MFSA newsletter
New legislation opens opportunities New legislation is set to create more opportunities in the financial services sector. Once it comes into effect, the new Act (Civil Code (Amendment No. 2) Act XIII of 2007), will provide alternative structures in the...
New legislation opens opportunities
New legislation is set to create more opportunities in the financial services sector. Once it comes into effect, the new Act (Civil Code (Amendment No. 2) Act XIII of 2007), will provide alternative structures in the form of foundations and associations, which among other things may be used for investment purposes.
According to the new Act, a foundation is "an organisation consisting of a universality of things constituted in writing whereby assets are either destined for the fulfilment of a specified purpose or for the benefit of a named person or class of persons, and are entrusted to the administration of a designated person or persons".
The assets of the foundation may originate from any lawful business activity and may consist of present or future assets of any nature.
On the other hand, an association is an agreement between three or more persons to establish an organisation with defined aims or purposes to be achieved through the dedication of efforts and resources by such persons and others who may join voluntarily. Even though associations are not bound by law to register as legal persons, they may elect to do so.
The patrimony of the foundation or of an association must be kept distinct from its founder, administrators or beneficiaries. The law also provides for hybrid associations which are established as a foundation but which have the features of an association or vice-versa. These qualify for registration both as foundations and as associations.
A foundation may be constituted by virtue of a public deed inter vivos or by a will. The deed of foundation must contain an endowment of money or property worth at least €1,500 with the exception of a foundation which is established exclusively for a social purpose or as non-profit-making, in which case the endowment shall be worth at least €250.
A foundation may be formed for a maximum period of 100 years. The exception to this rule is in the case of a purpose foundation (used as a collective investment vehicle or a foundation used in a securitisation transaction), which may be established for an unlimited term.
A foundation may not be established to trade or carry on commercial activities even if the proceeds of such efforts are destined for social purposes. A foundation therefore would qualify as a securitisation vehicle in terms of S.3(1) of the Securitisation Act. Thus it may engage in transactions whereby it directly or indirectly (a) acquires securitisation assets from an originator by any means; or (b) assumes any risks from an originator by any means; or (c) grants secured loans or other secured facility or facilities to an originator; and finances any or all of the above, directly or indirectly, in whole or in part, through the issue of financial instruments, and includes any preparatory acts carried out in connection with the above.
The provisions of the Income Tax Act relating to trusts, settlers and beneficiaries will be extended to foundations, their founders and the beneficiaries thereunder as well as to any persons who are donors of property to the fund.
The Duty on Documents and Transfers Act in S.32C also provides that the administrators of a foundation may elect that the foundation be treated as a trust for an exemption of duty insofar as it is the case to transfer immovable property or any real right over an immovable property by a founder to the foundation created for the purpose of a designated commercial transaction, including the securitisation of assets.
The above provisions relating to foundations and associations are not yet in force. Regulations will be issued in due course.
Industry told to 'redouble efforts' on euro payments area
EU finance ministers have called on the industry to step up efforts to complete the Single Euro Payments Area (SEPA), but obstacles to its full implementation are yet to be overcome. SEPA was launched on Janaury 28 and is due to be completed by 2010. It is intended to make EU-wide payments as cheap and easy as they are at national level.
According to Internal Market Commissioner Charlie McCreevy, the estimated benefits could amount to €123 billion for payments and a further €238 billion if SEPA is used as a platform for electronic invoicing.
Finance ministers encouraged the industry to "develop attractive SEPA payment products and market them actively so that there is a natural momentum for customers" to move to new payment products.
All 27 member states must implement the Payment Services Directive (PSD), which sets out a legal basis for SEPA, by November this year.
European Financial Integration Report 2007
The European Commission released its European Financial Integration Report (EFIR) in December, an annual analysis of integration of the EU financial services sector. EFIR monitors European financial integration and merged two former reports (the Financial Integration Monitor and the Single Market in Financial Services Progress Report).
The report indicates that the speed and scope of financial integration has not been the same across all market segments. For the wholesale segment, further integration will depend on the progress in integrating securities clearing and settlement systems. As for retail markets, the lack of integration is reflected in wide price variations across member states and the low volume of direct cross-border transactions. European financial integration has changed market structures, due in part to merger and acquisition activities. The continued consolidation has resulted in rising concentration ratios in many markets.
