Dr. Michelle Mizzi Buontempo

Deputy Director

Securities and Markets Supervision Unit

14th March 2014

AGENDA

• Am I a CSP?

• By way of business/De minimis rule/exemptions fromauthorisation

• If I am a CSP, what do I have to do to be registered?

• What are the requirements to obtain registration?

• Application process

• Criteria of fitness and properness and manner in whichthis is assessed by the MFSA

• When should I apply for registration?

• Powers of the MFSA

Am I a company service provider ?

• A CSP is:– Any natural or legal person resident or operating in or from Malta

who, by way of business, provides any of the following:

– formation of companies or other legal entities;

– acting or arranging for a person to act as director or secretary of acompany, a partner in a partnership or in a similar position inrelation to other legal entities;

– providing registered office facilities and other related services fora company, partnership or other legal entity.

COMPANY SERVICE PROVIDERS

What does ‘by way of business’ mean?

– Any person who holds himself out as providing company services;

OR

– Provides company services on a regular and habitual basis

AND

is directly or indirectly in receipt of remuneration or other benefits forthe provision of such services

BY WAY OF BUSINESS

• Following factors may indicate that a particular activityis being undertaken by way of business:

Amount of time taken to fulfil responsibility is significant;

Individual has no other employment;

Level of income received (in so far as quantum and as aproportion of individuals’ total income) is significant;

Existence of a business relationship through which habitual orfrequent or regular appointments are introduced;

Person offering/providing more than one type of companyservice;

Turnover of engagements is significant

BY WAY OF BUSINESS

• Directorships of private companies where the director is abeneficial owner or has a substantial financial interest in thecompany; and

• Directorships of companies beneficially owned by familymembers

• Persons employed with a Company Service Provider whoare appointed as directors or company secretary incompanies which are being serviced by the CSP would notbe subject to registration

WHAT IS NOT ‘BY WAY OF BUSINESS’

• For the purpose of determining whether an individual is providingdirectorship and/or company secretarial services by way of business, theMFSA will consider the number of positions held:

Rules set number of directorships and company secretarial positionsbeyond which you would need registration as a CSP as more than tenin aggregate

• Individuals holding directorships and/or company secretarial positions incompanies which are licensed, recognised or authorised by the MFSA interms of any of the laws for which the MFSA has been designated ascompetent authority shall not require registration

• The proposed de minimis rule relates to positions held by a natural person

DE MINIMIS RULE

EXEMPTIONS

• Article 3(1) of the Company Service Providers Act exemptscertain persons from registration requirement: Persons in possession of a warrant to act as advocate, notary, legal

procurator or certified public accountant;

Persons authorised to act as trustee or to provide other fiduciary servicesin terms of the Trusts and Trustees Act

• However persons exempt from registration requirement will stillneed to notify the FIAU of their activities as CSP

• In case of doubt whether activity being carried out would besubject to registration, matter to be conclusively determined byMFSA. Carrying on activity of company service provider withoutregistration from the MFSA is a criminal offence

SO I AM A CSP – WHAT NEXT?

• Any person currently acting as CSP or who intends providing, by way ofbusiness, any of the services that fall within the definition of a CSPneeds to submit an application to the MFSA to obtain registration

Requirement emanates from Directive 2005/60/EC which requirescompany service providers to be licensed or registered

EU Member States required to ensure that persons who effectivelydirect such entities as well as beneficial owners of such entities arefit and proper

• MFSA has the power to refuse an application for registration

• Registration may also be restricted to particular specified activities

• Registration may also be subject to such conditions as the MFSA maydeem appropriate

• MFSA has power to revoke any conditions imposed as well as imposenew/additional conditions

• Person must be resident or operating in Malta

• If company services are provided by a natural person, that individual must be fit and proper

• If company services are provided by a limited liability company:

the directors, as well as every person who directly or indirectly owns or controls 25% or more of the shares or voting rights, must be fit and proper;

Objects clause must not include activities which are incompatible with the services of a company service provider

