chapter 370 investment services...

INVESTMENT SERVICES [CAP. 370. 1

CHAPTER 370

INVESTMENT SERVICES ACT

To regulate the carrying on of investment business and to makeprovision for matters ancillary thereto or connected therewith.

19th September, 1994;23rd September, 1994;30th December, 1994;

8th July, 1995

ACT XIV of 1994 as amended by Acts: XXIV and XXV of 1995; LegalNotices 191 of 1998 and 46 of 1999; and Acts XVII of 2002 and IV of 2003.

PRELIMINARY

Short title.1. The short title of this Act is the Investment Services Act.

Interpretation.Amended by:XVII. 2002.136.

2. (1) In this Act, unless the context otherwise requires -

" c o l l e c t i v e i n v e s t m e n t s c h e m e " m e a n s a n y s c h e m e o rarrangement which has as its object or as one of its objects thecollective investment of capital acquired by means of an offer ofuni ts for subscr ip t ion , sa le or exchange and which has thefollowing characteristics:

(a) the scheme or arrangement operates according to theprinciple of risk spreading; and either

(b) the contributions of the participants and the profits orincome out of which payments are to be made to themare pooled; or

(c) at the request of the holders, units are or are to be re-purchased or redeemed out of the assets of the schemeor arrangement, continuously or in blocks at shortintervals; or

(d) units are, or have been, or will be issued continuouslyor in blocks at short intervals:

Provided that the competent authority may issue a licencewith respect to a scheme or arrangement whose units are to beoffered for subscription, sale or exchange to:

(i) licence holders; or(ii) persons whose ordinary business involves the

acquisition and disposal of instruments of thesame kind as the instrument or instruments inwhich the scheme or arrangement invests; or

(iii) persons whose ordinary business involves theacquisition and disposal of property of the samekind as the property, or a substantial part of theproperty, in which the scheme or arrangementinvests; or

(iv) persons who by regulation under this Act are

2 CAP. 370.] INVESTMENT SERVICES

exempt from the requirement of an investmentservices licence provided that the scheme orarrangement invests in instruments or propertyin respect of which such persons are exempt;

Notwithstanding that such a scheme or arrangement doesnot have the characteristic listed in paragraph (a), and in any suchcase , such scheme or a r rangement sha l l be deemed to be acollective investment scheme;

"collective investment scheme licence" means a licence for theissue or creation of units or the carrying on of an activity by acollective investment scheme issued under article 6;

"competent authority" means the body appointed by the Ministerin terms of article 2A;

"document" or "documentation" includes information recorded inany form and, in relation to information recorded otherwise than inlegible form, references to its production include references toproducing a copy of the information in legible form;

"exempted person" means a person who for any reason isexempted from any or all of the provisions of article 3;

"instrument" means any instrument, contract or right fallingwithin the Second Schedule to this Act and whether or not issued inMalta;

"investment advertisement" means any form or medium ofadvertising or promotional activity, other than a prospectus, thecontents of which, either invites persons, or contains materialcalculated to induce persons:

(i) to become or offer to become participants in acollective investment scheme; or

(ii) to subscribe for or otherwise acquire orunderwrite an instrument; or

(iii) to purchase or otherwise procure an investmentservice;

"investment agreement" means any agreement the making orperformance of which by either party constitutes an investmentservice;

"investment service" means any service falling within the FirstSchedule when provided in relation to an instrument;

"investment services licence" means a licence to provide aninvestment service under article 6;

"licence" means a collective investment scheme licence or aninvestment services licence;

"licence holder" means a person who holds a licence;

" M a l t a ’ s i n t e r n a t i o n a l c o m m i t m e n t s " m e a n s M a l t a ’ scommitments, responsibili t ies and obligations arising out ofmembership of , or a f f i l ia t ion to , or re la t ionship wi th , anyinternational, global or regional organisations or grouping ofcountries or out of any treaty, convention or other international


agreement, however called, whether bilateral, multilateral, to whichMalta is a party;

"Minister" means the Minister responsible for finance;

"overseas regulatory authority" means an authority which in acoun t ry o r t e r r i to ry ou t s ide Mal t a exe rc i ses any func t ioncorresponding to:

(a) a function of the competent authority under this Act;

Cap. 371.(b) a function of the Central Bank of Malta under the

Banking Act;

Cap. 345.(c) a function of the Listing Authority under the FinancialMarkets Act; or

Cap. 403.Cap. 404.

(d) a function of the competent authority under theInsurance Business Act and the Insurance Brokers andOther Intermediaries Act;

"participants" means the persons who participate in or receive, orare to participate in or receive, profits or income arising from theacquisition, holding, management or disposal of the propertycomprised in a collective investment scheme or sums paid out ofsuch profits or income;

"prescribed" means prescribed by rules or regulations madeunder this Act;

Cap. 386."prospectus" has the meaning assigned to it in article 2 of the

Companies Act, and the word "shares" therein shall be read asincluding a reference to the word "unit";

"qualifying shareholding" means a direct or indirect holding in abody corporate which represents ten per cent or more of the sharecapital issued by such body, or of the voting rights attaching tosuch share capi ta l or which makes i t possible to exercise asignificant influence over the management of the body corporate;

Cap. 345."recognised investment exchange" has the meaning assigned to it

under the Financial Markets Act;

Cap. 386."subsidiary" has the same meaning as that given to the term by

article 2 of the Companies Act;

"unit" means any representation of the rights and interests ofparticipants in a collective investment scheme.

(2) In this Act and in any regulations made thereunder, if thereis any conflict between the English and Maltese texts, the Englishtext shall prevail.

Competent authority.Added by:XVII. 2002.137.

2A. The Minister shall by Order in the Gazette appoint a bodyto be the competent authority for the purposes of this Act to carryout the functions of the competent authority under this Act and toperform such other funct ions as the Minis ter may considerappropriate in relation to the operation of this Act.


LICENSING REQUIREMENTS

Requirement of licence for investment services.Amended by:XVII. 2002.138.

3. (1) No person shall provide, or hold himself out asproviding, an investment service in or from within Malta unless heis in possession of a valid investment services licence.

(2) No body corporate, unincorporated body or associationformed in accordance with or existing under the laws of Malta,shall provide or hold itself out as providing an investment servicein or from within a country, territory or other place outside Maltaunless it is in possession of a valid investment services licence.

(3) The competent authority may by notice in writing to anyperson determine that -

(a) a service falls within the First Schedule when providedin relation to an instrument; or

(b) an instrument, contract or right falls within the SecondSchedule and whether or not issued in Malta;

and subject to any appeal under article 19 with respect to suchperson the determination by the Competent Authority unless overruled by the Tribunal shall be conclusive for all purposes of thisAct.

Requirement of licence for collective investmentscheme.

4. (1) Subject to the provisions of subarticle (3), no collectiveinvestment scheme shall issue or create any units or carry on anyactivity in or from within Malta unless there is in respect of it avalid collective investment scheme licence.

(2) Subject to the provisions of subarticle (3), no collectiveinvestment scheme formed in accordance with or existing under thelaws of Malta shall issue or create any units or carry on any activityin or from within a country, territory or other place outside Maltaunless there is in respect of it a valid collective investment schemelicence.

(3) No collective investment scheme shall be precluded by theprovisions of subarticle (1) from issuing or creating such units orfrom taking such steps as may be necessary for the incorporationor, as the case may be, the establishment of the scheme or fromt a k i n g s u c h s t e p s a s m a y b e n e c e s s a r y f o r s e c u r i n g t h eauthorisation of the scheme by the competent authority.

