Regulatory Alerts2019-08-20
Added · Updated
Conduct of Business Rulebook Revisions
The Malta Financial Services Authority amended the Conduct of Business Rulebook to implement ESMA restrictions on marketing, distributing, or selling Contracts for Differences (CFDs) to retail investors, effective 11 August 2019. New Rules 1.2.68 to 1.2.77 in Chapter 1 and Rules 4.1.42 to 4.1.45 in Chapter 4 impose requirements on investment firms, including restrictions on sales, slippage parameters, expert advisor use, and record keeping. The revisions also updated definitions in the Glossary and aligned insurance sector rules with the Solvency II Directive by adding and amending specific provisions in Chapter 1.
MFSA MALTA FINANCIAL SERVICES AUTHORITY
Circular
20 August 2019
Conduct of Business Rulebook Revisions
Reference is made to the Conduct of Business Rulebook (‘Rulebook’) originally issued by the Malta Financial Services Authority (‘the Authority’) on 20th December 2017. A copy of the revised Rulebook can be found on the Authority’s website and accessed here.
The changes carried out to the Rulebook are the following:
[i] Requirements Applicable to the Securities Sector
ESMA’s Renewal of its restriction on the Marketing, Distribution or Sale of Contracts for Differences to retail investors
On 13th May 2019, the Authority issued a Consultation document relating to the product intervention measures the Authority proposed to implement in relation to Contracts for Differences in terms of Article 42(2) of Markets in Financial Instruments Regulation. The measures have been included in Part C, Section 1 of Chapter 4 of the Rulebook (on Sales and Selling Practices) as well as Part C, Section 2 of Chapter 1 of the Rulebook (Disclosures). A definition of ‘Contracts for Differences’ has also been included in the Glossary. These measures shall be applicable as from 11th August 2019.
[ii] Requirements Applicable to Insurance Undertakings and/or Intermediaries
The Conduct of Business Rulebook has been amended to include certain conduct of business requirements which were previously included in Chapter 12 of the Insurance Rules.
Summary of Amendments
The below table summarises the amendments made:
| Definitions/Glossary Section | Definitions of ‘Contacts for Differences’, ‘Excluded Non-Monetary Benefit’, ‘Initial Margin’, ‘Margin Close-out Protection’, ‘Negative Balance Protection’ added in the Definitions/Glossary section. |
| Part C, Section 2, Chapter 1 | Rules 1.2.68 to 1.2.77 have been included in Section 2 of Chapter 1 introducing requirements applicable to investment firms who market, distribute or sell contracts for differences to retail clients in or from Malta. |
Triq l-Imdina, Zone 1 Central Business District, Birkirkara CBD 1010 +356 2144 1155 communications@mfsa.mt www.mfsa.mt
MFSA MALTA FINANCIAL SERVICES AUTHORITY
Circular
| Section 4, Chapter 1 | Rule 1.4.27 has been amended to include the disclosure requirement provided in the previous Rule 12.2.10 of Chapter 12 of Insurance Rules. |
| Part F, Section 4, Chapter 1 | New Rules 1.4.112 and 1.4.113 were added and Rule R.1.4.111 amended in order to be in line with the requirements of Solvency II Directive as applicable to the insurance sector. |
| Part C, Section 1, Chapter 4 | Rules 4.1.42 to 4.1.45 added to provide the circumstances where the marketing, distribution or sale of CFDs to retail clients is restricted. The Rules also set the requirements for slippage parameters, use of expert advisors and record keeping. |
Contacts
Any queries or requests for clarifications on the contents of this Circular should be addressed to Conduct Supervision on financialpromotion@mfsa.com.mt.
Triq l-Imdina, Zone 1 Central Business District, Birkirkara CBD 1010 +356 2144 1155 communications@mfsa.mt www.mfsa.mt
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