Michael Calleja | Senior Compliance Services Executive
In view of the aforementioned, it would be prudent to revisit both publications – noting the onerous obligations – wherein Aspida is perfectly positioned to provide clients with all updates and necessary reminders to avoid unwarranted breaches or sanctions by the Regulator.
Guidance Note on the Methodology to Set Administrative Penalties relating to Non-Material Breaches
The Malta Financial Services Authority (MFSA) published a Guidance Note detailing the principles and criteria for setting administrative penalties that are effective, proportionate, and dissuasive. This Guidance Note aims to increase transparency in MFSA’s policies and practices and ensure appropriate action against non-material breaches related to regulatory reporting submissions to the MFSA.
It is stated that the MFSA has enforcement powers under the MFSA Act and other financial services legislation. The penalties must be effective, proportionate, and dissuasive and should not exceed specified limits.
The Guidance Note serves the following purpose:
- Informs entities authorized and supervised by the MFSA about the process used to calculate administrative penalties for non-material breaches related to regulatory reporting submissions.
- Emphasizes that submissions should be timely, complete, and in accordance with the timeframes, otherwise, enforcement action will be taken.
- A non-exhaustive list of regulatory reporting requirements is provided, grouped by Financial Services Sector. Examples include submissions of annual reports, audited financial statements, and various other reports for sectors like Investment Services Firms, Listed Entities, Credit/Financial Institutions, Insurance Principals, and more.
In determining the Appropriate Level of Administrative Penalty, the MFSA follows a three-level process to determine the penalty amount:
Level 1 – Considers the importance of the respective regulatory submission and the criticality of the respective sector.
Level 2 – Considers the number of days delayed in the submission.
Level 3 – Considers the repetition of the breach:
Administrative Measures & Penalties Publication Policy (Effective Date: 1 June 2023)
This publication specifies that the MFSA conducts investigations on alleged breaches of financial services laws and regulations on license holders or those under its regulatory or supervisory function (termed ‘Investigated Person(s)’).
The MFSA also has the power to impose administrative or disciplinary sanctions or measures on these Investigated Persons, termed ‘Administrative Measures’. Article 16(8) of the Malta Financial Services Authority Act (MFSA Act) mandates the Authority to publish any Administrative Measure imposed on an Investigated Person. This policy document outlines the principles related to such publications.
The Publication Policy refines the process adopted by the MFSA when publishing any Administrative Measures. Contextually, the aim is to ensure the public is informed about any Administrative Measure imposed by the Authority. Furthermore, the policy applies to all Administrative Measures imposed by the MFSA.
The Guidance Document also outlines several policy principles which Aspida will summarise as follows:
- Medium of Publication: The primary medium for communication with the public is the MFSA’s website. However, other media might be used as deemed appropriate.
- Manner of Publication: After notifying the Investigated Person of the decision to impose an Administrative Measure, a public notice is issued on the MFSA website. This notice serves as a summary of the Authority’s decision.
- Anonymity of Publication: Generally, the MFSA believes in naming those sanctioned for breaches.
- However, under certain circumstances, the MFSA may publish the Administrative Measure anonymously.
- Two scenarios for anonymous publication are:
- Scenario 1: The breach is non-material (a list is provided in Annex I), and the penalty does not exceed thirty thousand Euro (€30,000).
- Scenario 2: Exceptionally, the MFSA may consider anonymous publication if it jeopardizes the stability of financial markets or an ongoing investigation, or if it would cause disproportionate damage to the person involved.
- Duration of Publication: The duration for which the public notice remains on the MFSA website varies based on the nature and seriousness of the breach. The criteria range from 2 years for minor infringements to permanent posting for cancellations of licenses.
- Monitoring: An annual assessment is conducted to monitor all published Administrative Measures, ensuring they adhere to the publication criteria.
Reference should also be made to Annex 1 within the Guidance Note.
This annex provides a list of breaches that the Authority considers as non-material. The list is extensive and covers various financial services sectors, including Investment Services Firms, Listed Entities, Company Services Providers, Trustees, Credit/Financial Institutions, Insurance Principals, and more. For each sector, specific non-material breaches are listed, such as the submission of annual reports, audited financial statements, and failure to pay supervisory fees.
Aspida, established in Malta in 2011, offers a comprehensive suite of advisory services tailored to support growth while managing risk. With a blend of local knowledge and global financial expertise. Aspida provides robust compliance, risk management, and assurance services. We offer a comprehensive compliance support service, including nominating a Compliance Officer, conducting health checks, providing a regulatory calendar, and drafting or analyzing existing policies and procedures.
Additionally, we assist with anti-money laundering measures, cybersecurity risk assessments, and governance structures. By partnering with Aspida, practitioners can ensure they remain compliant with regulatory requirements, thereby avoiding potential MFSA sanctions, penalties, measures, or fines.
For a discussion on options available to facilitate your requirements, please contact maltainfo@aspidagroup.com in the first instance.
This client briefing note is intended merely to highlight issues and not to be comprehensive, nor to provide legal or regulatory compliance advice.
