Financial Services & Fintech

Financial Services Law 720X242

The scope behind our Financial Services & Fintech Practice is to assist and advise our international clients on a plethora of issues, including investment funds and fund administration, custodian services, listing on the capital markets and Prospects, PSPs and EMIs, credit and financial institutions law, as well as various Fintech related services. While continuing to offer the highest level of service in more traditional fields of financial services law, our Practice has branched into Fintech in past years and was one of the pioneers in Malta who sought to assist clients and entrepreneurs seeking to set up shop in Malta. Malta now vaunts the world’s first fully-comprehensive legal framework for blockchain technology and cryptocurrency which has made the island one of the top locations in the world for Fintech businesses to relocate.

Malta Financial Services Law

In the past 20 years, Malta has worked tirelessly to become the jurisdiction of choice for renowned financial businesses that seek to establish themselves in a secure and well-regulated EU domicile. Regulated by the Malta Financial Services Authority (MFSA), the sole regulator for Financial Services in Malta, Malta’s financial services industry has grown thanks to the regulator’s open-door policy which allows interested businesses to conduct informal meetings to determine whether Malta would be the ideal jurisdiction to set up shop. Malta’s body of financial services regulations transposes all EU directives, and includes, among others: the Banking Act, the Investment Services Act, the Financial Institutions Act and the Insurance Intermediaries Act.

Malta Fintech Law – the first of its kind globally 

The Maltese government and the regulator have recently embraced the potential of blockchain and cryptocurrencies as disruptive technologies which could alter the financial services sector as we know it. To this extent, Malta has committed itself to become a true Blockchain Island and is one of the first countries in the world to have drafted in-depth legislation which shall regulate cryptocurrencies, the issuing of ICOs, the setting up of Cryptocurrency Exchanges and service providers of Distributed Ledger Technology (‘DLT’). The aim of the legislator was to give such companies a legal framework within which they can ensure they are operating in a manner that is fully compliant with the state’s regulations while maintaining a flexible approach that does not stifle innovation. 

The Malta Digital Innovation Authority Act & Innovative Technology Arrangements and Services Act 

The body of laws regulating Fintech is made up of three acts, namely the Malta Digital Innovation Authority (‘MDIA’) Act which envisages the creation of the MDIA which shall be responsible for the certification of Technology Arrangements and the registration of Technology Service Providers as provided for in the Innovative Technology Arrangements and Services Act. 

The Virtual Financial Assets Act (VFAA) 

The VFAA regulates the issuing of initial coin offerings (‘ICOs’) and provides detailed instructions on how a white paper is to be drafted. The act also distinguishes between different categories of DLT assets in order to determine which law shall govern the asset, or if it will be exempt from all laws and creates the Financial Instruments Test to facilitate the classification of DLT assets. 

Cryptocurrency Funds (Professional Investor Funds (‘PIFs’) Investing in Crypto)

The MFSA has also issued a regulatory framework whereby qualified investors have the option to invest in cryptocurrencies by adopting the PIF Regime to cryptocurrency investments. For more information, please refer to our factsheet. 

Our Fintech Practice is made up of individuals who are passionate about the possibility of fusing traditional notions with bespoke technologies. We have already assisted individuals and entities seeking to set up shop in a jurisdiction that has embraced cryptocurrencies and blockchain technology and continue to assist and guide clients seeking to:

•    Set up an ICO in Malta
•    Set up a Cryptocurrency Exchange in Malta
•    Set up a Cryptocurrency Fund in Malta

Cyprus Financial Services Law

The Cyprus Securities and Exchange Commission (CySEC) is the Cypriot financial regulatory agency of Cyprus which is responsible for the supervision and control of the Cyprus Stock Exchange and transactions carried out therein. It also supervises and controls Licensed Investment Services Companies, Collective investment funds and fund management companies and consultants. It is the entity which grants licenses to investment firms, brokerage firms and brokers and is also empowered with the ability to impose sanctions and disciplinary penalties for deviations from Stock Market legislation. 

Cyprus Fintech Law

There are no plans yet for a Cypriot legal framework regulating blockchain and cryptocurrencies, however the Central Bank of Cyprus has noted that the use of cryptocurrencies is not illegal, but neither is it subject to control or regulation. Any work with crypto assets must be conducted in accordance with rules of general civil law. 

Currently, licensing for ICOs, mining and crypto-trading is not provided but this may change in the future when more legal guidance is available from the relevant authorities.

