One of the most common questions that we get asked from clients looking to obtain a Malta financial services license is whether or not they need to set up an office in Malta. This matter is not addressed in the MFSA's rules and can be a source of some confusion. In this post I intend to share some experiences on this topic.
The key thing to bear in mind is that the regulator needs to see that the business is being done 'in or from Malta'. Otherwise the question arises: why is this regulator, rather than any other, exercising jurisdiction to regulate the business? What this means in practical terms will depend on the business in question. If you propose to have a hundred traders in Mayfair but only a single individual in Malta, that will inevitably be problematic (and not only because your Mayfair traders are likely to be highly envious of their colleague's new tan). A Malta financial services license needs to be backed up by real substance; this applies across the board, whether we are talking about a fund manager, a FOREX business, an insurance intermediary etc.
So far this is all very theoretical and high level of course. In order to discuss this topic in a more tangible manner, you need to look at the nature of the business in question, and the volume and kind of transactions that it is involved in. Not every Maltese financial services license is the same. A boutique advisory firm with a small, select clientele, is one thing. A FOREX market maker with sophisticated IT systems and thousands of customers is another.
Examples will help. We've been involved a number of times in the set-up of small advisory boutiques. Given that the activity here focuses on the giving of advice, the firm will certainly require at least one advisor to be located more or less permanently in Malta. The MFSA also invariably expects the compliance function (your CO) to be Malta based in one way or another. If the business is small, this could feasibly be sufficient, more so if the local advisor is also a director.
A different example: we were involved in the set-up of a highly specialized asset management company that catered for the needs a clientele composed of hedge funds. In this case, the promoters of the business moved to Malta en masse. This is of course ideal, but is by no means necessary. Intermediary arrangements in which some of the promoters are located in Malta while others are located elsewhere are fairly common and acceptable.
Note that in no case is the actual rental or purchase of office space a requirement. Various arrangements can be acceptable, as long as the interests of clients and investors are protected.
Of course, there are no hard and fast rules here given the silence of the rules on these matters. However I hope the above has shed some light on the matter. As usual, get in touch if you would like to discuss further.
Dr Charles Cassar
Malta Financial Services Lawyer
Chetcuti Cauchi Advocates
Malta financial services blog hosting posts on using Malta as a financial services centre for the hedge funds, investment services, insurance and banking and finance industries. Malta serves as a European domicile of choice for the set up of regulated companies in the European Union and has earnt a high place in the ranking of reputable international financial centres.
Sunday, 5 February 2012
Do I need an office in Malta?
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