APPLICATION, GRANT, REVOCATION, ETC., OF LICENCES

Application for a licence.

5. An application for a licence shall be made in the form andmanner required by the competent authority and shall furthermore -

(a) contain or be accompanied by such information andparticulars, in addition to those required by this article,as the competent authority may require or as may beprescribed;

(b) be verified in the manner and to the extent required bythe competent authority, or as may be prescribed;

(c) contain the address in Malta for service on theapplicant of any notice or other document required or


authorised to be served on him by or under this Act;

(d) in the case of an investment services licence, beaccompanied by a programme of operations setting outsuch matters as may be required to be set out by thecompetent authority from time to time;

(e) in the case of a collective investment scheme licence,specify the nature of the collective investment schemeconcerned; and

(f) be accompanied by such fee as may be prescribed inrespect of the licence applied for.

Power of competent authority to refuse or grant licence.Amended by:XVII. 2002.139;IV. 2003.174.

6. (1) The competent authority may grant or refuse to grant alicence applied for under this Act:

Provided that the competent authority shall not -

(a) grant an investment services licence unless it issatisfied that the applicant is a fit and proper person toprovide the investment services concerned and that theapplicant will comply with and observe any rules andregulations made under this Act and applicable to him;

(b) grant a collective investment scheme licence unless itis satisfied that the scheme will comply in all respectswith any rules and regulations made under this Act andapplicable to it and that its directors, and officers, or inthe case of a trust, its trustees, are fit and properpersons to carry out the functions required of them inconnection with the scheme.

(2) (a) In granting a licence the competent authority mays u b j e c t i t t o s u c h c o n d i t i o n s a s i t m a y d e e mappropriate, and having granted a licence it may, fromtime to time, vary or revoke any condition so imposedor impose new conditions.

(b) For the better carrying out of the provisions of thisAct, the competent authority may, from time to time,issue and publish guidelines which shall be binding onlicence holders and others as may be specified therein.Such guidelines may lay down additional requirementsand conditions in relation to activit ies of l icenceholders, the conduct of their business, their relationswith customers, the public and other parties, theirresponsibilities to the competent authority, reportingrequirements, financial resources, capital adequacyand related requirements, and any other matters as thecompetent authority may consider appropriate.

(3) When considering whether to grant or refuse to grant alicence the competent authority shall, in particular, have regard to -

(a) the protection of investors and the general public;

(b) the protection of the reputation of Malta taking intoaccount Malta’s international commitments;

(c) the promotion of competition and choice; and


(d) in the case of a collective investment scheme licence,the reputation and suitability of the applicant and allother parties connected with the scheme.

(4) Every licence shall specify the investment service whichthe holder thereof has been authorised to provide or, as the casemay require, the class of collective investment scheme to which thelicence relates.

(5) Without prejudice to the generality of subarticle (2), theconditions to which the competent authority shall subject a licencemay be made applicable, or be prescribed to be applicable, to -

(a) all investment services licences or all collectiveinvestment scheme licences, as the case may be;

(b) certain categories of licences;

(c) all licences granted to certain categories of holders;

(d) all licences in relation to particular services orschemes, as the case may be.

(6) Within six months from the date of the submission of aproperly completed application form together with the requisitedocumentation, the competent authority shall inform an applicantof its decision whether or not to grant a licence.

(7) Any requirement in this Act that a person be a fit andproper person to carry out certain activities or functions shall beinterpreted as a requirement not only that such person be a fit andproper person to carry out such activities or functions, but also thatany qualifying shareholder or members, director of officer of suchperson, and, in the case of a trust, each one of its trustees, be a fitand proper person to carry out such activities or functions.

(8) (a) Where close links exist between an applicant and anyother person the competent authority shall:

(i) only grant a licence if it considers that suchclose links do not prevent it from exercisingeffectively its supervisory functions; and

(ii) refuse to grant such a licence if it considers thatthe laws, regulations or administrativeprovisions of any country outside Maltagoverning one or more persons with whom theapplicant has close links, or their enforcement,prevent the effective exercise of its supervisoryfunctions.

(b) The competent authority may from time to time, bym e a n s o f g u i d e l i n e s u n d e r t h i s A c t d e f i n e t h ecircumstances in which "close links" are to be regardedas existing between any two or more persons.

(9) Where a licence holder or the manager, secretary, directoror other person responsible for a licence holder contravenes or failsto comply with any of the conditions imposed in a licence issuedunder this article, the competent authority may by notice in writingand without recourse to a court hearing impose on the licence


holder, manager, secretary, director, and or other persons, as thecase may be an administrative penalty which may not exceed fortythousand liri.

(10) Within a period of thirty days beginning with the date ofse rv ice o f a no t i ce impos ing an admin i s t ra t ive pena l ty inaccordance with subarticle (9), a person upon whom the notice isserved may appeal to the Financial Services Tribunal against thedecision of the competent authority in accordance with article 19.

Cap. 12.

(11) Where a notice as referred to in subarticle (9) has not beenappealed or where such notice has been appealed within fifteendays of the determination of such appeal, the administrative penaltyas contained in the notice or as reduced by the decision of theTribunal shall be due to the Authority and upon the service of acopy of the notice or the decision as the case may be, by means of ajudicial act on the person indicated in the notice or decision, thesaid notice or decision shall constitute an executive title for alleffects and purposes of Title VII of Part I of Book Second of theCode of Organization and Civil Procedure.

Power of competent authority to cancel or suspend licences.Amended by:XVII. 2002.140.

7. (1) The competent authority may at any time cancel orsuspend a licence in accordance with the provisions of this Act.

(2) In the case of an investment services licence, the competentauthority may cancel or suspend a licence -

(a) if it considers that the holder thereof is not a fit andproper person to provide the investment service he isauthorised to provide; or

(b) if it considers that the holder thereof does not fulfil therequirements of, or has contravened, any of theprovisions of this Act or of any rules or regulationsmade thereunder, or has failed to satisfy or complywith any obligation or condition to which he or thelicence is subject by virtue of or under this Act; or

(c) if the competent authority has been furnished by or onbehalf of the licence holder with information which isfalse, inaccurate or misleading; or

(d) if the licence holder has not commenced to provide theservice he has been authorised to provide within thetime provided for in the licence or has ceased toprovide such service; or

(e) if it considers it desirable to cancel or suspend thelicence for the protection of investors and the generalpublic, and the reputation of Malta taking into accountMalta’s international commitments; or

(f) at the request of the licence holder;

(g) in any of the circumstances under which the competentauthority would have been precluded from issuing thelicence under this Act or where under this Act it wouldhave been entitled to refuse the grant of such licence;and

(h) if the licence holder thereof has obtained the licence


by making false statements or by any other irregularmeans.

(3) In the case of a collective investment scheme licence, thecompetent authority may cancel or suspend a licence -

(a) if it considers that the directors, officers or trustees ofthe scheme are not fit and proper persons to carry outthe functions required of them in connection with thescheme; or

(b) if it considers that the scheme to which the licencerefers does not fulfil the requirements of any provisionof this Act or of any rules or regulations madethereunder, or there has been a contravention of anysuch provision as aforesaid, or an obligation orcondition to which the scheme or the licence is subjectby virtue of or under this Act has not been satisfied orcomplied with; or

(c) if information has been furnished to the competentauthority by or on behalf of or in relation to thescheme which is false, inaccurate or misleading; or

(d) if the scheme has not commenced the activities whichit was authorised to carry on within the time providedfor in the licence or has ceased to carry on suchactivities; or

(e) if it considers it desirable to cancel or suspend thelicence for the protection of investors and the generalpublic and the reputation of Malta taking into accountMalta’s international commitments; or

(f) at the request of the manager or trustee or custodian ofthe scheme, or their equivalent.