The report also tackles competition and the available evidence suggests that consumers and SMEs would benefit from stronger competition at EU level. Favourable economic conditions recently improved the efficiency indicators of EU financial institutions and markets. The report also shows that there is still significant potential for improvement as fragmentation or relative underdevelopment prevents economies of scale and scope from materialising in a number of markets. The progress of financial integration has multiplied the market links between member states and across financial sectors.
The full report can be accessed from the EU website http://ec.europa.eu/internal_market/finances/fim/index_en.htm.
Trust servicing picks up
The Trusts and Trustees Act has clearly started to leave its mark on the Maltese financial services scene with the arrival of more international corporate trustees.
BSI SA, originally Banca della Svizzera Italiana, a bank with its head office in Lugano, Switzerland, was recently authorised to carry out trust activity in Malta through a new subsidiary, BSI Trust Corporation (Malta) Ltd.
The company's directors said the decision to set up operations in Malta was taken after the group identified a number of advantages offered by the Act which would help them attract business from high net worth individuals across Europe.
Through its European network, the BSI Group will be able to offer its customers trustee and fiduciary services that enhance its wealth management package. The services to be provided by the Malta company will include trust creation and administration as well as the incorporation of companies and company administration services.
BSI, whose main focus is the provision of portfolio management services to its private banking clientele, has formed part of the Assicurazioni Generali Group since 1998. Founded in 1873, BSI has a network of branches, representative offices and affiliates in the major financial centres of Europe, South America and the Far East. The group operates other trust services companies in Italy, Guernsey and Bahamas. The experience gained in these jurisdictions combined with the expertise of its local professional team will reinforce BSI's activity in its target market.
Other international groups authorised to provide trust services in Malta in recent weeks include Dixcart Management (IOM) Ltd. Dixcart has been authorised to carry out these services under article 43(8)(ii) of the Trusts and Trustees Act, which states that authorisation to provide trust services in Malta may be granted to companies having a licence or authorisation to act as a trustee issued by the relevant regulatory authority in an approved jurisdiction.
Dixcart is incorporated in the Isle of Man, providing services to benefit international clients. It is authorised as a corporate and trust service provider by the Isle of Man Financial Services Commission, and among other activities acts as a management company assisting international clients with the management and control of companies.
Dixcart also has offices in Guernsey, Switzerland, UK, Madeira, Sark, Nevis and now Malta.
Licences issued - December 2007/January 2008
(i) Investment Services
Category 4 Investment Services Licence issued to Sparkasse Bank Malta plc.
Category 2 Investment Services licence issued to ProAurum Ltd.
(ii) Collective Investment Scheme Licences
Maltese UCITS
Licence issued to Celsius Global Funds SICAV plc in respect of one sub-fund.
Professional Investor Funds
Licence issued to Altma Fund Sicav plc in respect of six sub-funds, targeting Qualifying Investors.
Licence issued to NBCG Fund SICAV plc in respect of eight sub-funds, targeting Qualifying Investors.
Licence issued to NEF Global Resources SICAV Ltd in respect of one sub-fund, targeting Qualifying Investors.
Licence issued to The ARP Absolute Return Funds SICAV plc in respect of one sub-fund, targeting Qualifying Investors.
Licence issued to Amstel Global Umbrella Fund SICAV plc in respect of two sub-funds, targeting Experienced Investors.
Retail Funds
Licence issued to Wignacourt Fund SICAV plc in respect of one sub-fund.
(iii) Trusts and Trustees
FINAC Ltd has been authorised under the Trusts and Trustees Act.
(iv) Insurance Business Licences
Insurance Companies
Taurus Insurance Ltd licensed to carry on business of insurance and reinsurance restricted to risks situated outside Malta in four classes of general business.
Axeria Re Ltd licensed to carry on business of reinsurance restricted to risks situated outside Malta in respect of long term and general business.
Extension of Licence
Licence has been extended to Multi-Risk Indemnity Company Ltd to carry on business of insurance and reinsurance in another class of general business.
Cell Companies Licences
Zopa Cell has been approved as a cell of Atlas Insurance PCC Ltd to write general insurance business.
Warnings to investors
Over the past month the MFSA received and circulated a number of warnings to investors issued by overseas regulators. Full releases can be accessed from the Warnings for Investors section in the MFSA website: (www.mfsa.com.mt).