Investment Funds 

Malta and Cyprus are now considered as fund domiciles of choice for investors and fund managers seeking a cost-effective EU jurisdiction with an approachable and commercially-aware regulator. Our Financial Services team assists clients with the setting up of funds that suits their aims and investment strategy. Both countries offer a variety of fund structures for various types of investors, including:

•    The Malta Professional Investor Fund (PIF) – The PIF is Malta’s most popular hedge fund and is an efficient and flexible vehicle which allows investors to conduct highly innovative or unorthodox investment strategies. Indeed, the PIF can even be used to invest in cryptocurrencies. This fund is open to qualified investors who can invest a minimum of €100,000. PIFs can now also invest in cryptocurrencies.
•    The Alternative Investor Fund (AIF) – The AIF is available to investors following the transposition of the Alternative Investment Fund Directive. AIFs are generally controlled by less stringent requirements than UCITS which are targeted at retail investors and can be considered as collective investment undertakings which raise capital from several investors with a view of investing it in accordance with a defined investment strategy. AIFs benefit from EU passporting, thus can be offered to investors in any EU member state. 
•    Notified Alterative Investment Funds (NAIFs) – NAIFs are a Maltese product which aim at removing the double burden faced by fund managers and funds itself which are both subject to prudential regulation. The NAIF regime allows the Alternative Investment Fund Manager to assume full responsibility for the NAIF and for the fulfilment of its obligation. After notification of the AIF which falls within the remit of this regime, access to the market can be gained within just 10 days.
•    UCITS funds – UCITS funds are regulated under the UCITS Directive and are liquid and transparent retail products which are able to be marketed and distributed freely across the EU.
•    Alternative Investment Fund – Limited Number of Persons (AIF LNP) – The AIF LNP is the most common form for a fund in Cyprus. The AIF LNP is targeted towards a maximum of 75 unit-holders (investors) and must be marketed only to professional and/or well- informed investors who can contribute €125,000. 

Investment Services

With long standing experience in the field of investment services, our Financial Services specialists are fully geared towards helping clients attain an investment services license in accordance with MiFID as well as the local Investment Services Act. Our service spans pre-licensing, licensing and post-licensing compliance, thus providing a one stop shop for MiFID firms.

Credit Institutions, Financial Institutions & Recognised Financial Entities 

Through our Credit Institutions Law , Financial Institutions and Recognised Financial Entitles practice, Chetcuti Cauchi advises banks and financial institutions such as Electronic Money Institutions (EMIs) and Payment Services Providers (PSPs) and recognised financial entities on regulatory, licensing, operational and traditional substantive law issues. The firm also provides expertise in the legal and regulatory aspects of online delivery of financial products and services, particularly internet banking and online payment systems.

Our Practice has ample experience in advising such businesses seeking to set up shop in Malta. We work closely with out Corporate department in this regard and assist the client in order to set up a Malta or Cyprus company and to attain the relevant licensing. Our Financial Services team will also assist clients post-licensing or post-acquisition to ensure compliance at all times.

Our Practice also assists Recognised Financial Entities which are entities which do not need a licence to operate, but only a recognition from the Maltese regulator, the MFSA. Two of these entities are Fund Administrators, who carry out activities in support of the actual process of running a collective investment scheme, and Recognised Incorporated Cell Companies (ICCs) which are a modern and flexible alternative to insurance businesses. Our specialists have a longstanding experience in communicating with the regulator, thus we will make sure our clients’ recognised financial entity will be fully compliant at all times.

Capital Markets 

Corporations seeking to list on the Malta Stock Exchange (MSE) will need to first consult the Listing Authority within the MFSA in order to attain admissibility to list and later on list on one of the four capital markets on the MSE. Our Financial Services practice is fully geared to assist businesses seeking to raise finance, be it large corporations or small to medium size enterprises. The available markets are the following:

•    Malta Official Listing – this is Malta’s main capital market and serves as an ideal international platform for stocks due to the possibility of EU passporting. The minimum share capital needed to list on this market is €1 million.
•    Malta Alternative Companies List – ideal for smaller companies and investors who have the potential for growth but do not fulfil the rigorous requirements of the MSE Official Listing. Such companies will also benefit from EU passporting but only require a minimum share capital of €50,000.
•    The Institutional Financial Securities Market - this market has been specifically designed for institutional investors. A minimum denomination of financial instruments quoted on the IFSM is €100,000. 
•    Prospects SME Listing – this is an EU compliant multi-lateral trading facility tailored for small to medium sized businesses which would not be able to satisfy the requirements of the above lists but show potential for growth. Prospects offers cost-effective and facilitated access to capital, allowing small enterprises to raise up to €5 million with only €46,588 needed as minimum share capital. 

