under subparagraph (1) shall contain reasons for the termination or suspension and, in the case of termination, provide a timeline for replacing the director or executive officer. 16.__(1) A person who fails to comply with any requirement under this Directive shall be liable to a monetary penalty of— (a) in the case of a legal person, K 50,000,000; and (b) in the case of a natural person, a penalty of K10,000,000. (2) A person ordered by the Registrar to pay a monetary penalty shall pay the penalty, through an electronic bank transfer to the Reserve Bank of Malawi, within five working days of receiving the order. (3) In addition to the monetary penalty imposed under subparagraph (1), the Registrar may impose other administrative penalties as provided for under the Act and the Securities Act. 17. The Financial Services (Fit and Proper Requirements for Persons Associated with Ownership and Management of Securities Market Players) Directive, 2015 is hereby revoked. 24th May, 2024 231 Assessment of directors Notification of suspension or termination of appointment of directors or executive officers Penalties Cap. 46:06 Revocation of GN/21/2015

SCHEDULE (para.4(3)) FORM A APPLICATION FOR APPROVAL AS A FIT AND PROPER SHAREHOLDER FIT AND PROPER QUESTIONNAIRE FOR SHAREHOLDER

1. Full Name: ........................................................................................................................
2. In case of a body corporate, date of incorporation and registration number: .......................................................................................................................................... NOTE: Attach certified copy of certificate of incorporation and memorandum and articles of association
3. Postal Address:..................................................................................................................
4. Contact Number::..............................................................................................................
5. Physical Address::.............................................................................................................
6. Qualifications, if natural person__ (i) Minimum Academic Qualification....................................................................... .............................................................................................................................. (ii) Highest Academic Qualification.......................................................................... .............................................................................................................................. (iii)Other Qualifications............................................................................................. ..............................................................................................................................
7. Amount, type and percentage of shareholding, if any, in any financial institution: Type of Amount of Percentage of Name of financial institution Shareholding
8. Describe your source of income and attach latest audited financial statements for a body corporate or latest certified bank statements for an individual shareholder. ...........................................................................................................................................
9. Describe how you will be able to provide on-going capital support to the institution once approved as a shareholder. ...........................................................................................................................................
10. Shareholding in other companies: 232 24th May, 2024

Percenta￾Company’s Date of Amount of ge of Past name incorporation shareholding Remarks AB A. Refers to date of closure or surrender of shares B. Refers to reasons for closure or surrender 11. Employment/Business record (Please include positions you are holding, or may have held at any financial institution anywhere in the world) Name of Responsibilities Director Name of Positions held (where Reasons or Officer employer and dates applicable) for leaving 12. Provide a name (or names) of your banker and for the last five (5) years. PERIOD BANKER AND ACCOUNT DETAILS 13. Borrowings: (a) If yes, provide the following details for each of the loan facilities__ Loan Facility (i) Name of lending institution:............................................................................... (ii) Type of facility:.................................................................................................. (iii) Date of offer:...................................................................................................... (iv) Terms of offer:.................................................................................................... (v) Security offered:................................................................................................. (vi) Value of security:................................................................................................ (vii) Current outstanding balance:.............................................................................. 24th May, 2024 233

(b) Have you ever defaulted on a loan facility? Please provide your latest credit reference report from a licensed credit reference bureau: 14. Have you been subject to a direction, administrative penalty or any enforcement action by the Registrar of Financial Institutions or any regulatory body whether in Malawi or outside Malawi? (If yes, please provide details) ........................................................................................................................................... 15. Have you or any entity with which you are associated with as Director, Shareholder or Manager or ever held or applied for a licence or equivalent authorisation to carry on any business activity in any country? (a) If yes, provide details: ........................................................................................................................................... (b) If any such application was rejected or withdrawn after it had been issued, or any authorisation revoked, give particulars: 16. Has judgment involving finding of fraud, dishonesty, criminal conduct, misrepresentation, breach of contract, breach of fiduciary duty or professional negligence been given against you or are there any proceedings now pending that may lead to such a judgment or finding? If yes, provide details: ........................................................................................................................................... 17. Has any body corporate, partnership, or unincorporated institution with which you were associated as a controlling party shareholder, director, executive officer or senior management official, in Malawi or elsewhere, been wound-up, made subject to an administration order, otherwise made any compromise or arrangement with its creditors, or ceased trading either while you were associated with it or within one year after you ceased to be associated with it or has anything analogous to any of these events occurred under the laws of any other jurisdiction? If yes, please provide details: ........................................................................................................................................... 18. Have you contravened any written law designed for protecting members of the public against financial loss due to dishonesty, incompetence or malpractice by persons concerned in the provision of financial services or the management of companies or against financial loss due to the conduct of discharged or undischarged bankrupts? If yes, provide details: ........................................................................................................................................... 19. Has you ever failed to satisfy within one year a judgment of debt under a court order in Malawi or elsewhere? If yes, provide details: ........................................................................................................................................... 234 24th May, 2024