MFSA website: http://www.mfsa.com.mt
Registry website: http://registry.mfsa.com.mt
Consumer website: http://www.mfsa.com.mt/consumer
New legislation is set to create more opportunities in the financial services sector. Once it comes into effect, the new Act (Civil Code (Amendment No. 2) Act XIII of 2007), will provide alternative structures in the form of foundations and associations, which among other things may be used for investment purposes.According to the new Act, a foundation is "an organisation consisting of a universality of things constituted in writing whereby assets are either destined for the fulfilment of a specified purpose or for the benefit of a named person or class of persons, and are entrusted to the administration of a designated person or persons".
The assets of the foundation may originate from any lawful business activity and may consist of present or future assets of any nature.
On the other hand, an association is an agreement between three or more persons to establish an organisation with defined aims or purposes to be achieved through the dedication of efforts and resources by such persons and others who may join voluntarily. Even though associations are not bound by law to register as legal persons, they may elect to do so.
The patrimony of the foundation or of an association must be kept distinct from its founder, administrators or beneficiaries. The law also provides for hybrid associations which are established as a foundation but which have the features of an association or vice-versa. These qualify for registration both as foundations and as associations.
A foundation may be constituted by virtue of a public deed inter vivos or by a will. The deed of foundation must contain an endowment of money or property worth at least €1,500 with the exception of a foundation which is established exclusively for a social purpose or as non-profit-making, in which case the endowment shall be worth at least €250.
A foundation may be formed for a maximum period of 100 years. The exception to this rule is in the case of a purpose foundation (used as a collective investment vehicle or a foundation used in a securitisation transaction), which may be established for an unlimited term.
A foundation may not be established to trade or carry on commercial activities even if the proceeds of such efforts are destined for social purposes. A foundation therefore would qualify as a securitisation vehicle in terms of S.3(1) of the Securitisation Act. Thus it may engage in transactions whereby it directly or indirectly (a) acquires securitisation assets from an originator by any means; or (b) assumes any risks from an originator by any means; or (c) grants secured loans or other secured facility or facilities to an originator; and finances any or all of the above, directly or indirectly, in whole or in part, through the issue of financial instruments, and includes any preparatory acts carried out in connection with the above.
The provisions of the Income Tax Act relating to trusts, settlers and beneficiaries will be extended to foundations, their founders and the beneficiaries thereunder as well as to any persons who are donors of property to the fund.
The Duty on Documents and Transfers Act in S.32C also provides that the administrators of a foundation may elect that the foundation be treated as a trust for an exemption of duty insofar as it is the case to transfer immovable property or any real right over an immovable property by a founder to the foundation created for the purpose of a designated commercial transaction, including the securitisation of assets.
The above provisions relating to foundations and associations are not yet in force. Regulations will be issued in due course.
Industry told to 'redouble efforts' on euro payments area
EU finance ministers have called on the industry to step up efforts to complete the Single Euro Payments Area (SEPA), but obstacles to its full implementation are yet to be overcome. SEPA was launched on Janaury 28 and is due to be completed by 2010. It is intended to make EU-wide payments as cheap and easy as they are at national level.According to Internal Market Commissioner Charlie McCreevy, the estimated benefits could amount to €123 billion for payments and a further €238 billion if SEPA is used as a platform for electronic invoicing.
Finance ministers encouraged the industry to "develop attractive SEPA payment products and market them actively so that there is a natural momentum for customers" to move to new payment products.
All 27 member states must implement the Payment Services Directive (PSD), which sets out a legal basis for SEPA, by November this year.
European Financial Integration Report 2007
The European Commission released its European Financial Integration Report (EFIR) in December, an annual analysis of integration of the EU financial services sector. EFIR monitors European financial integration and merged two former reports (the Financial Integration Monitor and the Single Market in Financial Services Progress Report).
The report indicates that the speed and scope of financial integration has not been the same across all market segments. For the wholesale segment, further integration will depend on the progress in integrating securities clearing and settlement systems. As for retail markets, the lack of integration is reflected in wide price variations across member states and the low volume of direct cross-border transactions. European financial integration has changed market structures, due in part to merger and acquisition activities. The continued consolidation has resulted in rising concentration ratios in many markets.
