On the 12 March 2021, the MFSA issued a circular confirming that it would not be availing itself of the option afforded to it under Article 17(2) of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (the "SFDR") to extend the applicability of the SFDR to: (i) insurance intermediaries providing insurance advice in relation to insurance-based investment products ("IBIPs") and (ii) investment firms providing investment advice, which employ fewer than three (3) individuals.


Article 17(1) SFDR provides that the SFDR as a whole shall not apply to insurance intermediaries which provide insurance advice relative to IBIPs and to investment firms providing investment advice provided that they employ fewer than three (3) persons. Article 17(2) SFDR then goes on to provide member states with the ability to disapply the applicability of the aforementioned exemption at their discretion.

The MFSA's Position

By virtue of this circular, the MFSA has outright confirmed that the SFDR will continue to apply to insurance intermediaries providing insurance advice in relation to IBIPs and to investment firms providing investment advice solely in so far as these employ in excess of three (3) individuals. In other words, the status quo in terms of Article 17(1) SFDR has been retained. That said, the MFSA has advised stakeholders that it may be inclined to revise its position in view of ongoing developments in the area of sustainable finance and/or as it otherwise deems fit.

In its concluding remarks, the MFSA also noted that the exemption provided in Article 17(1) SFDR shall be without prejudice to the application of the provisions of national law transposing MiFID and the Insurance Distribution Directive and that while the abovementioned classes of financial advisers shall not be required to disclose information in accordance with the SFDR, they are still expected to consider sustainability risks in their advisory processes.

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