MFSA publishes observations from inspections with investment services providers

The Malta Financial Services Authority (“MFSA”) has published a Dear CEO letter addressed to all chief executive officers and compliance officers of ‘persons professionally arranging or executing transactions’, particularly to investment services providers. The letters sets out the MFSA’s main findings following numerous market abuse-related supervisory inspections which it carried out with numerous Maltese investment services providers – primarily member firms of the Malta Stock Exchange – between 2020 and 2024.The letter makes for some interesting reading as it gives the MFSA’s perspective on the industry’s compliance with MAR generally.

The letter also includes some recommended best practice to help investment services providers adhere to their obligations under the Market Abuse Regulation (“MAR”), as well as a number of poor practices which the MFSA observed in the market, all of which are summarised below.

General observations

The tone of the letter is overall quite positive since it opens by saying that the “very large majority” of investment services providers had at least undertaken efforts to implement appropriate systems and procedures to allow them to fulfil their obligations under MAR. That said, the MFSA also admits that there is “significant room for improvement” when it comes to general MAR compliance, even though the “general level of compliance had markedly improved” since the first set of inspections which the MFSA carried out between 2018 and 2020.

In our view, a number of shortcomings identified by the MFSA are, and can be, easily remedied by a minor investment of time and effort by investment services providers. For instance, the MFSA places significant emphasis on a lack of training, both in respect of market soundings as well as market monitoring, which can be easily rectified with a well thought out and planned training programme.

Best and poor practices

As mentioned, the letter sets out recommended best practices, as well as examples of poor practices observed by the MFSA. We’ve set out a summary of these in the table annexed to the article and have split them according to the key areas which the MFSA focused on in the letter, namely: (1) market soundings, (2) market monitoring, and (3) investment recommendations. Kindly note that the good practices do not necessarily correspond to the poor practices set out in the same row and each column should therefore be read separately.

Next steps

Given that MAR has been in force since 2016 and taking into consideration the various MFSA circulars and supervisory interactions held with market participants, the MFSA has made it clear that it expects all investment services providers to comply with MAR in full.

From experience, we’ve seen the MFSA ramp up its oversight of MAR — with more supervisory inspections and a notable rise in enforcement actions, including significant fines. Given the MFSA’s own assessment that there’s “significant room for improvement” in overall MAR compliance, we expect this intensified scrutiny to continue — or even escalate. Investment services providers should be ready for sustained regulatory attention in this area.

To this end, entities which fall in scope of MAR would be well advised to review their existing policy frameworks and operational arrangements to ensure that they are in full compliance with MAR and regulatory expectations.

(Click the table below to view the complete version)

Ganado’s Capital Markets team is well-versed in all market abuse-related matters and will be pleased to assist any issuer or potential issuer should the need arise.