The Role of the MFSA as the Financial Services Regulator in Malta

1. The Role of the MFSA as the Financial Services Regulator in Malta Paul Vella Director � Human Resources Malta Financial Services Authority

2. Presentation Summary The evolution of financial services regulation. The MFSA as one model of a financial services regulator. The advantages of being a financial services regulator in Malta. Possible Pitfalls. New roles of the MFSA. The future: Challenges.

3. The Evolution of Financial Services Regulation (The Maltese Experience)

4. The Evolution of Financial Services Regulation (The Maltese Experience) - Banks regulated by the Central Bank of Malta as the agent of the Ministry of Finance - Insurance Business regulated by the Ministry of Finance - Investment Services, practically non existent - Stockbroking Firms regulated by the Malta Stock Exchange subject to the oversight of the Central Bank of Malta - The Malta International Business Authority (MIBA) regulated off-shore business.

5. The Evolution of the Financial Services Regulator (The Maltese Experience) 1994 -1995: - Overhaul of Financial Services Legislation. - Complementary Legislation to legislate against Money Laundering and Insider Dealing. - Enactment of the Professional Secrecy Act - Conversion of MIBA into Malta Financial Services Centre (MFSC). - New Companies Act

6. Important Innovations to Financial Services Regulation after 1994-1995 Widening the scope of regulation in view of the need to prevent money laundering, market abuse and insider dealing. The introduction of gateways to professional secrecy. The involvement of auditors in the surveillance of licence holders The introduction of the concept of �appeal�. The winding down of the �offshore regime�. The introduction of the concept of exchange of information within and with other jurisdictions. More emphasis on international co-operation and dovetailing of rules and regulation under the auspices of Basle Committee, IOSCO and IAIS.

7. 2002-2003 - Further legislative amendments establishing the Malta Financial Services Authority (MFSA) as a single regulator for financial services in Malta. - Consumer related provisions in financial services legislation.

8. to regulate, monitor and supervise financial services in Malta; to promote the general interests and legitimate expectations of consumers of financial services, and to promote fair competition practices and consumer choice by: �

9. Objectives of the MFSA to advise the Government generally on the formulation of policies in the field of financial services, and to make recommendations to Government as to any action which in the opinion of the Authority it would be expedient to take in relation to matters in respect of which the Authority has such duties; � to investigate allegations of practices and activities detrimental to investors, and generally to keep under review trading practices relating to the provision of financial services and to seek to identify and to take measures to suppress and prevent any practices or transactions which may be unfair, harmful or otherwise detrimental to consumers of financial services; to perform such other functions or duties as may be assigned to it under this Act or any other law.

10. MFSA - Structure

11. Functions � Board of Governors Board of Governors comprises seven members including the Chairman. Chairman and Governors appointed for a period of up to five years and their appointment may be renewed for further periods of up to five years; Board of Governors not a regulator; The Legal and International Relations Unit acts as Secretary to the Board of Governors. The Listing Committee reports to the Board of Governors

12. Co-ordination Committee

13. Supervisory Council

14. Board of Management & Resources

15. The Position Today Full alignment of legislative framework with the corresponding EU Directives; The MFSA is securely placed and is supported by the two major political parties in Malta; High regulatory and anti money laundering standards could be maintained in satisfaction of ever changing international standards; Development of the financial services industry can be sustained; Co-operation process with Ministry of Finance, Central Bank of Malta and Financial Intelligence Analysis Unit; Process of co-operation and sharing of information with foreign regulatory agencies is on-going. Number of MOUs in place. On the way to achieve integrated supervision.

16. The MFSA as part of the Maltese Financial Services Sector Safety Net Ministry of Finance - Legislative Framework Logistic assistance and provision of expertise Central Bank of Malta - Financial Stability MOU and Mutual Co-operation Financial Intelligence Analysis Unit - A.M.L. Framework Assistance in AML related oversight and supervision

17. To Summarise : Adopts one model among several single unified regulators in other countries adopting different models; Operates within the international context � (e.g. the EU, the IMF, the OECD, the WTO); Engages in international co-operation through MOU�s and within specialised international regulatory bodies (e.g. CEBS within the EU); Acts as a consumer protection agency responding to a new context of consumer and competition legislation; Forms part of the Maltese Financial Services Sector Safety Net.

18. Positive Aspects of Financial Services Regulation in Malta  �Small is beautiful��� Easier face-to-face communication with licence holders and stake holders. Easier access to �informal� sources. Easier detection of suspicious transactions. Easier on-site visits. Lesser overhead expenses for supervision and regulation.

19. Possible Pitfalls� Perception that �Small could be insignificant��� Greater competition for human and other resources. Limited technical and financial resources. Considering regulations as being too onerous. Possibility of insular view of supervision and regulation. Complacency in relation to the possibility of a financial crisis. Too much reliance on informal sources and procedures Conflicts of interest. Not enough effort to maintauin quality in the sector.

20. New Roles of the MFSA Strategic Plan up to 2012 (in preparation) Consumer Complaints Consumer Education Involvement in Financial Services Sector Training

21. Consumer Complaints Consumer Complaints Manager has a Mediation Role Established procedure for lodging of complaints Complaints Freephone

22. Consumer Education Periodic Publications Annual Reports Media Programmes Talks on Invitation

23.  The MFSA works to achieve its training objectives through the: Industry Training Policy Education Council set up in terms of the Authority�s Strategic Plan for 2007 - 2009

24. The Future � Challenges Allocation of scarce resources to meet the demands of modern day financial services supervision. Restructuring of financial services industry and concurrent updating of regulatory and supervisory, standards and procedures. Transition from �rule based� to �risk based� supervision. Upgrading techniques to combat criminal abuse of the financial system. Consumer Protection and Education Being a strong link in the process of international co-operation and exchange of information. Sustaining a proactive role in international fora??

25. MFSA Website: www.mfsa.com.mt

26. Recommended Website Areas Regulatory Area according to elective chosen Publications: Annual Report & Consumer Complaints� Report Training Policy & Events Consumer Complaints

27.  Contact Details: ~ Paul Vella, Director Human Resources Tel: 25485279, pvella@mfsa.com.mt

28. Thank you for your attention!! Questions????