Notification of proposed refusal, variation, cancellation or suspension of a licence.Amended by:XVII. 2002.141.

8. (1) Where the competent authority proposes -

(a) to vary any condition to which the licence is subject orto impose a condition thereon; or

(b) to refuse an application for a licence or to cancel orsuspend a licence,

it shall give the applicant or, as the case may be, the licence holderor the manager and trustee or custodian of a collective investmentscheme, or their equivalent, notice in writing of its intention to doso, setting out the reasons for the decision it proposes to take.

(2) Every notice given under subarticle (1) shall state that therecipient of the notice may, within such reasonable period after theservice thereof as may be stated in the notice (being a period of notless than forty-eight hours and not longer than thirty days), makerepresentations in writing to the competent authority giving reasonswhy the proposed decision should not be taken, and the competentauthority shall consider any representation so made before arrivingat a final decision.

(3) The competent authority shall as soon as practicable notifyits final decision in writing to any of the persons to whom notice is


to be given under subarticle (1).

OBLIGATIONS OF LICENCE HOLDERS AND OTHERS

Changes in information; payment of fees.Amended by:XVII. 2002.142.

9. (1) The holder of an investment services licence and themanager of a collective investment scheme which has been licensedunder this Act, or any other person having responsibility for the dayto day administration or management of such a scheme, shallprovide the competent authority with particulars of any changes inthe information provided under this Act as soon as such holder,manager or person becomes aware of such changes and shall notifythe competent authority, on a continuous basis, of any changes orcircumstances which give rise to the existence of close links withinthe meaning in article 6.

(2) Every holder of a licence shall pay to the competentauthority such periodic fee, and within such time, as may from timeto time be prescribed.

Persons providing administrative services.Added by:XVII. 2002.143.

9A. (1) Any person who in Malta or from Malta provides tolicence holders in Malta, or to equivalent authorised persons andschemes overseas, administrative services which do not themselvesconstitute licensable activity under this Act, shall be required toapply for recognition by the competent authority under this article,and no pe rson sha l l p rov ide such se rv ices un less he i s sorecognised.

(2) The competent authority may from time to time, issueguidelines laying down the requirements for recognition andgenerally regulating the provision of such administrative services.Such guidel ines may in part icular include provision for thefollowing matters:

(i) establishing which activities constituteadministrative services for the purposes of thisarticle;

(ii) the form and the content of applications to thecompetent authority for recognition;

(iii) the application, annual and other fees payable inrespect of recognition;

(iv) the obligation to supply documentation andother information to the competent authority;

(v) measures to allow the competent authority toensure compliance by recognised administratorswith this Act and guidelines issued thereunder;

(vi) arrangements for the exchange of informationwith other regulatory bodies both in Malta andoverseas;

(vii) providing for the mutual recognition of personsrecognised as fit to provide such services outsideMalta;

(viii) generally any other matter ancillary orconnected with the above.


Notification of new or increased control.Amended by:XVII. 2002.144.

10. (1) No person shall acquire, directly or indirectly, aqualifying shareholding in a l icence holder or increase suchqualifying shareholding so that the proportion of the voting rightsor of the share capital held by him in the licence holder reaches orexceeds 20 per cent, 33 per cent or 50 per cent, or so that thelicence holder becomes the subsidiary of such person, unless suchperson has served on the competent authority a written noticestating that he intends to acquire or increase such shareholding,and -

(a) the competent authority has, before the end of theperiod of three months beginning with the service ofthat notice, notified him in writing that there is noobjection to his acquiring or increasing suchshareholding; or

(b) that period has elapsed without the competentauthority having served on him a notice of objection;or

(c) the competent authority has, before the end of the saidperiod of three months served a notice of objectionwhich has subsequently been withdrawn, cancelled orquashed for any reason:

Provided that the acquisition or increase of the qualifyingshareholding takes place within one year following the eventmentioned in paragraph (a), (b) or (c) as the case may be:

Provided also that in the case envisaged in the aforesaidparagraph (c) of this sub-article the aforesaid period of one yearshall commence to run from the date that the person concerned hasbeen notified of the withdrawal, cancellation or quashing of thenotice of objection, as the case may be.

(2) A notice served on the competent authority under subarticle(1) shall contain such information as the competent authority maydirect and the competent authority may, after receiving such anotice from any person, by notice in writing require him to providesuch addit ional information or documents as the competentauthority may reasonably require for deciding whether to serve anotice of objection.

(3) Where additional information or documents are requiredfrom any person by a notice under subarticle (2), the time betweenthe giving of the notice and the receipt of the information ordocuments shall be added to the period mentioned in subarticle(1)(a).

(4) Every notice of objection mentioned in subarticle (1)(b)shall state the reasons for such objection and shall state that therecipient of the notice may, within such reasonable period after theservice thereof as may be stated in the notice (being a period of notless than forty-eight hours and not longer than thirty days), makerepresentations in writing to the competent authority giving reasonswhy the no t ice of ob jec t ion should be wi thdrawn; and thecompetent authority shall consider any representations so madebefore arriving at a final decision.


(5) The competent authority shall notify its final decision inwriting to the person who makes representations in writing undersubarticle (4), within thirty days of receipt of representations asprovided for in the said subarticle (4).

(6) Any person who proposes to sell or dispose, directly orindirectly, of a qualifying shareholding in a licence holder or toreduce his qualifying shareholding so that the proportion of thevoting rights or of the share capital held by him in the licenceholder would fall below 20 per cent, 33 per cent or 50 per cent, orso that the licence holder would cease to be his subsidiary, mustinform the competent authority in writing stating his intention tosell, dispose of or reduce his shareholding and stating the size ofhis shareholding following such sale, disposal or reduction.

(7) Immediately on becoming aware of any proposed or actualacquisition or disposal of part or all of a shareholding in its sharecapital in any of the circumstances dealt with in this article alicence holder shall inform the competent authority in writing.

(8) Where the influence exercised by a person acquiring orproposing to acquire a part of the share capital is likely to beprejudicial to the sound and prudent management of a licenceholder, the competent authority may issue a notice of objection;and exercise any of the powers assigned to it under this Act,including the power to issue directives, as it may deem reasonableand appropriate in the circumstances.

(9) A copy of any notice served on the person concerned interms of subarticle (8) shall be served on the company to whoseshares it relates.

(10) Without prejudice to the provision of article 22, where ashare holding in a licence holder is acquired despite the objectionof the competent authority, the exercise of the correspondingvoting rights shall be suspended and any votes cast in contraventionof this subarticle shall be null and void.

(11) If the acquirer of the qualifying holding referred to in thisarticle is:

(a) a person holding a licence or an equivalentauthorisation from an overseas regulatory authority, or

(b) the parent undertaking of a person referred to inparagraph (a), or

(c) any person controlling a person referred to inparagraph (a),

and if, as a result of that acquisition, the licence holder in which theacquirer proposes to acquire a holding would become the acquirer’ssubsidiary or come under his control , the assessment of theacquisition by the competent authority must be the subject of priorconsultation with the overseas regulatory authority taking intoaccount Malta’s international commitments.