20. Have you ever been adjudged bankrupt by a court in Malawi or elsewhere? Has a bankruptcy petition ever been served on you? Have you ever made any compromise arrangement or otherwise failed to pay creditors in full? If yes, provide details: ...........................................................................................................................................
21. Have you ever been censured, prosecuted, warned as to conduct, disciplined, disqualified or suspended from practicing a profession, removed from office, publicly criticized, or made subject to a court order at the instigation of any governmental body appointed under any enactment, by a professional organization, or the substantial equivalent thereof in Malawi or elsewhere? If yes, provide details: ...........................................................................................................................................
22. Indicate three individuals of good standing who would be able to provide a reference on your personal integrity. The referees must not be related to you and must have known you for at least three years. Referee 1 Referee 2 Referee 3 Name Address Occupation Position held Contact details: phone numbers and email address State for how long has each referee known you DECLARATION: I, the undersigned, being proposed shareholder of the Applicant, declare that to the best of my knowledge and belief, the information given in this form and the supporting documentation submitted together with this form are true, correct, complete and made in good faith: SIGNED: FULL NAMES:................................................................................................................. SIGNATURE:..................................................... DATE:…….........................…........... FORM B (para.7(2)) APPLICATION FOR APPROVAL FOR APPOINTMENT AS DIRECTOR FIT AND PROPER QUESTIONNAIRE FOR A DIRECTOR 24th May, 2024 235

QUESTION RESPONSE

1. Full Name of Nominee
2. Date of Birth & Gender
3. Nationality & National ID Number
4. Postal Address
5. Telephone Number
6. Email Address
7. Physical Address
8. Date of Appointment
9. Minimum Academic Qualification
10. Highest Academic/Professional Qualification
11. Other qualifications
12. Work Experiences (where applicable include full details of employer, positions held and years of service
13. Briefly summarise your experience in the Financial Sector
14. Information on other directorships held by the Nominee
15. Information on business interests of the Nominee
16. Have you: (a) been subject to a direction, administrative penalty or any enforcement action by the Registrar of Financial Institutions or any regulatory body? (If yes, please provide details) (b) been convicted of any offence, or are there any proceedings now pending which may lead to a conviction for any offence involving fraud or dishonesty? (If so, please provide details) 236 24th May, 2024

QUESTION RESPONSE (c) been adjudged by a court of law to have committed fraud or any act of dishonesty, or criminal conduct, misrepresentation, breach of contract, bankruptcy, breach of fiduciary duty or professional negligence given against it, in any civil proceedings, or are there any proceedings now pending that may lead to such a judgement or finding? (If so, please provide details) (d) contravened any written law designed for protecting members of the public against financial loss due to dishonesty, incompetence or malpractice by persons concerned in the provision of financial services or the management of companies or against financial loss due to the conduct of discharged or undischarged bankrupts? (if so, please provide details) (e) ever been or is now subject to an investigation in Malawi or elsewhere, by or at the instigation of any governmental department or agency, professional association, or other regulatory body? (If so, provide details) (f) any details that the Registrar of Financial Institutions should know 17. Borrowings: 18. If yes, provide the following details for each of the loan facility: Name of lending institution............................................................................................... Type of facility.................................................................................................................. Date of offer....................................................................................................................... 24th May, 2024 237

Terms of offer.................................................................................................................... Security offered................................................................................................................. Value of security................................................................................................................ Current outstanding balance............................................................................................. 19. Have you ever defaulted on a loan facility? Please provide your latest credit reference report from a licensed credit reference bureau................................................................. ........................................................................................................................................... DECLARATION: I, the undersigned, being proposed Director of the Applicant, declare that to the best of my knowledge and belief, the information given in this form and the supporting documentation submitted together with this form are true, correct, complete and made in good faith: SIGNED: FULL NAMES:................................................................................................................. SIGNATURE:.................................................. DATE:…….........................…........... FORM C (para. 7(2)) APPLICATION FOR APPROVAL FOR SENIOR MANAGEMENT OFFICIAL FIT AND PROPER QUESTIONNAIRE FOR OFFICIAL SENIOR MANAGEMENT (Where space provided is not enough, please provide the extra information on additional sheets)