The Cyprus Stock Exchange, which collaborates closely with the Athens Stock Exchange allows local and foreign companies to list in Cyprus as well. Investors have the option to:

•    List on the Cyprus Stock Exchange – this option is available to both local and foreign companies in Cyprus, provided that a number of conditions are fulfilled. The issuer will need to ensure that at least 25% of the company’s share capital has been issued for the general public. 
•    List on the Cypriot Emerging Companies Market (ECM) – this is a multilateral trading facility which provides a simplified regulatory regime which is specifically designed for small and emerging companies. It is aimed at private companies seeking funding and easy access to the secondary market, investors seeking a new type of investment and public companies seeking to avoid the higher costs of regulated markets. Our Financial Services lawyers are able to fulfil the role of Nominated Advisor, or NOMAD which would see us facilitating your company’s admission to the ECM and ensuring compliance with rules before and after admission to the ECM. 

Insurance Law

Our Insurance practice provides project management solutions to clients who choose Malta or Cyprus as their Centre, HQ or branch of their insurance activity.  We also offer legal advisory services related to insurers, reinsurers, insurance agents, insurance brokers, captive insurance, the exercise of EU passporting rights, the re-domiciliation of insurance companies, various legal structures that Malta and Cyprus offer in the field of insurance. We also assist insurance managers and tied insurance intermediaries which seek authorisation from the regulator. 

Structured Finance 

Our Financial Services and Fintech Lawyers have garnered significant on-the-ground experience in assisting clients seeking structured finance solutions be it through acquisition and leveraged finance, asset-based lending, asset finance, capital markets, corporate lending, derivatives, public finance, real estate finance, structured trade and commodity finance, project finance, Islamic investment and financial restructuring and insolvency. 

Securitisation services are also offered by Financial Services team whose seasoned members are able to assist clients in even the most complex transactions. Our team will communicate with the regulator to obtain a license if the securitisation vehicle is a public one or notify the regulator if the vehicle is a private one. We assist clients with the drafting and compiling of the necessary offering documentation. Our advisors will assist clients in identifying the best structure which suits their needs, such as the setting up of Private Securitisation Cell Companies which may be used for all kinds of securitisation transactions.

Crowdfunding is another increasingly popular method of raising finance. Our lawyers will be able to walk clients through the legal maze surrounding this new method of raising finance which remains vastly unregulated. 

Trustees and Company Service Providers 

Our Financial Services a& Fintech team has also garnered longstanding experience in assisting Trustees and Company Service Providers seeking to set up in Malta or Cyprus. We assist clients by liaising with the regulator to obtain the relevant license. To this extent, we assist clients with the drafting, collection and competition of all necessary documentation, and also offer compliance services post-licensing.

Forex

Our Financial Services specialists also assists individuals seeking to acquire or hold foreign exchange (forex) for investment purposes attain a license from the Maltese or Cypriot legislator. Our advisors would be able to walk you through the relevant category license that would suit you and your business needs.  Our Forex practice is particularly active in Cyprus which has become one of the main hubs for the setting up of Forex Companies owing to the country’s attractive tax regime and reputation as a financial centre. Forex companies are considered as investment firms and thus are licensable and regulated by the CySEC. Our Cyprus Forex Practice assists clients seeking to set up and understand the requirements of setting up a forex company, assists them with the process to apply for a license from the CySEC and drafts, collects and compiles all the needed documentation o be submitted, including the business plan and provides other ancillary services to this extent. 

Ancillary services 

•    We work closely with our Corporate department to set up the most advantageous company structures which suits our clients’ needs, also taking into account tax considerations depending on the client’s situation. We can also assist clients with the winding down of their businesses in contemplation of redomiciliation to Malta or Cyprus.
•    We also work closely with our Real estate department to locate office space for companies and provide registered head office services for businesses which do not require a presence in Malta or Cyprus.
•    Our Tax department is also closely involved and assists us to help our clients find the most cost-effective option in terms of tax optimisation. 
•    Our long-standing, on the ground experience also allows us to aid our clients in finding the ideal candidates for their company, which includes executive and non-executive directors with prior experience in the relevant field, company secretaries, compliance officers or Money Laundering Reporting Officers, third party external auditors etc. 

Our Financial Services & Fintech Practice 

Our Financial Services Practice brings together a group of lawyers, accountants, and advisors hailing from different backgrounds which allows us to provide results-driven commercial advice to our clients. Our team works closely with other departments in the firm, including our banking, tax, insurance, corporate and real estate practices to provide our clients with a one-stop-shop solution that is tailored to their needs. We handpick professionals of an unrivalled breadth and depth of experience and work with a broad range of financial services institutions, credit institutions, insurance companies, funds and investment services companies to provide the best advice and assistance possible to our esteemed clients.

If you are interested in any of the services which we offer, we welcome you to contact our financial services experts at fsu@cclex.com. 



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Key Contacts

Dr Jean-Philippe Chetcuti

Global Managing Partner & Founder

+356 22056411

Mr Colin B German

Chief Executive Officer

+356 22056442

Dr Priscilla Mifsud Parker

Senior Partner, Tax & Corporate

+356 22056422

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