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SECTOR SPECIFIC REGULATORY UPDATES
1.0 INVESTMENT SERVICES
1.1 Consultation Document on Revisiting the Capital Markets Rules applicable to the Institutional Financial Securities Market
On the 8 th of July 2025, the MFSA issued a circular to inform the industry that it has launched a Consultation Document seeking feedback from stakeholders on the proposed amendments to the Capital Markets Rules applicable to the Institutional Financial Securities Market (IFSM).
The aim of the proposed revisions is to clearly define the scope and application of the rulebook, modernise and streamline the rules from a practical aspect, re-evaluate listing agents and their role, and introduce tailored provisions to cater for sukuk to facilitate the issuance thereof on the IFSM.
The MFSA considered all comments sent via email by the 8th of August 2025.
1.2 Investment Services Supervision Regulatory Briefing
On the 29th of July 2025, the MFSA issued a briefing to bring to the attention of the asset management industry a number of important publications issued by the MFSA, the European Commission and the European Supervisory Authorities (ESA's) from 1 st January 2025 to 24th July 2025.
The briefing focuses on key developments such as (i) MFSA updates, (ii) legislative proposals and Regulatory Technical Standards, (iii) consultations to which the industry is invited to contribute, (iv) updates to question and answer (Q&A) documents and other convergence measures and (v) publication of guidelines and reports issued by the ESAs.
1.3 Amendments to the Investment Services Rulebooks in relation to the Money Market Funds Regulations
On the 7th of August 2025, the MFSA published a circular that highlights the amendments carried out to the Investment Services Rulebooks which reflect the new ESMA Guidelines on stress test scenarios under the MMF Regulation (Regulation (EU) 2017/1131) published on the 24th of February 2025.
The amendments affected the following Rulebooks:.
- The Investment Services Rules for Alternative Investment Funds Part B: Standard Licence Conditions Applicable To Alternative Investment Funds,
- The Investment Services Rules For Investment Services Providers Part BII: Standard Licence Conditions Applicable To Investment Services Licence Holders Which Qualify As UCITS Management Companies,
- The Investment Services Rules For Investment Services Providers Part BIII: Standard Licence Conditions Applicable To Investment Services Licence Holders Which Qualify As Alternative Investment Fund Managers and
- the Investment Services Rules For Retail Collective Investment Schemes Part B - Standard Licence Conditions Part BII: Malta Based UCITS Collective Investment Schemes.
The Annex to the circular details the specific amendments, which require all relevant entities to measure the impact of common reference stress test scenarios on all MMFs under management as stipulated in Article 28 of the MMF Regulation, to submit stress test results and proposed action plans to the MFSA and to comply with the updated ESMA Guidelines.
1.4 Thematic Review on Liquidity Rsk Management and Investment Processes of Management Companies of AIFs and UCITS Funds
On the 8th of August 2025, the MFSA issued a Dear CEO letter to communicate the findings and expectations from a comprehensive thematic review conducted throughout 2024 on a sample of approximately 23% of authorised management companies.
The review assessed compliance with AIFMD and UCITS Directive requirements on liquidity risk management (LRM) and investment processes through selfassessment questionnaires, desk-based assessments, and on-site inspections and interviews.
The review examined liquidity stress testing procedures and LRM policies, the documentation of LRM arrangements, processes and techniques, the quality of LRM written procedures and methodology, the application of liquidity presumption to financial instruments, compliance with investment restrictions and pre-trade checking procedures, the investment decision-making processes and governance structures, the segregation of duties and conflicts of interest management and the composition and effectiveness of investment committees.
From this review it was concluded that 87% of management companies conduct pre-trade liquidity checks but 53% rely on general statements rather than specific methodologies. Moreover, 16% of management companies had no formal pre-trade liquidity checks primarily due to the illiquid nature of the assets and data limitations.
Apart from this, based on a review of Board Packs and Board Minutes, the MFSA Officials identified that the Board of Directors was often presented with Liquidity Risk Reports focusing on quantitative liquidity metrics without a supplementary explanation. In addition, in some cases, the Authority noted that the Board of Directors did not take proactive action on the liquidity concerns raised in the Liquidity Stress testing reports.
The frequency of Liquidity Stress Testing (LST) was generally documented; however, it was occasionally unclear whether Management Companies conducted LST more frequently in exceptional market conditions. Additionally, while all Management Companies have conducted LST, in some cases, fund level liquidity stress testing was not sufficiently robust, mainly in view of assessments not being tailored to the fund and its investment strategy.
