Thursday, 12 January 2012
Malta Investment Services: Gateway to Europe for Advisors and Managers
While much of the industry buzz in Malta has focused on the growth achieved in the gaming and funds sectors, the investment services industry has been quietly gaining traction without attracting similar levels of attention. By investment services I am here referring to those activities that are regulated under the Markets in Financial Instruments Directive, or MiFID.
In Malta a number of factors combine to make the jurisdiction one that is very well suited for service providers looking for a platform from which to do business in Europe. Today I will be looking at some of those factors.
The MFSA: the Malta Financial Services Authority is the single regulator for financial services in Malta. It is a single regulator responsible for the authorisation and supervision of most of the businesses that one would characterize as financial in nature. Investment advisors, fund managers, insurance principals and intermediaries and banks all fall other its jurisdiction. The key things to know about the MFSA are that; a) it is a serious regulator that expects adherence to high standards b) it is nevertheless open to innovative ideas and unorthodox strategies c) it is highly accessible and keen to meet licensees and applicants face to face. This means that Malta Investment Services businesses can enjoy an unusually open and frank relationship with their regulator.
Low costs: Malta is not the cheapest jurisdiction in the world to do business in, and those investment services providers for whom bottom line is the sole determining in choosing their jurisdiction will certainly find other territories that suit their needs better. Nevertheless, for those service providers for which high regulatory standards, and access to the EU market are important considerations, Malta is likely to be the most cost effective options. Licensing and supervisoryfees are very competitive, as are professional fees and salaries. High quality property can also be purchased at a fraction of what property of a similar qualit would fetch in any other well established European financial centre.
Access to Europe: investment services are harmonized across Europe via the MiFID. Investment services providers which are authorised to trasact business in a European country can therefore passport their services into other jurisdictions, that is, offer their services in another EU country without incurring additional regulatory burdens. The cost and efficiency benefits that this can give rise to are self-evident. Thus, within a month from the obtainment of a Malta Investment Services license, the new licensee enjoys access to the European market for financial services.
Proportionate regulatory burdens: Malta investment services providers are not subject to a one size fits all regulatory regime. Instead there are four categories of license that are available, each catering for the risks raised by different types of business. Thus the Category 1 Investment Services license caters for low risk activities such as advisory services and reception and transmission of orders, and gives rise to an EUR 50,000 capital requirement. Riskier and more sophisticated activities, such as the activity of a multi-lateral trading facility, necessitate the obtainment of a Category 3 Investment Services license, which carries a capital requirement of EUR 730,000, and so on.
The factors outlined above mean that Malta is uniquely well suited as a platform for investment services providers looking to target a European clientele. The jurisdiction provides an affordable cost base, passporting rights, and an 'open for business' regulatory environment. Get in touch with us if you would like to know more.
Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates