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MFSA New Rules Regarding Malta Forex Companies
The Malta Financial Services Authority (MFSA) has issued new guidelines governing the license rules for companies, seeking to operate in Forex, under the Investment Services Act. The guidelines, which have retrospective effect as of 20th October 2014, have significantly tightened the statutory criteria for applicants seeking licensing in the Forex Industry – both as a white label operator or PAMM as well as a market maker.
Prior to the issuance of the aforesaid notification, white label licence holders (acting as a white label to licensed prime brokers) were obliged to retain a minimum own funds requirement of EUR 125,000. Under the new rules, however, there has been a marked convergence between white label licence holders and margin makers, with the two licences now sharing several common ground. The new requirements may be succinctly summarised as follows:
- Minimum own funds for applicants wishing to act as white label FX providers has been increased to EUR 730,000 or equivalent in any other currency;
- The shareholding structure shall, irrespective of the licence applied for, require the involvement of at least one entity holding an equity participating in the prospective licence holder, which is licensed or regulated in a reputable jurisdiction;
- More onerous local presence requirements – with the avoidance of over-concentration of powers into one / two individuals
The use of expert advisors (FX Bots) is not precluded – but clear policies governing their use must be provided to clients.
Irrespective of the licence applied for (white label forex / PAMM or market maker) the licence holder is expected to retain real time access to and control over all transaction data. The MFSA shall expect that the adequacy of any proprietary online trading platform (whereby bespokely developed or otherwise) has been independently certified by an IT Auditor, and that such certification is renewed on an annual basis. However, the use of online trading platforms (e.g. MetaTrader which are industry benchmarks) shall be considered more favourably by the MFSA.
