The MFSA’s Capital Markets Strategy – Pillar II Coming into Force

Amendments to the Capital Markets’ Regulatory Framework

In March 2021, the Malta Financial Services Authority (‘MFSA’) launched its Capital Markets Strategy in an attempt to foster growth, enhance and future-proof the applicable regulatory framework, whilst also ensuring effective investor protection and safeguarding market integrity and the soundness of the financial markets.

Taking a holistic approach to the local capital markets’ eco-system, the MFSA formulated the Capital Markets Strategy upon five strategic pillars, being:

• Pillar I – Establishing the MFSA’s Risk Appetite in considering applications for admissibility to Listing
• Pillar II – Revising the Regulatory Framework
• Pillar III – Strengthening the Sponsors’ Regime
• Pillar IV – Building up Supervisory Capacity
• Pillar V – Educating Investors

As part of Pillar II, the MFSA proposed the revision of various aspects of the Maltese regulatory framework for Capital Markets in order to enhance its role, and in particular, its supervisory and investigative powers in view of the precepts of the Prospectus Regulation (EU/2017/1129).

In general, the revisions were two-fold and concerned (i) amending the Financial Markets Act (Chapter 345 of the Laws of Malta) (hereinafter the ‘Act’) and (ii) updating MFSA’s regime for Capital Markets, including the Listing Rules for Main Market and the Wholesale Securities Markets, and Listing Authority Policies.

i. Amendments to the Financial Markets Act

Amongst other amendments, Part III of the Act, which was previously entitled ‘Listing Authority’, now reads ‘Prospectus, Listing and Trading’. All references to Listing Authority and Listing Committee under the unrevised Act have now been deleted, and all powers previously vested in the Listing Authority or the Listing Committee now rest with the MFSA.

Under the amended Act, the MFSA is the designated single competent administrative authority responsible for a) the scrutiny, review and approval of Prospectuses relating to a qualifying ‘offer of securities to the public’ in addition to those required in conjunction with an application for admissibility to listing; and b) the supervision of the ongoing obligations of listed companies.

The changes effected to the Act are applicable from 23 July 2021.

ii. Updates to the MFSA’s regime for Capital Markets

In reflecting the changes to the Act, the MFSA also updated its ‘Listing Rules’ for the Malta Stock Exchange Main Market and the Wholesale Securities Markets as well as the Listing Authority Policies by a) aligning certain definitions with those included in the Act; b) substituting references to ‘Listing Authority’ and Listing Committee’ with ‘MFSA’; c) deleting all Listing Rules referring to the functions and the composition of the Listing Committee; and d) substituting reference to ‘Listing Rules’ with ‘Capital Markets Rules’.

In addition, the MFSA’s updated regime for Capital Markets caters for stringent financial reporting requirements to be satisfied by listed companies in line with the European Single Electronic Format (ESEF).

The revisions made to the MFSA’s regime for Capital Markets were brought into effect on 13 August 2021.

Deloitte Malta will be monitoring developments in the furtherance and implementation of the MFSA’s Capital Markets Strategy.