Investment Services Licensed Entities

In Malta there are 4 categories of Investment Services Licensed entities, depending on the type of entity and the activities it intends to carry out, as follows:

Investment Management Companies

 

Investment Management companies normally control or hold clients’ money and therefore apply for a Category 2 Investment Services Licence.

 

A Category 2 licence is also required if the company would like to act as a Fund Manager. In this regard, although the basic framework of a Category 2 licence is uniform, there are three different sets of rules that apply, depending on whether the company would like to act as a UCITS Management Company, an AIFM or simply act under MiFID. 

 

 

Forex Companies

 

A forex trading platform may require either a Category 2 or Category 3 investment services licence, with the main difference being whether the company intends to deal on own account or otherwise.

 

Apart from the standard licensing procedure, an online forex trading platform would also require an online questionnaire disclosing all the details on the software and IT infrastructure to be used.

 

 

Binary Options Companies

 

 

The licence for Binary Options is very similar to the one issued for forex trading platforms and an entity may apply jointly for a Category 3 licence covering forex and binary options trading.   Malta Binary Options fall within the remit of the MFSA and are not considered as a gaming activity.

 

 

Advisors and Brokers

 

The licenses applied for by Brokers range from a Category 1 to a Category 3, depending on whether such Brokers will be holding or controlling Clients’ Money or dealing on own account or whether the activities would be simply restricted to reception and transmission of orders.  If they will only provide investment advice, a Category 1 Investment Services Licence is required.

 

 

Payment Institutions

 

 

The activities which can be carried out by a licensed payment institution consist of the following:


a)   Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;


b)   Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;


c)   Execution of payment transactions, including transfers of funds on a payment account with the user’s PSP or with another PSP:


•    execution of direct debits, including one-off direct debits;
•    execution of payment transactions through a payment card or a similar device;
•    execution of credit transfers, including standing orders;


d)   Execution of payment transactions where funds are covered by a credit line for payment service user:


•    execution of direct debits, including one-off direct debits;
•    execution of payment transactions through a payment card or a similar device;
•    execution of credit transfers, including standing orders;


e)   Issuing and/or acquiring of payment instruments;


f)    Money remittance;


g)   Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services.


The specific activities conducted by the operator will determine the minimum capital requirement.  Thus, where the institution provides the payment service listed in paragraph (f), the applicable minimum capital requirement is of Eur20,000.  Where the institution provides the payment service listed in paragraph (g), the applicable minimum capital requirement is of Eur50,000.  Where the institution provides any of the payment services listed in paragraphs (a) – (e), the applicable minimum capital requirement is of Eur125,000.  If the institution grants any sort of credit, these capital requirements are subject to revision by the MFSA.


If the company undertakes any of the allowed activities not included in paragraphs (a) to (g) above, the initial capital of the financial institution will be set by the MFSA on a case-by-case basis and will be commensurate with the level of risk involved.

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