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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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