Prospectus and investment advertisements.Substituted by:XVII. 2002.145.

11. (1) (a) No collective investment scheme, whether licensedor not, shall issue or cause to be issued a prospectus in or fromwithin Malta unless the prospectus has been approved by theCompetent Authority.

(b) No person, other than licence holders, may issue orcause to be issued an investment advertisement in or from withinMalta unless its contents have been approved by a licence holder.

(2) The competent authority may, from time to time, issue suchguidelines or directives to licence holders as it may considerappropriate in order to set minimum standards and requirementswhich are to be observed by licence holders when issuing orapproving investment advertisements or issuing a prospectus inaccordance with subarticle (1). Such guidelines or directives mayalso include provision for such exemptions or conditions as may bespecified therein and may make different provision for differentcases or classes of cases, under such terms and conditions as maybe prescribed.

(3) The competent authority may impose such conditions,limitations and restrictions on a licence holder with respect to theissue or approval of investment advertisements, as it may considerappropriate.

REGULATORY AND INVESTIGATORY POWERS

Minister’s power to make regulations.Amended by: XXV.1995.432;XVII. 2002.146;IV. 2003.175.

12. (1) The Minister, acting on the advice of the competentauthority, may make rules or regulations to give effect to theprovisions of this Act, and without prejudice to the generality ofthe foregoing may, by such rules or regulations, in particular, doany of the following:

(a) amend the definition of "collective investmentscheme" contained in article 2, as well as thedefinition of "investment service" contained in article2 and the First and Second Schedules;

(b) regulate investment services and collective investmentschemes, as well as services provided and activitiescarried on in conjunction therewith or in relationthereto, providing for any matter he may deemexpedient including the creation and exercise of rightsby or for the benefit of the public and the imposition ofduties and obligations on the holders of a licence orpersons responsible for the management oradministration thereof; provide for the safekeepingand custody of the property of collective investmentschemes and for the requirement to appoint acustodian, and prescribe and regulate in the mostextensive manner the functions, duties, responsibilitiesand obligations of the custodian; establish thequalifications and other eligibility criteria necessary toact as custodian, including residence qualifications;provide for the protection of the property of theschemes in the event of the insolvency of the


custodian, and for the purpose of this paragraph"custodian" shall include a sub-custodian; require thekeeping of records with respect to the transactions andfinancial position of collective investment schemesand for the inspection of those records, and prescribereporting and disclosure requirements, including thepreparation of periodical reports with respect to theschemes and the furnishing of those reports to theshareholders, unit-holders or other participants in thesaid schemes, and to others; and provide for theregulation of the free circulation of units of collectiveinvestment schemes and to regulate the managementcompanies of such schemes; and to make provisions oncapital adequacy requirements;

(c) establish schemes or other arrangements for thecompensation of investors in cases where licenceholders or any categories thereof as may be specified,are unable to satisfy their obligations towardsinvestors or claims in respect of any liability incurredby them in connection with the carrying out of anyactivity in regard to which they are licensed, and toregulate the management and the financing of any suchschemes or arrangements and, the contributions andlevies to be paid thereto, to set the minimum andmaximum levels of compensation payable thereunderand may under such schemes and arrangementsdistinguish between different classes of investors and,exclude certain classes from compensation, and tomake provision for the regulation of and for otheraspect related to such schemes or arrangements andmay moreover provide that such schemes orarrangements as may be prescribed shall have a legalpersonality distinct from that of the contributorsthereto and of the competent authority and provide forthe judicial and legal representation thereof; and suchschemes shall be exempt from the payment of incometax as from the date of establishment of such schemes;

(d) define the criteria for determining whether a holding isan indirect holding for the purposes of determiningwhether a qualifying shareholding exists;

(e) regulate the promotion or sale by or on behalf of anyperson, and by any means, of an investment service orof a collective investment scheme or of anyinstrument, including the criteria and procedures forthe granting or refusing of consent by the competentauthority pursuant to the provisions of article 11 ofthis Act;

(f) amend the provisions of article 18 on thecircumstances in which auditors are obliged tocommunicate information to the competent authority,to prescribe rules governing the disclosure by auditorsof information pursuant to article 18 and to establish


supervisory and disciplinary procedures for auditors inrespect of their duties under the provisions of article18;

(g) regulate the drawing-up, approval, publication anddistribution in Malta of prospectuses relating to theoffer of transferable securities authorised or otherwiseapproved, in a country or countries outside Malta andto make provision for the recognition of suchprospectuses taking into account Malta’s internationalcommitments;

(h) provide for and regulate the payment by any person,body or scheme, as the case may be, of licence or otherfees and such other charges payable to the competentauthority in respect of any matter provided for, by orunder this Act or any rules or regulations made underthis article, as may be prescribed;

(i) exempt any person, service, instrument, collectiveinvestment scheme, or advertisement from any one ormore of the provisions of this Act subject to suchvariations, additions, adaptations and modifications asmay be prescribed and subject to such conditions orother requirements, including other forms ofauthorisation and notification procedures, as may beprescribed;

(j) prescribe anything that is to be or which may beprescribed;

(k) provide for any matter incidental to or connected withany of the above.

(2) (A) Rules or regulations made under this article may alsocontain provision for enabling a person who has entered, or offeredto enter, into an investment agreement with the holder of a licenceto rescind the agreement or withdraw the offer within such periodand in such manner as may be prescribed, and in particular, butwithout prejudice to the generality of the foregoing, may makeprovision -

(a) for requiring the service of notice with respect to therights exercisable under the rules or regulations;

(b) for the restitution of property and the making orrecovery of payments where those rights are exercised;

(c) for such other matters as are incidental to or connectedwith any of the above.

Cap. 16.

(2) (B) Rules or regulations made under this article may makeprovision for the constitution of common funds for investmentpurposes in the form of a collective investment scheme by contractor other arrangement in writing and may exempt such funds fromthe application of any article or provision of the Civil Code underTitle V of Part I of Book Second with such modifications andvariations as may be established.

(3) Rules or regulations made under this article, may be made


subject to such exemptions or conditions as may be specifiedthere in , may make d i f fe ren t p rovis ion for d i f fe ren t cases ,circumstances or purposes and may give to the competent authoritysuch powers of adaptation of the rules or regulations as may also beso specified.

(4) Rules or regulations made under this article may imposepunishments or other penalties in respect of any contravention orfai lure of compliance not exceeding a f ine (multa ) of for tythousand liri or imprisonment for a term not exceeding one year, orboth such fine and imprisonment.

(5) The exercise of any of the powers assigned under thisarticle shall be subject to any obligations or rights arising fromMalta’s international commitments.

Power of competent authority to require information.Amended by:XVII. 2002.147.

13. (1) The competent authority may, by notice in writing,require -

(i) any person who is or was providing, or whoappears to be or to have been providing, aninvestment service; or

(ii) a collective investment scheme; or(iii) any person who is or was carrying on, or who

appears to be or have been carrying on activitiesin connection with such a scheme; or

(iv) any person who has issued, or appears to haveissued an advertisement falling within theprovisions of article 11(1); or

(v) any other person who appears to be inpossession of relevant information,

to do all or any of the following:

(a) to furnish to the competent authority, at such time andplace and in such form as it may specify, suchinformation and documentation as it may require withrespect to any such service, scheme or advertisementas aforesaid, or with respect to any person with whomthe licence holder has close links within the meaningof article 6;

(b) to furnish to the competent authority any informationor documentation aforesaid verified in such manner asit may specify;

(c) to attend before the competent authority, or before aperson appointed by it, at such time and place as itmay specify, to answer questions and provideinformation and documentation with respect to anysuch service, scheme or advertisement as aforesaid.

