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SECTOR SPECIFIC REGULATORY UPDATES
1.0 INVESTMENT SERVICES
1.1 Investment Services Act and Banking Act (MiFID and MiFIR Administrative Penalties, Measures and Investigatory Powers)(Amendment) Regulations 2025
On the 3rd of October 2025, Legal Notice 216 of 2025 was published in the Government Gazette with the aim of transposing Article 1(12)(b) of Directive (EU) 2024/790, which updates the European framework governing markets in financial instruments. The objective of these changes is to strengthen supervisory powers and expand the list of MiFIR provisions subject to administrative sanctions and enforcement action by the Malta Financial Services Authority (MFSA).
The amended regulations broaden the scope of MiFIR provisions under which breaches may give rise to administrative penalties or other supervisory measures. These include provisions on pre- and post–trade transparency requirements for a wide range of instruments such as shares, bonds, derivatives, structured finance products, emission allowances, and exchange-traded funds. They also cover obligations related to deferred publication, the provision of and quality of market data, synchronisation of business clocks, record-keeping, transaction reporting, and data transmission to consolidated tape providers (CTPs).
The amendments also address systematic internalisers' publication of firm quotes, execution of client orders, post-trade disclosure by investment firms, and non-discriminatory access to trading venues and CCPs. Importantly, Article 39a which prohibits the receipt of payment for order flow has been expressly included in the list of enforceable provisions, reflecting the EU's current emphasis on mitigating conflicts of interest.
Through this Legal Notice, the MFSA's ability to investigate, sanction, and impose administrative measures for MiFIR breaches has been significantly enhanced, the expanded list of enforceable provisions ensures that investment firms, trading venues, and data reporting service providers are subject to consistent regulatory oversight across the full spectrum of their MiFID and MiFIR obligations.
Although this Legal Notice does not directly amend the regulatory framework for fund marketing or distribution, it has indirect implications for MiFID investment firms engaged in fund distribution, order execution, or investment advice. Any firm that executes fund-related transactions or reports under MiFIR must ensure that its transparency and data reporting obligations are fully met, as breaches of these provisions may now lead to administrative penalties. Additionally, the prohibition on payment for order flow has implications for fund distributors and platforms that route client orders for execution, as such arrangements may now be more closely scrutinised by the MFSA. Firms should therefore review their distribution frameworks and execution arrangements to ensure continued compliance under the amended framework.
1.2 Position Limits and Position Management Controls in Commodity Derivatives and Reporting (Amendment) Regulations, 2025
On the 3rd of October 2025, Legal Notice 219 of 2025 was published in the Government Gazette with the aim of amending the Position Limits and Position Management Controls in Commodity Derivatives and Reporting Regulations. The new regulations implement Articles 1(10) and 1(11)(a) -(c) of Directive (EU) 2024/790, which amends MiFID II in relation to commodity derivatives and derivatives of emission allowances. The amendments refine the EU regime on position limits, position management controls, and reporting obligations, with a view to increasing market transparency and improving oversight of derivative exposures.
The amendments extend the regulatory framework to cover derivatives of emission allowances in addition to commodity derivatives. Investment firms and market operators are now required to apply position management controls across both categories of instruments. These controls include the power to obtain detailed information on the size, purpose and beneficial ownership of positions, as well as data on economically equivalent OTC contracts and related exposures.
Reporting obligations have been enhanced. Trading venues must publish weekly position reports, including for derivatives of emission allowances, showing aggregate positions by category of participant and the percentage of total open interest. Investment firms trading outside a trading venue are required to provide daily reports to the competent authority setting out their own and their clients' positions through to the end client. These reports must also be communicated to the European Securities and Markets Authority (ESMA).
The amendments further extend the application of the regulations to certain entities that were previously exempt from licensing under the Investment Services Act (Exemption) Regulations. As a result, some firms that were formerly outside the regulatory perimeter may now fall within scope for the purposes of position limits, management controls and reporting requirements.
1.3 Various Amendments to the Investment Services Rulebooks
On the 7th of October 2025, the MFSA issued a circular informing the industry of the publication of the amendments carried out to the Investment Services Rulebooks as outlined in Annex A attached to the Circular. These changes primarily affect the Investment Services Rules for Investment Services Providers, as well as the glossaries to the Investment Services Rules for Alternative Investment Funds (AIFs) and Retail Collective Investment Schemes (RCIS).
Rule R8-8.2.1 of the Investment Services Rules for Investment Service Providers – Part A: The Application Process, which governs the process for surrendering an Investment Services Licence, has been expanded and refined to introduce additional confirmations. For Licence Holders qualifying as MiFID Firms under part BI, Rule R1-1.11.1, a further confirmation is now required stating that there are no pending ex-ante contributions to national resolution financing arrangements. The amendments also require Licence Holders to notify the MFSA of any withdrawal of passporting rights or branch establishments by copying in mifidnotifications@mfsa.mt. The rule reiterates that the original licence must be returned to the MFSA prior to surrender and clarifies that the list of required confirmations is not exhaustive, placing responsibility on the Licence Holder to ensure that all obligations have been fully complied with before surrendering the licence.
Moreover, within the glossaries to the Investment Services Rules for AIFs and RCIS, the definition of "Special Purpose Vehicle" (SPV) was included. The definition clarifies that an SPV is a vehicle established by an AIF as part of its investment strategy for the purpose of achieving its investment objectives. It must be owned or controlled through a majority shareholding of voting shares either directly or indirectly by the Scheme and having the majority of its directors in common with the Scheme which set it up. This ensures consistency and regulatory alignment between the AIF and RCIS frameworks in relation to SPV structures.
1.4 Consultation on Amendments to the Investor Compensation Scheme Regulations Issued Under the Investment Services Act
On the 3rd of December 2025, the Malta Financial Services Authority ("the MFSA") issued a Consultation Document on the proposed amendments to the Investor Compensation Scheme Regulations under the Investment Services Act. The consultation closed on the 16th of January 2026 and seeks to revise the regulatory framework governing scheme participation, funding, and compensation mechanisms.
The aim of the amendments is to strengthen the financial sustainability of the Scheme and align it more closely with the Investor Compensation Scheme (Directive 97/9/EC). The proposed amendments introduce a revised contribution framework for the Investor Compensation Scheme, built around a combination of fixed contributions, variable contributions calculated by reference to investment services related revenue, and the establishment of an Emergency Drawdown Reserve to ensure that funds are available in the event of a compensation payout. In addition, the Scheme would be empowered to impose extraordinary contributions where necessary, providing further financial backstop mechanisms to safeguard its ability to meet compensation obligations. Alongside this, a new Management Expenses Contribution is proposed to cover the operational and administrative costs of the Scheme, clearly separating these expenses from funds held for compensation purposes.
The consultation also seeks to align participation requirements more closely with the revised EU Investment Firms Regulation and Investment Firms Directive, reflecting the updated categorisation of Class 1, Class 2, and Class 3 investment firms. Fund managers authorised to provide ancillary MiFID services to retail clients would fall within the scope of mandatory participation, while firms servicing exclusively nonretail clients would generally remain outside the compulsory contribution regime, subject to the option to participate voluntarily. This alignment is intended to ensure consistency between prudential classification and compensation scheme obligations.
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