The provision of investment services in or from Malta is regulated by the Investment Services Act, and the Investment Services Rules, which implement EC Council Directive 2004/39/EC (MiFID) and certain provisions of EC Council Directive 85/611/EC ('UCITS' Directive).

The investment services industry in Malta is regulated and monitored by the Malta Financial Services Authority (MFSA), the single regulator for financial services in Malta.

Licensable activities

A person providing any one or more of the following investment services in or from Malta, in relation to specified 'instruments', must be licensed by the MFSA:

  • Reception and transmission of orders in relation to instruments
  • Execution of orders in relation to instruments on behalf of other persons
  • Dealing on own account
  • Management of investments
  • Trustee, Custodian or Nominee Services
  • Investment Advice
  • Underwriting of instruments and/or placing of instruments on a firm commitment basis
  • Placing of instruments without a firm commitment basis
  • Operation of a Multilateral Trading Facility.

Categories of Licenses

There are four categories of Investment Services licenses:

  • Category 1a

Licence Holders authorised to receive and transmit orders and, or provide investment advice and, or place instruments without a firm commitment basis but not to hold or control clients' money or customers' assets.

  • Category 1b

Licence Holders authorised to receive and transmit orders, and/or provide investment advice in relation to one or more instrument and/or place instruments without a firm commitment basis solely for professional clients and/or eligible counterparties but not to hold or control clients' money or customers' assets.

  • Category 2

Licence Holders authorised to provide any investment service, and to hold or control clients' money or customers' assets, but not to operate a Multilateral Trading Facility or deal for their own account or underwrite or place instruments on a firm commitment basis.

  • Category 3

Licence Holders authorised to provide any investment service, to hold and control clients' money or customers' assets.

  • Category 4

Licence Holders authorised to act as trustees or custodians of collective investment schemes.

The above categories determine a Licence Holder's Financial Resources Requirements as well as the registration and annual fees payable to the MFSA. Licence categories 1 to 3 are cumulative however this is not the case with Category 4.

Capital Requirements

The following Initial Capital requirements apply to Investment Services license-holders:

Initial capital is comprised of equity capital and reserves.

A license holder must maintain own funds which are equal to or in excess of its Capital Resources Requirement as defined in the Investment Services Rules.

European 'passporting' rights

An authorised EC/EEA Investment Firm may exercise its European right to establish a branch in Malta or to provide services in Malta without the requirement of obtaining authorisation under the relevant legislation, provided that the passporting provisions are complied with.

Similarly, a Maltese license holder may exercise its right to establish a branch or provide services in another EC Member State or EEA State by submitting all relevant notifications and documentation to the MFSA in accordance with the passporting provisions.

Malta Tax Treatment

As in the case of any Maltese company, a company licensed as an investment services provider incorporated under the laws of Malta would be chargeable to Malta tax on its profits at the standard rate of 35%.

Upon a distribution of dividends by the Company to its shareholder/s, the said shareholder/s would be entitled to claim a refund from the Malta tax authorities of a significant part of the Malta tax paid by the said Company on the profits out of which the dividend was distributed.

Certain services provided by licensed investment services providers (including fund management and fund administration) are exempt from VAT in Malta. Any input tax incurred which is attributable to exempt without credit supplies is not recoverable.

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.