The report also tackles competition and the available evidence suggests that consumers and SMEs would benefit from stronger competition at EU level. Favourable economic conditions recently improved the efficiency indicators of EU financial institutions and markets. The report also shows that there is still significant potential for improvement as fragmentation or relative underdevelopment prevents economies of scale and scope from materialising in a number of markets. The progress of financial integration has multiplied the market links between member states and across financial sectors.
The full report can be accessed from the EU website http://ec.europa.eu/internal_market/finances/fim/index_en.htm.
Trust servicing picks up
The Trusts and Trustees Act has clearly started to leave its mark on the Maltese financial services scene with the arrival of more international corporate trustees.
BSI SA, originally Banca della Svizzera Italiana, a bank with its head office in Lugano, Switzerland, was recently authorised to carry out trust activity in Malta through a new subsidiary, BSI Trust Corporation (Malta) Ltd.
The company's directors said the decision to set up operations in Malta was taken after the group identified a number of advantages offered by the Act which would help them attract business from high net worth individuals across Europe.
Through its European network, the BSI Group will be able to offer its customers trustee and fiduciary services that enhance its wealth management package. The services to be provided by the Malta company will include trust creation and administration as well as the incorporation of companies and company administration services.
BSI, whose main focus is the provision of portfolio management services to its private banking clientele, has formed part of the Assicurazioni Generali Group since 1998. Founded in 1873, BSI has a network of branches, representative offices and affiliates in the major financial centres of Europe, South America and the Far East. The group operates other trust services companies in Italy, Guernsey and Bahamas. The experience gained in these jurisdictions combined with the expertise of its local professional team will reinforce BSI's activity in its target market.
Other international groups authorised to provide trust services in Malta in recent weeks include Dixcart Management (IOM) Ltd. Dixcart has been authorised to carry out these services under article 43(8)(ii) of the Trusts and Trustees Act, which states that authorisation to provide trust services in Malta may be granted to companies having a licence or authorisation to act as a trustee issued by the relevant regulatory authority in an approved jurisdiction.
Dixcart is incorporated in the Isle of Man, providing services to benefit international clients. It is authorised as a corporate and trust service provider by the Isle of Man Financial Services Commission, and among other activities acts as a management company assisting international clients with the management and control of companies.
Dixcart also has offices in Guernsey, Switzerland, UK, Madeira, Sark, Nevis and now Malta.
Licences issued - December 2007/January 2008
(i) Investment Services
Category 4 Investment Services Licence issued to Sparkasse Bank Malta plc.
Category 2 Investment Services licence issued to ProAurum Ltd.
(ii) Collective Investment Scheme Licences
Maltese UCITS
Licence issued to Celsius Global Funds SICAV plc in respect of one sub-fund.
Professional Investor Funds
Licence issued to Altma Fund Sicav plc in respect of six sub-funds, targeting Qualifying Investors.
Licence issued to NBCG Fund SICAV plc in respect of eight sub-funds, targeting Qualifying Investors.
Licence issued to NEF Global Resources SICAV Ltd in respect of one sub-fund, targeting Qualifying Investors.
Licence issued to The ARP Absolute Return Funds SICAV plc in respect of one sub-fund, targeting Qualifying Investors.
Licence issued to Amstel Global Umbrella Fund SICAV plc in respect of two sub-funds, targeting Experienced Investors.
Retail Funds
Licence issued to Wignacourt Fund SICAV plc in respect of one sub-fund.
(iii) Trusts and Trustees
FINAC Ltd has been authorised under the Trusts and Trustees Act.
(iv) Insurance Business Licences
Insurance Companies
Taurus Insurance Ltd licensed to carry on business of insurance and reinsurance restricted to risks situated outside Malta in four classes of general business.
Axeria Re Ltd licensed to carry on business of reinsurance restricted to risks situated outside Malta in respect of long term and general business.
Extension of Licence
Licence has been extended to Multi-Risk Indemnity Company Ltd to carry on business of insurance and reinsurance in another class of general business.
Cell Companies Licences
Zopa Cell has been approved as a cell of Atlas Insurance PCC Ltd to write general insurance business.
Warnings to investors
Over the past month the MFSA received and circulated a number of warnings to investors issued by overseas regulators. Full releases can be accessed from the Warnings for Investors section in the MFSA website: (www.mfsa.com.mt).
MFSA website: http://www.mfsa.com.mt
Registry website: http://registry.mfsa.com.mt
Consumer website: http://www.mfsa.com.mt/consumer