(2) The competent authority may take copies of any documentsfurnished or provided under this article.

(3) Where the person required to provide information ordocumentat ion under this ar t icle does not have the relevantinformation or documentation, he shall disclose to the competent


authority where, to the best of his knowledge, that information ordocumentation is, and the competent authority may require anyperson, whether indicated as aforesaid or not, who appears to it tobe in possession of that information or documentation, to provideit.

(4) A statement made and documentation provided inpursuance of any requirement under this article may be used inevidence against the person making the statement or providing thedocumentation as well as against any person to whom they relate.

Cap. 9.

(5) The provisions of this article shall not apply to informationor documentation which is privileged in accordance with theprovisions of article 642(1) of the Criminal Code.

(6) The power to require the production of documentationunder the provisions of this article shall be without prejudice to anyl i e n o r c h a r g e c l a i m e d b y a n y p e r s o n i n r e l a t i o n t o s u c hdocumentation.

(7) Where the competent authority has appointed a personunder subarticle (1)(c), such person shall, for the purposes ofcarrying out his functions under his appointment, have all thepowers conferred on the competent authority by this article and arequirement made by him shall be deemed to be and have the sameforce and effect as a requirement of the competent authority.

Cap. 204.

(8) Without prejudice to the other provisions of this article, alicence holder may be required to submit to the Central Bank ofMalta such information as the Bank may reasonably require for thedischarge of its duties under the Central Bank of Malta Act.

Appointment of inspectors.

14. (1) The competent authority may, whenever it deems itnecessary or expedient, appoint an inspector or inspectors toinvestigate and report on the affairs of any persons or schemereferred to in article 13(1)(i) to (iv).

(2) An inspector appointed under subarticle (1) -

(a) may also, if he thinks it necessary or expedient for thepurposes of that investigation, investigate the affairsof any person or scheme mentioned in subarticle (1);

(b) shall have and may exercise all the powers conferredon the competent authority by article 13, and anyrequirement made by him shall be deemed to be andhave the same force and effect as a requirement of thecompetent authority;

(c) may, and if so directed by the competent authorityshall, make interim reports and on the conclusion ofhis investigation shall make a final report to the saidauthority.

(3) The competent authority shall have power to order that allexpenses of, and incidental to, an investigation pursuant to thisarticle be paid by the persons or scheme concerned.


Power to issue directives.Amended by:XVII. 2002.148.

15. (1) Without prejudice to any of the powers conferred on itby articles 13 and 14, the competent authority may, whenever itdeems it necessary, and whether upon a report by an inspectorappointed under article 14 or not, give, by notice in writing, suchdirectives as it may deem appropriate in the circumstances; and anyperson or scheme as is referred to in article 13(1) to whom or towhich the notice is given shall obey, comply with and otherwisegive effect to any such directive within the time and in the mannerstated in the directive or further directive.

(2) Without prejudice to the generality of the foregoingprovisions of this article, a directive under this article may -

(a) require anything to be done or be omitted to be done,or impose any prohibition, restriction or limitation, orany other requirement, and confer powers, with respectto any transaction or other act, or to any assets, or toany other thing whatsoever;

(b) require a collective investment scheme and themanager of such a scheme, or his equivalent, and anyother person who may issue, redeem, sell or purchaseunits in the scheme, to cease the issue, redemption,sale, or purchase of units or all or any combination ofthose activities, as may be specified in the directive orfurther directive;

(c) require that any person having functions in relation tothe holder of a licence be removed or removed andreplaced by another person acceptable to thecompetent authority;

(d) require a collective investment scheme or its directorsand shareholders, or the manager or trustee orcustodian of a scheme, or their equivalent, to wind itup by such date and in accordance with such procedureand other provisions as may be specified in thedirective or further directive;

(e) require a licence holder or any person who is or wasproviding, or who appears to be or to have beenproviding an investment service to cease operationsand to wind up its affairs, in accordance with suchprocedures and directions as may be specified in thedirective, which may provide for the appointment of aperson to take possession and control of all documents,records, assets and property belonging to or in thepossession or control of the licence holder or suchother person.

(3) The power to give directives under this article shall includethe power to vary, alter, add to or withdraw any directive, as well asthe power to issue new or further directives.

(4) Where the competent authority is satisfied that thecircumstances so warrant, it may at any time make public anydirective it has given under any of the provisions of this article.

Right of entry.16. (1) Any officer, employee or agent of the competent


authority, on producing, if required, evidence of his authority, mayenter premises occupied by a person on whom a notice has beenserved under article 13 or whose affairs are being investigatedunder article 14, for the purpose of obtaining there the informationor documents required by that notice, or otherwise for the purposeof the investigation, and of exercising any of the powers conferredby the said articles.

(2) Where any officer, employee or agent of the competentauthority has reasonable cause to believe that if such notice as isreferred to in subarticle (1) were served it would not be compliedwith or that any documents to which it could relate would beremoved, tampered with or destroyed, such person may, onproducing, i f required, evidence of his authori ty , enter anypremises referred to in subarticle (1) for the purpose of obtainingthere any information or documents specified in the authority,being information or documents that could have been requiredunder such notice as is referred to in subarticle (1).

(3) For the purposes of any action taken under the provisions ofthis article, the competent authority may request the assistance ofthe Commissioner of Police, who may for such purpose exercisesuch powers as are vested in him for the prevention of offences andthe enforcement of law and order.

CO-OPERATION WITH OVERSEAS REGULATORY AUTHORITY

Powers exercisable.Amended by:XVII. 2002.149.

17. (1) The competent authority may exercise the followingpowers at the request of or for the purposes of assisting an overseasregulatory authority:

(a) the power to impose, revoke or vary conditions on thegrant of a licence pursuant to the provisions of article6(2);

(b) the power to cancel or suspend a licence under article7(1);

(c) the powers of inquiry under article 13;

(d) the power to appoint inspectors under article 14;

(e) the powers of intervention under article 15;

(f) the powers of entry under article 16;

(g) the power to communicate to the overseas regulatoryauthority information which is in the possession of thecompetent authority, whether or not as a result of theexercise of any of the above powers.

(2) The competent authority shall exercise powers by virtue ofthis article:

(a) where the assistance is requested by the overseasregulatory authority for the purposes of the exercise ofone or more of its regulatory functions; or

(b) where so required within the terms of Malta’sinternational commitments; or

(c) where so required within the terms of undertakings


assumed in bilateral or multilateral agreements for theexchange of information and other forms ofcollaboration with overseas regulatory authoritiesincluding a request arising under a memorandum ofunderstanding concluded with the competent authority.

DUTY OF AUDITORS

Auditor’s duty to report.Amended by:XVII. 2002.150.

18. (1) An auditor of the holder of a licence shall have theduty to report immediately to the competent authority any fact ordecision of which he becomes aware in his capacity as auditor ofsuch licence holder which -

(a) is likely to lead to a serious qualification or refusal ofthe auditor’s report on the accounts of such licenceholder; or

(b) constitutes or is likely to constitute a material breachof the legal or regulatory requirements applicable tothe licence holders in or under this Act; or

(c) gravely impairs the licence holder’s ability to continueas a going concern; or

(d) relates to any other matter which may be prescribed.