1. Full Name of Nominee:....................................................................................................
2. Proposed position:.............................................................................................................
3. Postal Address:..................................................................................................................
4. Contact Numbers:.............................................................................................................
5. Physical Address:..............................................................................................................
6. Qualifications__ (i) Minimum Academic Qualification (include date obtained and institution).............. :................................................................................................................................... (ii) Highest Academic Qualification (include date obtained and institution).................. :................................................................................................................................... (iii) Other Qualifications (include date obtained and institution)..................................... :...................................................................................................................................
7. Amount, type and percentage of shareholding, if any, in any company: 238 24th May, 2024

Amount of Percentage of Name Type of shareholding 8. Do you hold any directorship in any company? If yes, please provide details. ........................................................................................................................................... 9. Employment record (Please include positions you are holding, or may have held with any employer anywhere in the world) Positions Responsibilities Name of Employer held and dates (where applicable) Reasons for Leaving 10. Provide a name (or names) of your banker and your bank account details for the last five (5) years. YEAR BANKER BANK ACCOUNT DETAILS 11. Are you an accredited member of any professional body in Malawi such as Institute of Chartered Accountants in Malawi (ICAM), Institute of Internal Auditors (IIA), Economics Association of Malawi (ECAMA) or Malawi Law Society (MLS)?............ If yes, provide details: ........................................................................................................................................... 12. Have you or any entity with which you are associated with as Director, Shareholder or senior management official ever held or applied for a licence or equivalent authorisation to carry on any business activity in any country? If yes, provide details: ........................................................................................................................................... 24th May, 2024 239

12.2If any such application was rejected or withdrawn after it had been issued, or any authorisation revoked, give particulars: ........................................................................................................................................... 13. Has judgment involving finding of fraud, dishonesty, violence, misrepresentation breach of contract, breach of fiduciary duty or professional negligence given against you or are there any proceedings now pending that may lead to such a judgment or finding? If yes, provide details: ........................................................................................................................................... 14. Has any body corporate , partnership, or unincorporated institution with which you were associated with as a controlling party shareholder, director, or senior management official, in Malawi or elsewhere, been wound-up, made subject to an administration order, otherwise made any compromise or arrangement with its creditors, or ceased trading either while you were associated with it or within one (1) year after you ceased to be associated with it or has anything analogous to any of these events occurred under the laws of any other jurisdiction? If yes, provide details: ........................................................................................................................................... 15. Have you contravened any written law designed for protecting members of the public against financial loss due to dishonesty, incompetence or malpractice by persons concerned in the provision of financial services or the management of companies or against financial loss due to the conduct of discharged or undischarged bankrupts? If yes, provide details: ........................................................................................................................................... 16. Have you ever failed to satisfy within one (1) year a judgment of debt under a court order in Malawi or elsewhere? If yes, provide details: ........................................................................................................................................... 17. Have you ever been adjudged bankrupt by a court in Malawi or elsewhere? Has a bankruptcy petition ever been served on you? Have you made any compromise arrangement or otherwise failed to satisfy creditors in full? If yes, provide details: ........................................................................................................................................... 18. Have you been censured, prosecuted, warned as to conduct, disciplined, disqualified or suspended from practicing a profession, removed from office, publicly criticized, or made subject to a court order at the instigation of any governmental body appointed under any enactment, by a professional organization, or the substantial equivalent thereof in Malawi or elsewhere? If yes, provide details: ........................................................................................................................................... 19. Indicate three (3) individuals of good standing who would be able to provide a reference on your personal and professional integrity. The referees must not be related to you and must have known you for at least three (3) years. 240 24th May, 2024

Referee 1 Referee 2 Referee 3 Name Address Occupation Contact details: phone numbers and email address State for how long has each referee known you 20. Please attach copies of employment contracts, where applicable. 21. Did the Board approve your appointment? If yes, please attach a copy of the Board resolution approving your appointment. ........................................................................................................................................... 22. Please attach a copy of certified minutes of the board of directors demonstrating that they have thoroughly evaluated the proposed nominee according to the “Fit and Proper” requirements of the Registrar of Financial Institutions and deem the applicant to be “fit and proper”. DECLARATION: I, the undersigned, being proposed as…………………………………………….., declare that to the best of my knowledge and belief, the information given in this form and the supporting documentation submitted together with this form are true, correct complete and made in good faith: SIGNED: FULL NAMES:................................................................................................................. SIGNATURE:..................................................... DATE:…….........................…........... Issued this 1st day of May, 2024. DR. W. T. BANDA (REF. NO. FIN/PFSPD/02/12) Registrar of Financial Institutions 24th May, 2024 241 Printed and published by THE GOVERNMENT PRINTER, Lilongwe, Malawi__(Price K13,700.00)