The Maltese legislator’s recent publication of five amending legal notices on 29 July 2025 marks a continuous alignment of the Investment Services Act (Chapter 370 of the Laws of Malta) with the European Union’s prudential regime for investment firms.
Each of the five legal notices (L.N.) addresses a discrete lacuna that had emerged once the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD) began to apply across the Union earlier this decade.
Legal Notice 152 of 2025 amends Malta’s rules on supervisory consolidation under the IFD, refining the criteria by which the Malta Financial Services Authority (MFSA) is designated as consolidating supervisor and clarifying the use of the group capital test where full balance‑sheet consolidation would be disproportionate (see L.N. 152 of 2025, reg 3). The changes ensure that a Maltese parent investment holding company heading an investment‑firm group can be supervised on a consolidated basis without importing the banking rules that the Capital Requirements Directive (CRD) reserves for systemically important institutions.
Legal Notice 154 of 2025 complements that reform by revising the Capital Requirements Directive consolidation regulations so that only those investment firms which, by virtue of their size or their membership of a banking group, fall within CRD retain the status of credit institution for prudential purposes (see L.N. 154 of 2025, reg 2). The amendment replaces MiFID-transposed cross‑references with IFD references, thereby avoiding the double counting of capital and confirming that smaller Class 2 and Class 3 investment firms are excluded from the CRD perimeter once the €15 billion asset threshold ceases to be met. The combined effect of Legal Notices 152 and 154 is to establish a clean boundary between the two capital consolidation regimes and to embed the proportionality principle upon which the IFD and IFR are built.
Legal Notice 155 of 2025 concerns third‑country market access. MiFID II, as amended by Article 64 of the IFD, imposes fresh transparency and reporting obligations on branches of non‑EU investment firms, together with stricter limits on the so‑called own‑initiative or reverse‑solicitation exemption. The Maltese provisions governing branches and service provision by third‑country firms now incorporate those Union requirements, obliging branches licensed in Malta to share margin‑model and risk data with the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) and to cooperate with other host supervisors (see L.N. 155 of 2025, amendment to reg 7A). In practice, this means that if, for example, a group is headquartered in the United Kingdom or the United States the revised regime requires reconciliating Maltese branch reporting with any obligations owed to other Union regulators, raising the compliance threshold for branch-based cross‑border activity.
Legal Notice 156 of 2025 revises the investigatory powers that the IFD requires Member States to confer upon their competent authorities. The structure of the Maltese Administrative Penalties Regulations had mirrored earlier banking provisions but certain drafting choices left penalties for legal persons capped below the IFD’s minimum standard. By substituting internal cross‑references and extending the fining power to all breaches listed in regulation 5, the amendment guarantees that administrative fines can reach the higher of five million euros or ten per cent of annual turnover for serious infringements, backed by a public statement unless publication would jeopardise market stability (see L.N. 156 of 2025, regs 2‑3). The MFSA is also given explicit authority to combine pecuniary penalties with supervisory measures such as director removal, suspension of activities or withdrawal of authorisation. These powers match those available under the Capital Requirements Directive and eliminate any enforcement asymmetry between banks and investment firms.
Legal Notice 157 of 2025 completes the reform by updating the supervisory review and evaluation process introduced earlier. The amendment integrates the latest EBA methodology, adjusts the numbering of the underlying IFD articles and revises Schedule I so that the MFSA may impose additional own‑funds or liquidity requirements whenever an investment firm’s internal capital assessment fails to capture material risks (see L.N. 157 of 2025, reg 7 and Schedule I). The measure also confirms that references to the Investment Firms Regulation replace earlier references to the Investment Firms Rules, thereby ensuring that breaches of the directly applicable Regulation fall within the domestic enforcement net.
Viewed as a single legislative package, the July 2025 amendments achieve three related objectives. First, they provide legal certainty on the scope of prudential consolidation, reserving CRD consolidation for the largest firms or mixed groups while applying the IFD group‑capital framework to the great majority of Maltese investment‑firm groups. Secondly, they strengthen the gatekeeping regime for third‑country access in order to protect market participants and align national law with the post‑Brexit focus on equivalence and transparency. Thirdly, they sharpen the enforcement architecture by increasing maximum fines, harmonising disclosure duties and modernising the supervisory review process. From a practitioner’s perspective these reforms require immediate attention to group‑structure mapping, cross‑border reporting lines and ICAAP governance. They also signal a more assertive supervisory posture: the MFSA now possesses a full suite of investigative and remedial tools and has a clear European mandate to deploy them where prudential or conduct risks justify intervention.
The Investment Services Act (Chapter 370 of the Laws of Malta) thus now stands on equal footing with its banking counterpart and fully reflects the Union’s shift to a differentiated, yet risk‑sensitive, prudential regime for investment firms.
This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Mario Mizzi.