The only amendments effected relate to:
- a clarification that it is the place of operation of a person (whether legal or natural) that is the relevant connecting factor for regulatory purposes and no longer residence;
- the ability of trustees, fiduciary mandataries and administrators of foundations to also act as CSP’s generally (and not restrictively to their existing clients);
- the administrative sanctions that can be imposed in terms of the TTA.
The most notable amendment, however is no doubt that which finally eliminates any doubt as to whether authorised trustees, principally (but even fiduciary mandataries and administrators of foundations), who are authorised as such by the MFSA, are able to also offer CSP services across the board, including to clients who are not also clients of their fiduciary business and thereby avail themselves of the exemption in the Company Service Providers Act (Cap. 529 of the Laws of Malta; article 3(1)).
Article 3(1) of the CSP Act, in fact, provides that “any person resident or operating in or from Malta who acts as a company service provider by way of business, shall apply for registration with the Authority in terms of this Act:
Provided that the following persons shall not be required to be registered with the Authority in terms of this Act:
(b) a person authorised to act as a trustee or to provide other fiduciary duties in terms of the Trusts and Trustees Act.”
Despite this provision seemingly exemption persons authorised by the MFSA in terms of the TTA from requiring a separate MFSA licence in terms of the CSP Act, the fact that article 43(4)(i) of the TTA obliged corporate trustees to ensure that:
(a) their objects include acting as trustee and carrying on activities ancillary or incidental thereto and excludes objects that are incompatible with the services of a trustee; and, furthermore that
(b) its actual activities are both compatible with AND connected with the services of a trustee
this started being interpreted by the MFSA as, albeit permitting CSP services to be offered (as they were – rightly so – not deemed incompatible with the services of a trustee, and all the more so with the services of a fiduciary mandatary which often go hand-in-hand), obliging trustees to only offer such CSP services to existing or new clients to whom fiduciary services were being offered.
This understandably sent shockwaves through the industry as it was a known fact that, following the promulgation of the CSP Act which actually exempt licensees under the TTA from requiring a separate CSP licence, various fiduciary service providers actually took steps to start liquidating their separate CSP company so as to avoid having 2 regulated entities to service.
Unfortunately, the situation also put on freeze a number of potential applications for CSP and trustee services as prospective operators were not keen to go for a trustee authorisation but not be able to offer CSP services until the law was amended, or to go for a CSP licence which they would then only be able to give up once the law is amended and they would then be able to apply for and use their trustee authorisation. This seems to have lead to some activity on the acquisitions market as some prospective applicants sought to purchase existing operators licence and all, rather than seek to commence the authorisation process from scratch.
Similar restrictions as applied to trustees also applied to:
(i) fiduciary mandataries in terms of article 43(13) of the TTA;
(ii) administrators of foundations in terms of article 43(15) of the TTA;
Article 12 of the amending Act has now resolved this definitively and put to rest any possible speculation about interpretations as well as injected the needed certainty into the financial services industry. This has been done through the addition of an identical proviso for each of the service lines that states that:
“Provided that, notwithstanding the provisions of paragraphs (a) and (b) [described above], persons authorised in terms of sub-article (1) may act as company service providers as defined in the Company Service Providers Act, subject to any rules or regulations which may be applicable under this Act;”;
Although the MFSA has subjected this activity to any rules or regulations that may be applicable in terms of the TTA, we are not aware of any in the pipeline. It could well be that the reference here is to the proposed Rulebook for trustees and other fiduciaries (issued by the MFSA for consultation on the 30th December, 2016) and which is expected to be published any time soon now, which does specifically tackle the provision of CSP services by trustees and other fiduciaries and also anticipated the newly introduced proviso by referring to it in the draft issued for consultation.
Offences and Administrative sanctions
Insofar as penalties are concerned, various amendments have been made to article 51, in the first place establishing that it is not only a trustee that can be held liable for an offence or administrative sanction but also:
- a director of a trustee company; or
- any other person entrusted with the management and administration thereof; or
- any other person having obligations with respect to the trustee.
It is not immediately clear who the ‘other person having obligations with respect to the trustee’ is intended to catch and whether it extends also to service providers.
A further basis of breach has been added to cover situations where the MFSA is satisfied that the conduct amounts to a breach of any provisions of the TTA, regulations or rules issued thereunder, as well as clarifying that a failure to cooperate in an investigation is also regarded by the MFSA as a sanctionable breach.
The amendment clarifies the process the MFSA will follow when imposing an administrative sanction, specifying that this will be imposed by notice in writing without recourse to a court hearing. It further stipulates in a new paragraph 7(b) that the sanction may be imposed in the form of a fixed penalty, a daily penalty or both. The maximum amount of EUR150,000 remains unchanged.
A new paragraph 7(c) clarifies that the imposition by the MFSA of an administrative penalty is without prejudice to any other consequence of the act or omission of the offender under civil or criminal law, but makes it clear, however, that in all cases where the MFSA imposes an administrative penalty in respect of anything done or omitted to be done by any person and such act or omission also constitutes a criminal offence, no proceedings may be taken or continued against the said person in respect of such criminal offence.
The ‘name and shame’ policy operated by the MFSA in terms of article 16(8) of the Malta Financial Services Authority Act (Cap. 330 of the Laws of Malta) has also been extended to sanctions in terms of the TTA.
Disclaimer: while every effort has been made to make the above as exhaustive as possible, it is not intended to constitute an exhaustive statement of the law on the matter or to act as a substitute for an examination of the provisions of law applicable to Maltese trustees. This document is intended to be a discussion document and does not constitute legal advice