Introducers under Maltese Financial Services Law

Dr Anton John Mifsud | 27 Apr 2012

Introducers under Maltese Financial Services Law

Introducers in Malta: Introduction

An Introducer is defined in the Glossary published by the MFSA as a person who enters into a written arrangement with a License Holder, whereby such person introduces a potential customer to the License Holder, as a consequence of which the License Holder may remunerate the Introducer by means of commission.[1] The Licence Holder is obliged to disclose of the names and addresses of the Introducers to the MFSA

Regulation of Maltese Introducers

An Introducer does not need to acquire a license from the MFSA in order to be able to operate as such. However, a process will still need to be undertaken which makes it possible for the MFSA to conduct its due diligence process on the applicant and eventually issue him with a ‘recognition’. [2]  Given that the recognition process on the part of the MFSA is less onerous than a true and proper licensing process, there are a number of restrictions that are applicable to the activities that may be carried out by an Introducer.

Introducers may only act as such for one License Holder, and thus their services are deemed to be exclusive. Moreover. the Introducer cannot not hold itself out to the general public as acting as Introducer and cannot actively promote its “introducing services”.

Activities of Malta Introducers

It is very important that under no circumstances may the Introducer give investment advice, promote a certain product or undertake any Investment Services licensable activity. This because such activities are licensable in their own right and thus, can only be carried out by licensed entities.

The Introducer is not permitted to pass on any documentation or to promote any particular product or service on behalf of the License Holder, to the client. Moreover, an Introducer cannot assist the client in the completion of any relevant documentation and is not permitted to receive any funds from clients or give any commitments on behalf of the License Holder.

The Introducer’s involvement is thus limited to arranging a meeting between the License Holder and the customer. However, the Introducer can also attend the meeting between the client and the License Holder if he is required to do so. In any case, the Introducer is bound by confidentiality as to the means and resources of the customer if it is made aware of them.

The relevant Standard License Conditions applicable to Introducers hold that the License Holder is responsible for “Know Your Customer” checks and cannot rely on the Introducer’s opinion. Moreover, the charges which the client of the License Holder incurs should not differ irrespective of whether the client approached the License Holder directly or else through an Introducer. In order to allow the MFSA to retain a measure of supervisory control over this obligation, it is prescribed that a record is to be retained for inspection by the MFSA’s Compliance Officers of commissions paid to each Introducer.

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Dr Priscilla Mifsud Parker

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+356 22056422

Mr Steve Muscat Azzopardi

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+356 22056438

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