Investment Services

MFSA – Consultation on Proposed Amendments to the Investor Compensation Scheme Regulations

08 Nov 2016

2 min read

On the 4th November 2016, the MFSA issued a consultation document on amendments being proposed to the Investor Compensation Scheme Regulations S.L 370.09 (‘‘Regulations’’), a subsidiary legislation issued under the Investment Services Act Chapter 370 of the Laws of Malta.

The proposed amendments include those amendments which are required in order to bring the Regulations further in line with the Investor Compensation Scheme Directive 97/9/EC (‘‘ICD’’). By virtue of such amendments, all investment firms which fall within the scope of the ICD would also participate in the Investor Compensation Scheme (‘‘Scheme’’). Hence, pursuant to such amendments:

  • Category 1 licensed investment firms would participate in the Scheme;
  • Category 2 and Category 3 investment would participate even where such firms provide services solely and exclusively to non-retail clients;
  • Category 4 investment firms would not participate because such firms only offer trustee or custody services to Collective Investment Schemes, and such services fall outside the current ICD participation requirement.

The proposed amendments would also have the effect of:

  • Setting a target fund level for the Scheme of approximately €5.8 million. Such a fund size would represent an ex-ante funding coverage ratio of 0.5%;
  • Making provision for the payment of additional ex post contributions in the event the ex-ante funds are not adequate to cover all liabilities of a Scheme;
  • Ensuring that the Scheme will settle any judgment or award for up to € 20,000 in respect of a determination of civil liability which is obtained by an investor against a financial services provider;
  • Ensuring that all compensation payments to investors are shall be made in euro unless the monies or instruments owed to or belonging to investors are in a currency other than the euro;
  • Clarifying that the Scheme immediately and automatically subrogated by operation of the law into all the rights of the investor, up to the amount of the compensation paid to the said investor, against the licence holder and any other third party; and
  • Modifying the provisions relating to the Fixed and Variable Contributions

The MFSA is seeking feedback from the industry on the proposed amendments which is to be received by Monday 5th December 2016.

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