(2) An auditor of the licence holder shall report to thecompetent authority any facts or decision as specified in subarticle(1) of any person having close links with such licence holder withinthe meaning in article 6, of which he becomes aware in his capacityas auditor of the licence holder or of the person having such closelinks.

(3) No duty (including the duty of professional secrecy) towhich an auditor of the holder of a licence may be subject, shall beregarded as contravened by reason of his communicating in goodfaith to the competent authority, whether or not in response to arequest from it, any information or opinion on a matter of which theauditor has become aware in his capacity as auditor of that licenceholder and which is relevant to any functions of the competentauthority under the provisions of this Act or is required to becommunicated by virtue of subarticle (1).

(4) The matters prescribed for the purposes of subarticle (1)(d)may include matters related to persons other than the licenceholder.

APPEALS, REMEDIES, SANCTIONS AND CONFIDENTIALITY

Appeals.Amended by:XVII. 2002.151.Cap. 330.

19. (1) In this article the Financial Services Tribunal meansthe Tribunal established under article 21 of the Malta FinancialServices Authority Act.

(2) Subject to the provisions of this article, an appeal shall lieto the Tribunal with respect to:

(a) any notice in terms of article 3(3);

(b) any failure to inform an applicant within the terms ofarticle 6(6);


(c) any administrative penalty imposed under article 6(9);

(d) any refusal, variation, cancellation or suspension of alicence under article 8(3);

(e) any decision under article 10(5);

(f) any decision concerning an advertisement under article11;

(g) any directive given under article 15; or

(h) any decision to make a public statement, under theprovisions of article 25, as to a person’s misconduct.

(3) An appeal under this article shall lie only on any of thefollowing grounds:

(a) that the competent authority has wrongly applied anyof the provisions of this Act; or

(b) that the decision or directive of the competentauthority constitutes an abuse of discretion and ismanifestly unfair, but the discretion of the competentauthority may not, so long as it has been exercisedproperly, be queried by the Tribunal.

(4) An appeal made under this article shall not suspend theoperation of any decision or directive from which the appeal ismade:

Provided that a decision to cancel a licence shall notbecome operative until the expiration of the period within which anappeal lies under this article and, if an appeal is made within suchperiod, the decision shall become operative on the date of thedecision of the Tribunal dismissing the appeal or the date on whichthe appeal is abandoned:

Provided further that a decision to issue a statement as to aperson’s misconduct shall not be published until expiration of theperiod within which an appeal lies under this article and, if anappeal is made within such period, the statement shall not bepublished before the date of the decision of the Tribunal dismissingthe appeal or the date on which the appeal is abandoned.

Unenforceability of certain agreements.

20. An investment agreement which is entered into -

(a) by a person in the course of providing an investmentservice in contravention of the provisions of article 3of this Act; or

(b) by the holder of an investment services licence or byan exempted person in consequence of anything saidor done by a person in the course of providing aninvestment service in contravention of the provisionsof article 3,

shall be unenforceable against the other party; and such other partyshall be entitled to recover any money paid, or other propertytransferred by him under the agreement, or where such propertycannot be so recovered, such party shall be entitled to have itreplaced by its value at the time of the agreement, together with


compensation for any loss sustained by him in consequence of suchpayment or transfer or the non-recovery of the property transferredand any profits that may have accrued as a result of that money orother property having been transferred by him:

Provided that where on demand for a recovery under thisarticle, the court is satisfied that -

(i) in a case falling under paragraph (a), the persontherein mentioned reasonably believed he wasnot contravening the provisions of the saidarticle 3; or

(ii) in a case falling under paragraph (b), the licenceholder or exempted person neither knew norought to have known that the agreement wasentered into as mentioned in that paragraph,

it may allow an investment agreement to which this article appliesto be enforced and the money or property paid or transferredthereunder to be retained.

Powers of the court in the case of a likely contravention.Amended by: XXIV.1995.362.

21. (1) If, on an application by the competent authority madeto the Civil Court, First Hall, the said court is satisfied -

(a) that there is reasonable likelihood that a person willcontravene any of the provisions of articles 3, 4 or 11or of any rules and regulations made under it, or willcontravene or fail to comply with any condition,obligation, requirement, directive, or order made orgiven under any of the provisions of this Act; or

(b) that a person has contravened any such provision orhas contravened or failed to comply with any suchcondition, obligation, requirement, directive, or orderand that steps could be taken to remedy thecontravention or failure,

the court may give such orders as it may deem appropriate torestrain the contravention or, as the case may be, to require theperson referred to in paragraph (a) or (b), or any other person whoappears to the court to have been knowingly concerned in thecontravention, to take such steps as the court may direct.

(2) If, on an application made under subarticle (1), the court issa t i s f ied tha t a person has en te red in to any t ransac t ion incontravention of any of the provisions of articles 3, 4 or 11, thecourt may order that person and any other person who appears tothe court to have been knowingly concerned in the contravention totake such steps as the court may direct for restoring the parties tothe position in which they were before the transaction was enteredinto.

(3) If, on an application made under subarticle (1), the court isfurther satisfied that -

(a) profits have accrued to any person as a result of thecontravention; or

(b) an investor has suffered loss or been otherwiseadversely affected as a result of that contravention,


the court may order the person responsible for the contravention topay into court such sum as appears to it to be just having regard tothe extent of the profit, loss or adverse effect as aforesaid, andorder such sum to be paid out as the court may direct to the personswho have entered into transactions as a result of which profits haveaccrued or losses or adverse effects have been suffered asaforesaid.

(4) For the purposes of this article the court may order theproduction by any person of such accounts and the provision ofsuch information, and verified in such manner, as the court maydeem appropriate.

(5) The provisions of this article shall be without prejudice toany right of any aggrieved person to bring proceedings directly inrespect of any right such person may otherwise have independentlyof the competent authority.

Offences. 22. (1) Any person who contravenes or fails to comply withany of the provisions of articles 3, 4, 9, 10, 11, 13, 15 or 26 or ofarticle 13 as applied by article 14, or of articles 13, 14 or 15 asapplied by article 17, or of any court order made under article 21 orof any rules or regulations made under art icles 12 or 31, orcontravenes or fails to comply with any condition, obligation,requirement, directive or order made or given under any of theprovisions of this Act, shall be guilty of an offence.

(2) Any person who for the purposes of, or pursuant to, any ofthe provisions of this Act or of any rules or regulations madethereunder, or any condition, obligation, requirement, directive ororder made or given as aforesaid, furnishes information or makes astatement which he knows to be inaccurate, false or misleading inany material respect, or recklessly furnishes information or makes astatement which is inaccurate, false or misleading in any materialrespect, shall be guilty of an offence.

(3) Any person who is knowingly a party to the carrying on ofany investment service or of any activity by a collective investmentscheme with a fraudulent intent or for a fraudulent purpose, shall beguilty of an offence.

(4) Any person who by any statement, promise or forecastwhich he knows to be misleading, false or deceptive, or by anydishonest concealment of material facts, or by the reckless making(whether dishonest or otherwise) of any statement, promise orforecast which is misleading, false or deceptive, induces orattempts to induce another person to enter into or offer to enter intoan investment agreement, shall be guilty of an offence.

