A TRINITY OF REGULATORS - no more

The modern approach to financial services regulation in Maltese law may only be traced to 1994, which may claim to be a historic turning point. This is due to the extensive legislation passed by Parliament during this period, laying the groundwork for further legislative changes currently envisaged for 2002.

Coupled with the parallel reforms in consumer protection law, the extensive measures adopted by Parliament since 1994 has radically changed the legal landscape in which financial, corporate and related services now operate. Perhaps the most important rule is that most financial intermediaries are now subject to some degree of supervision and to an authorisation requirement. Thus, for instance, 1994 saw the adoption of the Investment Services Act, a new Banking Act (which replaced the 1970 Act), and a Financial Institutions Act. Carrying out regulated activity without the proper licence is now a criminal offence. New legislation on insider dealing, money laundering and professional secrecy were also enacted in support of these primary laws, in an effort to keep the business clean and free from abuse.

Up to the end of 2001, a feature of the local structure of regulation in this sector was the presence of three distinct regulatory bodies, established under distinct legislation, with each body being allotted a particular area or sets of areas to supervise. These three bodies were in chronological order: the Central Bank of Malta, the Malta Financial Services Centre and the Malta Stock Exchange. This tri-partite division of regulatory responsibilities is actually quite normal and mirrors the position existing in many other countries. Some countries have recently started moving away from this fragmented institutional arrangement preferring to concentrate all the supervisory functions in one single unified (three-in-one) agency. During these past two years, the Minister of Finance and a number of local newspaper reports have confirmed that government policy favoured the establishment of a single regulatory body wherein all regulatory responsibilities would be consolidated. From the consumer perspective, this should be a beneficial development as there shall only be one single point of reference reducing the possibility of uncertainty and of passing the buck.

With effect from the 1st January 2002, by legal notices issued by the Minister of Finance in the Government gazette, all regulatory responsibilities under the Banking Act and the Financial Institutions Act, both of 1994, were transferred from the Central Bank to the MFSC.


(This first part of the article has sought to highlight some salient features of our consumer legislation as recently amended, and to indicate a number of areas of direct interest to financial services providers. It has also introduced the financial regulatory authorities entrusted with administering the relevant laws. The second part of the article shall focus further on the actual financial services legislation and shall attempt to indicate a number of ways whereby these laws protect investors.)

NB The second part of this article has not yet been published.

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