Circular on Customer Protection and Complaints Handling Processes
On 25 March 2020, MFSA issued a circular reminding firms of its expectations of the measures that they should have in place regarding complaints handling.
All firms need to ensure that they have a customer communication strategy and plan which will kick in in the event of serious disruption to its business, products or services, they will be constantly monitoring, evaluating and mitigating the risks to which they are exposed, they engage proactively with the MFSA if they fear a significant risk of disruption which could potentially have an adverse effect on consumers, they communicate planned or unplanned service changes, interruptions or withdrawals with the MFSA as early as possible and in a transparent manner, they have adequate resources available to properly handle complaints even if these are numerous and/or voluminous and provide customers with clear and timely information regarding their rights including details on how to put forward a complaint and the availability of statutory compensation measures. If necessary, ad hoc training to the respective customer facing staff should be provided by the firm.
Where there is significant disruption, the MFSA may require the customer records of those affected. Hence, maintaining accurate and up-to-date customer records is of paramount importance.
The MFSA invites all licence holders to provide information on a voluntary basis in relation to any increase in customer complaints which are related to COVID-19. This information should include details of the nature of the issue or the customer detriment involved, whether such complaint has been resolved and the intended actions which the firm intends to take to resolve such complaints.
Interim Measures for the Processing of Physical Documentation
The MFSA has issued a circular stating that documentation to be submitted to the MFSA shall as of the 24 March 2020 be submitted electronically. Such an approach shall be taken until further communications are made by the MFSA.
The circular issued by the MFSA makes reference to documents being submitted by: (i) all persons or entities who are licenced, registered, enrolled, recognised or authorised in any other form by the Malta Financial Services Authority and (ii) applicants and prospective applicants.
All documentation, including those which under normal circumstances would be submitted in original, must as of the date of this circular be submitted either as a scan copy via email or through the relevant MFSA online portals. When it comes to Personal Questionnaires, passport copies of foreign individuals may be submitted via scan copy, without the need for certification, whilst audited financial statements can be submitted via email accompanied by an email from each director confirming that such accounts were approved by the respective director.
Following the receipt of the email, the MFSA may, at its sole discretion ask for copies to be sent via mail or courier. Original signed documents, certified true copies and other documents usually submitted to the MFSA in physical format will be expected to be submitted at a future date (when communicated by the MFSA).
Moreover, the MFSA announced that it shall take the following approach when issuing documentation: All documentation issued by the it shall be issued in pdf format or through the relevant MFSA portals whilst original signed documents shall be dispatched at a later date. Until the MFSA issues further communications, all documentation sent via email by the MFSA shall be regarded as official communications.
This Circular was last updated by the MFSA on the 14th April 2020 so as to further provide that regulatory submissions, such as audited financial statements, can be submitted with an email by the Chairman of the Board.
Notice to Consumers
On 24 March 2020, the MFSA issued a circular providing information to the general public on consumer protection measures being taken. The MFSA re-assured consumers that it is closely monitoring and engaging with regulated entities to understand any potential impact of COVID-19 on the entities' business and their clients. The MFSA stressed the importance of the paramount principle, which is applied across all financial services practice areas, of 'always treating customers fairly.'
The MFSA appealed for caution when deciding on whether to invest, buy or sell an investment during these unprecedented times. Information circulated to potential investors by MFSA regulated entities may quickly become outdated, especially if it contains forecasts. Up to date financial information on the issuers may not necessarily be available given that various reporting deadlines have been extended in the light of the current circumstances. Consumers should treat investment communications promoting investments based on medical/scientific solutions to the crisis (such as cures or vaccines) with extreme caution. Investors should always consult a licensed financial intermediary before investing.
If the investment communication contains phrases such as "you will benefit from a sum of money very easily", "you have to give away personal or account information" and/or "you will have to make a quick decision" then it is highly likely that you are being targeted by a financial scam or a fraudulent scheme.
Consumers should: (i) steer away from investment adverts on social media and paid for/sponsored adverts online, (ii) avoid clicking on links or opening emails from senders not already known; and (iii) avoid disclosing personal details.
The MFSA advises consumers to immediately reach out if they think that they might be dealing with an unauthorised entity or financial scammers.
Extension of Regulatory Reporting deadlines for Regulated Firms
The MFSA has taken a decision to extend some of the regulatory reporting deadlines for the submissions that fall due this month or next month. In this regard, the MFSA has published a Circular, addressed to all regulated entities, explaining its approach and listing the applicable extensions for each sector.
In the Circular, the MFSA also informed the financial services sector that for the time being, the reporting deadlines which are due in May and June will remain in place, although based on its ongoing assessment of events, it will consider extensions at a later stage if the situation warrants one.
The MFSA also communicated in the Circular, that it reserves the right to apply a more stringent approach to the accepted delays from those outlined in the Circular and that its approach might change as a result of developments both at a local and EU level.
Contingency Planning for Licence Holders
On March 13, 2020, the MFSA indicated that it is closely monitoring the impact of COVID-19 on Investors, Investment Firms, Custodians, Fund Managers and Collective Investment Schemes (the "Licence Holders") and the need for such Licence Holders to take into consideration the impacts of COVID-19 on their business continuity and contingency plans.
- Business Continuity Plan
The MFSA highlighted that all Licence Holders should have in place a Business Continuity Plan (the "BCP") which is to outline the management process to ensure continuity of business and advance planning required in such outbreaks, given that access to company offices may become physically impossible. BCP's are to ensure minimum losses and guarantee the continuity of fundamental business practices.
The MFSA is encouraging Licence Holders to review, update and test their BCP in light of the current outbreak. The MFSA specifically highlighted that any provisions on customer/investor communication is to be tested, given the current significant market disruptions.
BCP's are to be communicated to all stakeholders and employees and any disclosure on contingencies should be posted on the Licence Holder's website or provided at account opening stage. Licence Holders who do not have adequate BCP's are to notify the MFSA without any delay.
- Physical Board Meetings
The MFSA is expecting Licence Holders that are obliged to hold physical board meetings to hold such meetings using tele or video conferencing systems. The frequency of board meetings is to remain the same, whilst the obligation to minute discussions remains with the added obligation to minute the rationale for holding the meetings via conference calls.
- Communication with Clients and Investors
With increased volume of queries being expected due to unprecedented market movements, the MFSA is envisaging temporary operational challenges in keeping up with the volume of queries. Should this occur, Licence Holders are to upload a specific notice on their website providing alternative communication points.
The current situation, does not exonerate the Licence Holders from complying with the relevant conduct of business requirements relating to the provision of information and disclosure of all possible risks pertaining to investments and the potential effects of volatility in price and fluctuation of interest rates/exchange rates on the value of investments.
- Algorithmic Trading & Cyber Security
Licence Holders using computer-driven algorithmic trading systems are expected to switch off any computerised automatically executed trades based on pre-programmed instructions in order to prevent unnecessary disruptions and maintain market integrity.
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.