(5) Any person who with intent to avoid detection of thecommission of an offence under this Act removes, destroys,conceals or fraudulently alters any book, document or other paper,shall be guilty of an offence.

(6) Any person who intentionally obstructs a person exercisingrights conferred by this Act shall be guilty of an offence.

Penalties. 23. A person guilty of an offence under the provisions of


article 22 shall be l iable on conviction to a fine (multa) notexceeding two hundred thousand liri or to a term of imprisonmentnot exceeding four years, or to both such fine and imprisonment,unless such fine or term of imprisonment is otherwise imposedunder article 12(4).

Criminal proceedings.

24. (1) No proceedings for an offence under this Act shall becommenced without the consent of the Attorney General.

(2) The provisions of this Act shall not affect any criminalproceedings that may be competent under any other law.

Public statement as to person's misconduct.

25. (1) If it appears to the competent authority that a personwho holds or who held a l icence has contravened any of theprovisions of this Act or of any rules and regulations made underthis Act or has contravened or failed to comply with any condition,obligation, requirement, directive or order made or given under anyof the provisions of this Act, the competent authority may publish astatement to that effect.

(2) Before publishing a statement under subarticle (1), thecompetent authority shall give the person concerned written noticeof the proposed statement and of the reasons for which i t isproposed to act.

(3) Where the reasons stated in the notice relate specifically tomatters which -

(a) refer to a person identified in the notice other than theperson who is the subject of the notice; and

(b) are in the opinion of the competent authorityprejudicial to that person in any office or employment,

the competent authority shall, unless it considers it impracticable todo so, serve a copy of the notice on that other person.

(4) A notice served on a person pursuant to the provisions ofthis article shall give particulars of the person’s right of appealunder article 19 and of the provisions of subarticle (5).

(5) Subject to the provisions of article 19(4), upon expiry ofone month from the date of service of the notice under subarticle(2), or a copy of the notice under subarticle (3), whichever was thelater, the competent authority may publish the proposed statementand, after publication, shall send a copy to that person and to anyperson on whom a copy of the notice was served under sub-article(3).

(6) Nothing in this article shall restrict or otherwise prejudicethe powers of the competent authority under article 15(4).

Confidentiality.Amended by:XVII. 2002.152.Substituted by:IV. 2003.176.

26. (1) Information obtained by any person for the purposesof, or pursuant to, any of the provisions of this Act, or of any rulesor regulatons made thereunder, or in the discharge of any functionsunder any of the said provisions, or from overseas regulatoryauthority, shall be treated as confidential and protected by the dutyof professional secrecy, and shall not be disclosed to any otherperson except in:


(a) cases covered by criminal law provisions under thisAct or any other Act, including the detection,prevention or prosecution of criminal offences;

(b) a summary or collection of information formed in sucha way as not to enable the identity of any persons towhom the information relates to be ascertained; and

(c) civil or commercial proceedings in relation to thebankruptcy or dissolution and consequential windingup by the Court of a licence holder provided suchinformation does not concern third parties involved inattempts to rescue such licence holder, and to suchoverseas bodies responsible for the liquidation andbankruptcy of a person holding a licence or anequivalent authorisation from an overseas regulatoryauthority or for other similar procedures.

(2) The provisions of subarticle (1) shall not preclude thedisclosure of information, provided the consent of the person fromwhom the informaiton originates is obtained -

(a) with a view to the institution of, or otherwise for thepurposes fo any proceedings by the competentauthority before any court under this Act;

(b) to an auditor where such disclosure would assist himin the exercise fo his functions under article 18;

Cap. 345.(c) to the Central Bank of Malta or to the Listing

Authority under the Financial Markets Act, where suchinformation is required by the Bank or the ListingAuthority in the exercise of their respective functionsin terms of law;

(d) in response to a request from, or for the purpsoe ofassisting, an overseas regulatory authority pursuant toarticle 17; and

(e) to such other local or overseas regulatory, judicial orenforcement authorities where such disclosure isrequired or requested for the pursuance of seriousregulatory concerns.

MISCELLANEOUS

Exclusion of liability.Amended by:XXV.1995.432.

27. The competent authority and any member, officer oremployee of the competent authori ty , and any other personappointed to perform a function under this Act, or under any rulesor regulations made thereunder, shall not be liable in damages foranything done or omitted to be done in the discharge or purporteddischarge of any funct ions under th i s Act , o r any ru les orregulations aforesaid, unless the act or omission is shown to havebeen done or omitted to be done in bad faith.

Notices, etc. 28. A notice or other document to be given or served under thisAct, or any rules or regulations made thereunder, shall be deemedto have been duly given or served on a person if -

(a) it has been delivered to him; or


(b) it has been left at the address furnished by him to thecompetent authority, or to his last known address; or

(c) if it has been sent to him by post or by telefax at any ofthe aforesaid addresses; or

(d) in the case of a body of persons, whether corporate orunincorporate, or of a scheme or of a trust, if it hasbeen given or served in any of the manners aforesaidto or on a secretary, clerk, manager, trustee or theirequivalent, or to any member of the governing body oran appointed representative.

Application of Exchange Control Act.Cap. 233.

29. The Exchange Control Act shall not apply to transactionscarried out by licence holders (or by the companies or trusts of suchlicence holders as are collective investment schemes) with personsnot resident in Malta for the purposes of the said Act:

Provided that a licence holder who is not resident in Maltafor the purposes of the said Act shall be exempt from the provisionsof the said Act with respect to any steps which may be taken asprovided in article 4(3), or for the purposes of the establishment ofthe licence holder in Malta.

Social security and import duty exemptions in respect of licence holders and expatriate staff. Cap. 318.

30. (1) Expatriate officers and employees of any licenceholder and the licence holder shall be exempt from the provisionsof the Social Security Act, in respect of remuneration paid orattributed to such officers and employees by the licence holder forservices rendered exclusively in a managerial capacity or in afunct ion requir ing special exper t ise which is not general lyavailable in Malta.

(2) In order to obtain the exemption provided for by subarticle(1), the licence holder shall apply to the Department for SocialSecurity identifying the officers and employees concerned togetherwith such proof as the department may require that the conditionsof that sub-article are satisfied.

(3) Personal belongings and effects of an expatriate officer oremployee of a licence holder imported by him into Malta, not laterthan six months from his first taking up residence, shall be exemptfrom customs duty:

Provided that duty shall become payable on anythingimported free of duty and subsequently sold, assigned or otherwisetransferred to a person resident in Malta.

(4) Furniture, equipment and other material required by alicence holder and imported into Malta for its own use and purposeshall be exempt from customs duty:

Provided that duty shall become payable on anythingimported free of duty and subsequently sold, assigned or otherwisetransferred to a person resident in Malta.

(5) For the purposes of this article, "expatriate" means anindividual who is not a national of Malta, who has been posted toMalta from abroad or recruited directly from abroad in order to beemployed by a licence holder, whose mission in Malta is of a


temporary nature and who has maintained the centre of hiseconomic interests outside Malta.

Continuance of foeign body corporate.Substituted by:XVII. 2002.153.

31. (1) A body corporate, formed, incorporated or registeredin a country outside Malta (hereinafter referred to as "foreign bodycorporate"), and carrying on the business of a collective investmentscheme, which is similar in nature to a body corporate as knownunder the laws of Malta (hereinafter referred to as "local bodycorporate") , and which would, i f i t were such a local bodycorporate qualify to be authorised or recognised as a collectiveinvestment scheme under this Act, may, subject to the specificapproval and authorisation of the competent authority, be continuedas a collective investment scheme under this Act and under theapplicable laws of Malta.

