The MFSA has issued a Notice regarding applicants for a Category 2 or Category 3 Investment Services licence that would like to carry out online forex trading in terms of the Investment Services Act.
In this Notice, the Authority set out its criteria regarding the licensing of entities that would like to offer online forex trading to retail clients in terms of the Investment Services Act, following various factors that the Authority has come across in handling applications in this sector as well as various risk warnings issued at EU level alerting retail investors to the main risks involved in forex trading.
The issuance of these criteria are intended to give clear guidance to the industry of the aspects that applicants wanting to offer online forex trading to retail clients are expected to satisfy. Moreover the high risks associated with forex trading by retail investors due to the reliance on automated systems, the complex nature of forex products and the accessibility to such products by retail investors, have also led to a further tightening of the licensing criteria.
These licensing criteria are applicable with immediate effect to all new applications submitted to the Authority after the date of this Notice. Applicants whose application is currently being processed by the MFSA are also required to come in line with the below-mentioned additional criteria with immediate effect with the exception of the Shareholding Struc-ture and Capital Requirements, on which a grandfathering period of one year from the date of publication of this Notice is being granted by the Authority for such entities to regularise their position.
In this respect, apart from the conditions set out in Part A of the Investment Services Rules for Investment Services Pro-viders, a number of additional criteria shall apply to potential applicants for a Category 2 or a Category 3 Investment Ser-vices Licence that would like to engage in online forex trading. These criteria are related to the Shareholding Structure, Capital requirements, competence requirements, local presence, corporate governance set-up, expert advisors, record keeping, IT systems, as well as liquidity providers and counterparties.
The full Notice is available on the MFSA Website.
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.
