Maltese regulator tightens Financial Licensing Rules for FX; minimum capital up to €730,000 

The MFSA has issued a notice regarding applicants for a Category 2 or Category 3 Investment Services Licence that would like to carry out online forex trading in terms of the Investment Services Act.

MFSA underscored the necessity of  further tightening the licensing criteria because of the high risks associated with forex trading by retail investors due to the reliance on automated systems, the complex nature of forex products and the accessibility to such products by retail investors.

Therefore, the MFSA shall only accept an application for a licence if at least one entity holding a direct qualifying shareholding in the applicant is already regulated in the provision of financial services to a level which is satisfactory to the MFSA and whose activities are relevant in the context of the application in question.

The regulator outlines the applicant’s shareholding structure that will take into consideration and also clarifies that additional documents such as audited accounts might be needed.

Furthermore, the Authority, in order to achieve comfort regarding the source of funds of the promoters, reserves the right to request a promoter (who is also the ultimate beneficial owner of the applicant) to provide it with a statement of wealth that should be signed by a person holding a warrant of a certified public accountant under the Accountancy Profession Act (Cap. 281) or holds professional qualifications of similar standing of an institute of repute recognised by the Authority.

Companies applying for a Category 2 licence will be subject to a higher minimum initial capital requirement of €730,000, similar to the initial capital requirement for Category 3 licence holders in light of the risks associated with this kind of
business and potential loss of retail clients’ money.

The Authority also needs to be provided with comfort that the proposed Board members of an online forex company collectively have the necessary competence to be able to effectively contribute to the decision-making process of the Board.

Moreover, the licence holder shall only be authorised by the Authority to commence its business as an online forex trading firm if it has the requisite number of personnel in place that will ensure compliance with the dual control principle on an ongoing basis. the authority highlights the fact that it does not accept operational set-ups whereby the licensable activities, as well as the key functions of the licence holder, are concentrated in one individual.

The above new rules apply only in the case of new applications made as of October 20th. Existing applications submitted before are exempt from the incoming Shareholding Structure and Capital Requirements guidelines. However, they must meet all other requirements.

 

Source: MFSA-Maltese regulator tightens Financial Licensing Rules for FX; minimum capital up to €730,000

 

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