(2) The continuance of a foreign body corporate shall not takeplace unless such continuance (or similar process, includingconversion) is permitted by the applicable laws of the foreignjurisdiction and is in accordance with such provisions thereof asmay bring about such continuance (or similar process).

(3) Continuance may only take place if it is allowed by thestatute or equivalent instrument of the foreign body corporate to socontinue, and if it is approved in accordance with the procedure, ifany, established therein or in the applicable law of the foreignjurisdiction for this purpose.

(4) The continuance of a foreign body corporate as a local bodycorporate shall be effected by an instrument of continuancecon ta in ing , in add i t ion to the dec la ra t ions re la t ing to thecontinuance, the equivalent of a memorandum and articles orequivalent constitutive document as may be required by this Act orother applicable laws of Malta for the registration of such bodycorporate in accordance with the type of local body corporate inwhich it is to be continued, and showing on the face of it that thecontinuance has been approved as provided in this article.

(5) The delivery of the instrument of continuance to theRegistrar of Companies shall, for all purposes of the laws of Malta,be equivalent to the delivery of a deed of partnership or of amemorandum and articles of a company, as the case may be, as if itwere a local body corporate to be registered under this Act; and theRegistrar shall treat it accordingly.

(6) Upon the delivery of the instrument of continuance and itsregistration under this Act the body corporate shall cease to be abody corporate under the jurisdiction of its previous registrationand shall continue its corporate existence under the laws of Malta,and shall retain all its assets, rights and liabilities.

(7) Where continuance as aforesaid entitles or requires thebody corporate to redeem the interest of dissenting persons whoseapproval is required, such interest may be redeemed on such termsas may be agreed or as the courts in Malta may, on demand ofeither party, establish.

(8) (a) A local body corporate carrying on business as acollective investment scheme authorised or otherwise


falling within the meaning of this Act, may, subject tot h e s p e c i f i c a p p r o v a l a n d a u t h o r i s a t i o n o f t h ecompetent authority, be continued as a foreign bodycorporate, and the foregoing provisions of this articleshall apply mutatis mutandis.

(b) A local body corporate shall not cease to be a localbody corporate subject to Maltese jurisdiction until theReg i s t r a r has r ece ived no t i ce in wr i t ing o f thecontinuance (or other process) made as aforesaid andunless and until, being satisfied that the requirementsof this article have been complied with, the Registrarh a s r e g i s t e r e d s u c h c o n t i n u a n c e a n d h a s , i nconsequence thereof and by virtue of this section,struck the name of the company off the register.

(9) The Minister may, acting on the advice of the competentauthority, make regulations for the better carrying out of theprovisions of this article.

SCHEDULES

Amended by:L.N. 46 of 1999;XVII. 2002.154.

FIRST SCHEDULE

Services

1. Dealing as Principal or Agent

Buying, selling, subscribing for or underwritinginstruments as principal or as agent.

2. Arranging Deals

Arranging for another person to buy, sell, subscribe for orunderwrite instruments.

3. Management of Investments

Managing or agreeing to manage assets belonging toanother person if those assets consist of or include one ormore instruments or the arrangements for their managementare such that the person managing or agreeing to managethose assets has a discretion to invest any of those assets inone or more instruments.

4. Trustee, Custodian or Nominee Services

(a) Acting as trustee, custodian or nominee holder of aninstrument, or of the assets represented by orotherwise connected with an instrument, where theperson acting as trustee, custodian or nominee holderis so doing as part of his providing any investmentservice in paragraphs 1, 2, 3, 5 or 6 of this Schedule;or

(b) Holding an instrument or the assets represented by orotherwise connected with an instrument as nominee,


where the person acting as nominee is so doing onbehalf of another person who is providing anyinvestment service in this Schedule or on behalf of aclient of such person, and such nominee holding iscarried out in relation to such investment service; or

(c) Acting as trustee or custodian in relation to acollective investment scheme.

5. Investment Advice

Giving, or offering or agreeing to give, to persons in theircapacity as investors or potential investors:

- advice on the merits of their purchasing, selling,subscribing for or underwriting an instrument,or exercising any right conferred by aninstrument to acquire, dispose of, underwrite orconvert an instrument; or

- advice in relation to a scheme or arrangementinvolving an instrument.

6. Stockbroking

Carrying on the business of purchasing, selling or otherwisetrading instruments quoted on a recognised investmentexchange for and on behalf of a third party or parties.

Amended by:L.N. 191 of 1998;XVII. 2002.155.

SECOND SCHEDULE

Instruments

1. (1) Securities, including shares and stock in the capital of acompany, debentures, debenture stock, loan stock, certificates ofdeposi t , bonds, notes and any other instruments creat ing oracknowledging indebtedness.

(2) Certificates or other instruments which create oracknowledge indebtedness and which upon issue confer the right toclaim the debt created or acknowledged thereby at some time in thefuture, subject to the condition that the claim thereunder may bereduced to be low the va lue o r p r i ce o f the ce r t i f i ca tes o rinstruments at the time of issue.

(3) Subarticle (1) above shall not apply to -

(a) any instrument acknowledging or creatingindebtedness for, or for money borrowed to defray, theconsideration payable under a contract for the supplyof goods or services;

(b) a cheque or other bill of exchange, a banker’s draft ora letter of credit; or

(c) a banknote, a statement showing a balance in a current,deposit or savings account or (by reason of anyfinancial obligation contained in it) to a lease or otherdisposition of property, or a contract of insurance,


other than a contract of a kind specified in article 7 ofthis Schedule.

2. Units in a collective investment scheme.

3. Warrants, options, certificates or other instruments,including any record whether or not in the form of a document,entitling the holder to subscribe for, acquire, sell or otherwisedispose of, underwrite or convert any instrument or an interest inany instrument falling within this Schedule or for any currency.

4. Certificates or other instruments which confer propertyrights in respect of any instrument falling within this Schedule.

5. Futures and foreign exchange contracts entered into forinvestment purposes or foreign exchange acquired or held forinvestment purposes.

6. Rights under a contract for differences or under any othercontract the purpose or intended purpose of which is to secure aprofit or avoid a loss by reference to fluctuations in the value orprice of property of any description or in an index or other factordesignated for that purpose in the contract.

Cap. 403.

7. (1) Subject to the following provisions of this article,rights under a contract the effecting and carrying out of whichconstitutes business of insurance within the meaning of class III,linked long term, under the description of classes of long termbusiness contained in the Second Schedule to the InsuranceBusiness Act.

(2) Where the provisions of a contract of insurance are suchthat the effecting and carrying out of the contract -

(a) constitutes both long term business within the meaningof that Schedule and general business within themeaning of the Third Schedule to that Act; or

(b) by virtue of article 5(3) of that Act constitutes longterm business notwithstanding the inclusion ofsubsidiary general business provisions,

references in subarticle (1) to rights and benefits under the contractare references only to such rights and benefits as are attributable tothe provisions of the contract relating to long term business.

(3) Subarticle (1) does not apply to rights under a contract ofreinsurance.

(4) Rights falling within subarticle (1) shall not be regarded asfalling within article 6 of this Schedule.

chapter 370 investment services...

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