As a result, the LST frequency should be adjusted in response to exceptional market conditions to ensure that the liquidity profile of all the funds remains robust and aligned with their respective redemption obligations. Liquidity Stress Testing and back-testing methodologies should also be defined based on prudent/conservative criteria. While Management Companies can adopt estimates in their LST, where market/historical data is limited, such estimates should not be used as a substitute for a more detailed and tailored fund-specific LST. Management Companies should review LST assumptions, scenarios and models and update them accordingly.
Management companies must also ensure the formal approval and regular review of liquidity management policies by Boards, the adoption of clear frequent risk reports with conclusions and recommendations from Risk Management functions, the documentation of escalation processes for material liquidity issues and the implementation and monitoring of liquidity contingency plans.
Management companies should also ensure that there is a clear separation of duties in investment committees, that robust conflict of interest policies are in place and that enhanced due diligence on committee members is carried out.
The MFSA also expects liquidity profiles appropriate to redemption policies, sufficient information for portfolio structuring and cash flow anticipation as well as documented liquidity assessments with adequate policies and procedures.
1.5 Circular on the Benchmarks Regulation ('BMR') – Update to the Information Gathered relating to the Use of Benchmarks
On the 13th of August 2025, the MFSA published a circular which applies to all MFSA licence holders on a crosssectorial basis including investment funds and investment service providers and requires market participants to provide updated information on their use of benchmarks under the Benchmarks Regulation (EU) 2016/1011. This information gathering exercise serves the Authority's supervisory mandate over users, administrators, and contributors within the scope of the Benchmarks Regulation.
Market participants must complete and submit the updated Benchmarks Return Template which details exposure to critical benchmarks and includes details of other benchmarks currently in use. Only entities using benchmarks as at 30th June 2025 are required to respond. The deadline for the submission is the 26th of September 2025.
The circular also reminds entities that benchmark use includes the issuance of financial instruments referencing an index, the determination of amounts payable under financial contracts by referencing an index, being a party to a financial contract which references an index, providing borrowing rates calculated as spread over an index which are solely used as a reference in a financial contract to which the credit is a party and measuring investment fund performance through an index for the purpose of tracking return of such index, defining the asset allocation of a portfolio, or computing the performance fees.
1.6 Circular to Investment Firms on Amendments to the Investment Services Act, Banking Act, various Subsidiary Legislation and Investment Firms' Rules
On the 1 st of September 2025, the MFSA issued a circular to inform the industry of the publication of the recent amendments to the Investment Services Act (ISA) and the Investment Services Rules applicable to investment firms. These amendments are primarily aimed at fully transposing the EU Investment Firms Directive (IFD) into Maltese law whilst clarifying regulatory expectations.
Article 17A of the Investment Services Act was amended to improve clarity on how the MFSA handles verification requests. Apart from changes to the primary legislation, several subsidiary laws were updated. The amendments carried out to Regulation 7A of S.L. 370.43 oblige branches licensed in Malta to share margin-model and risk data with the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) and to cooperate with other host supervisors.
The amended S.L. 370.46 ensures that only those investment firms which, by virtue of their size or their membership of a banking group, fall within CRD retain the status of credit institution for prudential purposes. Cross-references are also aligned with IFD references thereby avoiding the double counting of capital and confirming that smaller Class 2 and Class 3 investment firms are excluded from the CRD perimeter once the €15 billion asset threshold ceases to be met.
Moreover, the amended S.L 370.47 integrates the latest EBA methodology, adjusts the numbering of the underlying IFD articles and revises Schedule I so that the MFSA may impose additional ownfunds or liquidity requirements whenever an investment firm's internal capital assessment fails to capture material risks. Furthermore, by substituting internal cross-references and extending the fining power to all breaches listed in regulation 5, the amendment to S.L.370.48 guarantees that administrative fines can reach the higher of five million euros or ten per cent of annual turnover for serious infringements, backed by a public statement, unless publication would jeopardise market stability. The MFSA is also given explicit authority to combine pecuniary penalties with supervisory measures.
Lastly, the updated S.L. 370.49 aligns Malta's rules on supervisory consolidation under the IFD, refining the criteria by which the MFSA is designated as consolidating supervisor, and clarifying the use of the group capital test where full balance-sheet consolidation would be disproportionate
Part BI of the Rules applicable to Investment Services Licence Holders which qualify as MiFID Firms (hereinafter referred to as 'the Rulebook') was also amended to align the Rulebook with the IFD capital requirements and operational procedures. In fact, Investment Firms other than those referred to in Article 9(1), Article 9(2) and Article 9(4) must meet a €150,000 minimum capital requirement. Certain operational requirements were added, such as holding collateral available for central bank funding. The capital conservation buffer requirements were updated in line with the EU's CRD and the obligation to provide fully reasoned decisions on the application of the exemption which permits investment firms, under specific conditions, to be exempt from maintaining the institution-specific countercyclical capital buffer, was removed.
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