The Malta Financial Services Authority has made significant changes to the Maltese pension regulations which will have a major impact on how advisers operate in the jurisdiction.
Advisers in Malta are now subject to much tighter requirements. According to the financial watchdog, it is no longer enough for the investment adviser to just be licensed. Now, the licence must allow the the adviser to provide investment advice to the Member.
All advisers have until 30 June 2019 to obtain the necessary licences to continue providing advice to a client. With effect from 1 July 2019, anyone not meeting the above requirements will not be permitted to carry on providing investment advice in respect of accounts held by a Malta Retirement Scheme.
There are also stricter rules when it comes to investing. Pension Schemes are only permitted a maximum of 30% in structured notes with no more than 20% with the same issuer. Also, a member has to meet the eligibility criteria of an investment product to be able to invest in it.
This means that if the product is only open to professional investors it will not be allowed unless the member is a ‘Professional Member' .
The MFSA highlights that the Retirement Scheme Administrator is also expected to ensure that a member's investments are in line with the risk profile of each member.
If the product has a minimum investment requirement, this must also be met by the member's own account and cannot be pooled with other investors, as a guidance note by specialists Trireme Pension Services shows.
The industry had mixed reactions to new rules, which came into effect from 1 January 2019. For deVere, the new framework makes it better for both advisers and clients.
James Green, divisional manager for Western Europe at deVere Group, said: "At deVere, we welcome the new MFSA pension rules and the proactive stance taken by the regulator on this important issue. The changes further enhance client protections by ensuring brokers give licensed investment advice that leads to good client outcomes via diversification of assets.
"We also welcome the need for a MiFID license and tighter controls on client risk appetite. A great week for deVere,"
"A few concerned competitors though, I'm sure," Green added.
Under the new rules, unless a member is classified as a professional member, or a discretionary fund manager is appointed, the Retirement Scheme Administrator must ensure that the client has been provided with a full disclosure of all costs payable and of any commissions payable to the adviser or any other third party under the terms of any investment selected, including any upfront, ongoing or exit charges.