In late 2012, a Consultation Document was prepared by the Malta Financial Services Authority (hereinafter the ‘Authority’) which included proposals to amend the Malta Trust and Trustees Act, Chapter 331 of the laws of Malta (hereinafter the ‘Act’). One of the areas which the Authority addressed is the regulation of trustees in Malta and significant changes were proposed in this area which shall be discussed below.
Trusteeship only available to Companies
Article 43 of the Act currently stipulates that any person who is resident or operating in Malta and who receives property on trust or who accepts to act as a trustee, receives remuneration for so acting, does so on a regular basis and holds out to be a trustee requires authorisation by the Authority to act as a trustee. The Authority has proposed that this clause be limited solely to companies, thereby excluding the ability of individuals to act as a trustee.
The Authority has further suggested that companies which apply for a trustee licence should be required to have a minimum of twenty five thousand Euros (€25,000) paid up share capital which should be maintained through the duration of the company. Defining the term ‘qualifying shareholding’ as any director or indirect shareholding in a company which represents ten per cent or more of the share capital or of the voting rights or which makes it possible to exercise a significant influence of the management of the company, the Authority proposed that any person who has a qualifying shareholding in the company should be approved by it as being a fit and proper person.
Persons Exempt from Acquiring a Licence
The Act provides for certain persons to be exempt from applying for a licence with the Authority, to act as trustee in carrying out activities, where such persons are already licenced under other Maltese legislation, including: (i) persons in possession of a valid licence issued in terms of the Banking Act, (ii) persons licenced in terms of the Investment Services Act to hold clients’ monies or assets, (iii) persons authorised in terms of the Insurance Business Act or enrolled in the Brokers List under the Insurance Intermediaries Act to hold clients’ monies or asses; (iv) persons with an equivalent licence to (i) to (iii) issued by the relevant regulatory authority in another approved jurisdiction or (v) persons in possession of an authorisation to operate a central securities depositary in terms of the Financial Markets Act, (vi) persons approved by the Authority for transport in Malta to act as a trustee of a shipping trust or a shipping foundation as defined in Article 84Z of the Merchant Shipping Act and (vii) persons registered in terms of the Special Funds (Regulation) Act to act as a trustee to retirement schemes. The Authority has put forward a proposal that such persons as defined above shall only be exempt if the provision of trustee services is incidental and ancillary to the main activities for which they are licenced and therefore, any persons intending to provide trustee services as one of its main activities shall require the Authority’s authorisation.
Obligation to Keep Records for Ten Years
Persons in possession of a warrant to act as an advocate, notary public, legal procurator or certified public accountant who act as trustee as an incidental or ancillary service in their profession and who does not hold himself out as a trustee to the public are obliged by the Act to keep records of clients’ assets for a period of not less than five years. The Authority has proposed that such period be extended to a period of not less than ten years from the date of termination of the trust.
Acting as Mandatary for another Person
Any person may act as a mandatory for another person without the obligation of applying for authorisation from the Authority, irrespective of the extent of his activities, whether remuneration is payable or whether such person holds himself out as providing such services. The Authority has proposed that such person be defined as an individual or a company resident or operating in or from Malta whereby such person shall be entitled to hold securities and/or immovable property. In the event that a company wishes to act as a mandatory, the Authority has further proposed that such company should request authorisation from the Authority and such would only be given if the objects of the company include acting as a mandatary and carrying on activities which are ancillary or incidental thereto, and does not include objects which are not compatible with the services of a mandatary. Moreover, the activities of such company should be compatible and connected with the services of a mandatary, the directors of the company should be at least three in number and should be approved persons by the Authority, the company should have a minimum share capital of twenty five thousand Euros (€25,000), fully paid up which should be maintained throughout the duration of the company, the company should have adequate systems for maintaining proper records of the identity and residence of the ultimate beneficial owners , of any transactions relating to the securities and/or immovable property subject to the mandate and of compliance with the applicable law, every person who has a qualifying shareholding, as defined above, should be authorised by the Authority as being a fit and proper person, the name of the company should not be inconsistent with its activity as mandatary and where the company is not registered in Malta, such company should be incorporated in an approved jurisdiction in terms of the Act.
Duties of Auditors
The Authority has proposed the introduction of a new provision to the Act relating to the duties that auditors of a trustee authorised in terms of the Act should maintain. The new provision stipulates that auditors shall be obliged to report immediately to the Authority (i) if he becomes aware, in his capacity as auditor, of any fact or decision which may lead to a serious qualification or refusal of the auditor’s report on the accounts of the trustee, or (ii) if it constitutes or is likely to constitute a material breach of the legal or regulatory requirements applicable to trustees under the Act; (iii) if it gravely impairs the ability of the trustee to continue as a going concern or (iv) if it relates to any other matter which may be prescribed, including matters relating to persons other than the trustee. By reporting the matter to the Authority, the auditor would not have contravened any of his duties, including that relating to professional secrecy, providing that such report would have been done in good faith.
The proposed amendments seek to regulate further the growing popularity of trustees in Malta, an area which has significantly enabled our financial services sector to develop. One of the most noteworthy changes proposed is the elimination of the ability of individuals to act as trustees, securing this ability solely to companies. However, given that the above is based on a series of proposals made by the Authority on the matter, one would have to follow the situation closely to see whether such proposals will or will not be eventually be part of our Maltese law on trusts.