Board of directors must be composed of at least two individuals

• Compliance Officer

• Money Laundering Reporting Officer

REQUIREMENTS TO OBTAIN REGISTRATION

• Requirement for registered person to have sufficient financialresources so as to:

– Conduct its business effectively; and

– Meet its liabilities

• Commercial Partnerships - €5,000 initial paid up share capital Own funds must amount to €5,000 for duration of registration

May be made up of Cash or other liquid assets

• Individuals – Working Capital of at least €2,500 to be maintained forduration of the registration as a CSP. Individual may also opt to obtain guarantee or irrevocable letter of credit

issued by a credit institution licensed by MFSA or in a reputablejurisdiction

RESOURCES REQUIREMENTS

• In the case of a juridical person: Completed application form;

M&A;

Copy of most recent financial statements;

Clients’ agreements;

Business plan;

PQs of directors, qualifying shareholders and senior officers, including MLRO and Compliance Officer;

Directors’ Resolution;

Group Structure;

Application fee of €250

APPLICATION PROCESS

• In the case of a natural person:

Completed application form;

Business proposal;

Personal Questionnaire of the individual concerned;

Evidence of working capital;

Client’s Agreement;

Application fee of €250

APPLICATION PROCESS

• Qualifying shareholders, members of Board of Directors, senior officials and other key functionaries are required to meet fit and proper test

• Onus of proving that an applicant is a fit and proper person for the type of registration applied for is on the applicant itself

• MFSA’s approach is cumulative and will take into account all material facts, disclosed or otherwise

• MFSA will not grant registration if it appears that the criteria of fitness and properness are not or will not be satisfied

CRITERIA OF FITNESS AND PROPERNESS

• Integrity: applicant being of good repute and acting honestly and in a trustworthy fashion in relation to its clients and other parties

• Competence: persons carrying on business of the licence holder must be able to demonstrate an acceptable amount of knowledge, professional expertise and experience

• Solvency: MFSA must be satisfied that the applicant has financial resources sufficient to meet commitments on a continuing basis as well as the ability to withstand any financial risks to which the business is exposed

CRITERIA OF FITNESS AND PROPERNESS

• The satisfaction of the fit and proper criteria is a continuous obligation

• Licence holders and/or approved persons are required to report any material changes to the information submitted to the MFSA

CRITERIA OF FITNESS AND PROPERNESS

• PQ assists the MFSA to assess whether a person is fit and proper

• MFSA reserves right to seek information and references from organisations and individuals mentioned in the PQ

• PQ is to be completed by the applicant personally who retains responsibility for its content

PERSONAL QUESTIONNAIRE

• Contents of PQ: Information regarding licence holder;

Personal information regarding applicant;

Qualifications/memberships;

Employment history;

Directorships;

Bank references & other regulatory authorisations;

General information;

Declarations and confirmations

• A number of documents attached to the PQ

PERSONAL QUESTIONNAIRE

• On conclusion of its review of application and fitness andproperness exercise, the application referred to theAuthority’s Supervisory Council

• MFSA will issue an ‘in principle approval’ subject tosatisfactory resolution of any outstanding matters

• On satisfactory resolution of any outstanding mattersMFSA will issue a certificate of registration

MFSA APPROVAL

• Any person acting as company service provider upon coming into force of Act regulating CSPs needs to apply for registration with the MFSA within three months –

By not later than 24 March 2014

• MFSA to process applications within six months fromreceipt of a complete application, including supportingdocumentation

TRANSITORY PROVISIONS

POWERS OF MFSA

• Power to cancel registration No longer fit and proper

Registered person has contravened provisions of the Company ServiceProviders Act and/or any rules issued thereunder

Registered person has knowingly supplied the MFSA with informationwhich is false, inaccurate or misleading

Person no longer acting as a Company Service Provider

• Power to issue directives

• Power to impose administrative sanctions including impositionof a penalty not exceeding €25,000 for each infringement

• Power to require information

In case of queries contact:

Dr. Michelle Mizzi Buontempo on mmizzibuontempo@mfsa.com.mt or 2548 5112

Thank you