Monday, 16 January 2012

Getting a Malta Financial Services license - what's it like?

Thanks to its low base costs and access to EU, Malta is attracting many smaller start-up firms. The jurisdiction is therefore seeing the arrival of smaller fund managers, investment boutiques and FOREX funds. This means that for many of my clients, their application for a Malta financial services license is their first encounter with a financial regulator.

Stepping into a regulated environment for the first time can be a daunting experience, but with proper preparation and guidance, it need not be. Therefore today I will try to provide a brief overview of the process that an applicant is expected to go through in order to obtain a Malta financial services license.

Preparing the documentation

Key to every licensing process is the preparation of high quality documentation that can demonstrate the well-preparedness of the applicant to the regulator. Thus, business plans, projections and other documents will need to be supplied to the MFSA for getting. Information about the individual promoters also needs to be provided as the MFSA will need to be satisfied that the promoters are fit and proper i.e. they have the qualities of integrity, solvency and competence that are expected from individuals running a financial business. Applicants need to be prepared to submit very high quality documentation; Malta is business friendly but regulators do not compromise on standards.

Meeting the regulator

The MFSA encourages face to face meetings. In fact we always advise or clients to make it a point to meet the regulator before proceeding with their applications. Responsiveness to applicants is one of the MFSA's strong points, and meetings can typically be secured in a matter of days (even within 24hrs, in urgent cases). Meetings are conducted in a friendly and informal atmosphere; the aim is not to discourage applicants, but to identify any possible challenges and discuss plans going forward.

Post-submission dialogue

Once documentation has been submitted, a two way dialogue process with the regulator begins. The MFSA will typically raise a number of queries or require certain clarifications. The regulator will very rarely respond to an application with an outright no (we have never had this experience), but is strict about standards and will expect applicants to be similarly diligent.

In principle approval

Once the regulator is satisfied with the documentation, an 'in principle approval' is issued. This is a document stating that, all things being equal, the license will be issued. Typically this document indicates a number of basic requirements that need to be ticked off, such as the formation of the relevant companies and the signature of agreements with third party service providers. Generally these are minor matters that can be settled in a few days.

Time-frames

This is of course the million dollar question! If an applicant is well prepared and pro-active, a two/three month period from submission should suffice. Nevertheless, preparedness of the applicant is key here. Malta has many things going for it, but it is not a 'quick fix' solution. Applicants should also make sure they budget for the time it takes for passporting procedures to be completed.

Post-licensing

Once the license is obtained, the licensee can start to offer its services. The licensee is required to adhere to a number of post licensing conditions, designed to ensure it is well run and its clients protected. Post-licensing conditions are a big topic, and I'll touch upon them in a future post.

Get in touch if you would like to learn more.

Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates

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