L.S. 370.05 Regolamenti dwar il-Kontroll ta' Assi skond l-Att dwar Servizzi ta' Investiment

(1)The title of these regulations is the Investment Services Act (Control of Assets) Regulations. Citation and scope. Amended by: L.N. 113 of 2016.

(2)These regulations shall not apply to custodians of collective investment schemes, which shall be regulated by the Investment Services Act (Custodians of Collective Investment Schemes) Regulations. Amended by: L.N. 398 of 2017. S.L. 370.32

(3)The objective of these regulations is to implement the relevant provisions of Articles 1

(3)and

(4)and Articles 2 to 8 of the Commission Delegated Directive (EU) 2017/593 of 7 April 201 6 supp lementing Directive 20 14/6 5/E U of the Euro pean Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance, obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits. Added by: L.N. 398 of 2017. 2.

(1)Any reference in these regulations to the Act is a reference to the Investment Services Act, and subject to the provisions of subregulation

(2), the provisions of article 2 of the said Act shall also apply to these regulations. Interpretation. Amended by: L.N. 496 of 2004; L.N. 400 of 2005; L.N. 425 of 2013’ L.N. 113 of 2016; L.N. 215 of 2016. Cap. 370.

(2)In these regulations, unless the context otherwise requires - "the Act" means the Investment Services Act; "assets" means movables and immovable property of any kind; "Commission Delegated Directive" means Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or nonmonetary benefits, as amended from time to time; "the competent authority" means the Malta Financial Services Authority established by the Malta Financial Services Authority Act; "control of assets" means the holding or control of assets belonging to, or on behalf of a customer, by a person hereinafter referred to as the subject person, acting in the course of rendering an investment service under the Act, and includes custody of assets; Added by: L.N. 398 of

1. Added by: L.N. 398 of
2. Cap.
3. 2 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) "custodian" means a custodian qualified in accordance with regulation 14; "customer" means any person whose assets are held under the control of a subject person; Added by: L.N. 398 of
4. "Directive 2009/65/EC" means Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), as amended from time to time and includes any implementing measures that have been or may be issued thereunder; Added by: L.N. 398 of
5. "Directive 2013/36/EU" means Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, as amended from time to time and includes any implementing measures that have been or may be issued thereunder; "Investment Services Rules" refers to Rules issued by the competent authority under various articles of the Act; Added by: L.N. 398 of
6. "MiFID" means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, as amended from time to time, and includes any implementing measures that have been or may be issued thereunder; Added by: L.N. 398 of
7. "professional client" means a client meeting the criteria laid down in Annex II of MiFID; Added by: L.N. 398 of
8. "qualifying money market fund" means a collective investment undertaking authorised under Directive 2009/65/EC, or which is sub ject to sup erv isio n an d, if applicable, au th orised by the competent authority under the Act, and which satisfies all of the following conditions: (a) its primary investment objective must be to maintain the net asset value of the undertaking either constant at par (net of earnings), or at the value of the investors’ initial capital plus earnings; (b) it must, with a view to achieving that primary investment objective, invest exclusively in high quality money market instruments with a maturity or residual maturity of no more than 397 days, or regular yield adjustments consistent with such a maturity, and with a weighted average maturity of 60 days. It may also achieve this objective by investing on an ancillary basis in deposits with credit institutions: Provided that for the purposes of paragraph (b), a money market instrument shall be considered to be of high quality if the collective investment scheme or the INVESTMENT SERVICES ACT (CONTROL OF ASSETS) [ S.L.370.05 3 management company on behalf of the collective investment scheme performs its own documented assessment of the credit quality of money market instruments that allows it to consider a money market instrument as high quality. Where one or more credit rating agencies registered and supervised by ESMA have provided a rating of the instrument, the internal assessment carried out by the collective investment scheme or the management company on behalf of the collective investment scheme shall have regard to, inter alia, those credit ratings; (c) it must provide liquidity through same day or next day settlement; "Regulation (EU) 2015/2365" means Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 as amended from time to time; Added by: L.N. 398 of
9. "retail client" means a client who is not a professional client as defined in Annex II of MiFID; Added by: L.N. 398 of
10. "securities financing transaction" means transactions as defined in Article 3

(11)of Regulation (EU) 2015/2365; Added by: L.N. 398 of 2017. "subject person" means a person who is in possession of an i n v e s t m e n t s er v i c e s l i c en ce u n d e r t h e A ct o r i s o t h e r w i s e authorised or approved by the competent authority or is acting under an exemption from the requirement of such a licence in terms of the Investment Services Act (Exemption) Regulations: S.L.370.02 Provided that a custodian as defined under the Investment Services Act (Custodians of Collective Investment Schemes) Regulations that is also licensed to carry out other investment services shall also be a subject person under these regulations in relation to such investment services other than custody for collective investment schemes and in which case, the Investment Services Act (Custodians of Collective Investment Schemes) Regulations shall apply. S.L.370.32 Part 2 General 3.

(1)A subject person having the control of assets belonging to a customer in the course of rendering an investment service to such customer, shall hold such assets solely for and on behalf of and in the interest of the customer. Assets held under control constitute a distinct patrimony.

(2)Notwithstanding anything stated in article 1894 of the Civil Code or in the agreement entered into between the subject person and the customer or the fact that a customer’s assets held under the control of a subject person are registered in the name and title of or are otherwise vested in the subject person, such assets shall be deemed to constitute a distinct patrimony, separate from that belonging to the subject person and from that of other customers Cap. 16. 4 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) the assets of whom are also held under the control of the subject person.

(3)Except as expressly provided in the agreement entered into between the subject person and the customer and notwithstanding the provisions of the Civil Code, the control of assets belonging to a customer by a subject person shall not give or be deemed or construed to give to the subject person any rights over such assets nor shall it create any form of loan between the subject person and the customer and this notwithstanding the nature of the assets or the rights or obligations of the subject person in relation to the assets. Customer enjoys right of ownership in assets. 4.

(1)A customer whose assets are held under the control of a s u b j e ct p e r s o n e n j o y s a r i g h t o f o w n e r s h i p i n s u c h a s s e t s notwithstanding that they may be registered in the name and title of or are otherwise vested in the subject person. Where such assets are held by the subject person as part of a common pool of identical assets or are otherwise held in a clients’ or common account, the customer shall have an undivided share in ownership of all the assets held collectively by the subject person in such a pool or account.

(2)The records, accounts and other statements held or issued by the subject person in terms of regulation 7

(3)shall, saving any proof to the contrary, constitute evidence of their contents and of the right of ownership of the customer as provided in subregulation

(1). Assets held under control not subject to the rights of creditors of the subject person. Amended by: L.N. 398 of 2017 5.

(1)The creditors of a subject person shall have no claim or right of action on or against the assets held under the control of the subject person for and on behalf of and in the interest of any customer and such assets shall not be affected in any manner by the p r o v i si o n s o f l a ws an d r eg u la t io n s i n f o r ce r eg u la ti n g t h e insolvency or bankruptcy of the subject person.

(2)In the event of any such insolvency or bankruptcy or related order or resolution, or in the event that the competent authority so requires, the subject person or any administrator or receiver or other officer appointed to represent it by any court or otherwise, shall on demand of any customer or of the competent authority, immediately transfer the control, possession and title to all assets held by or in the name of the subject person on behalf of the customer to another subject person or to such other person as may be instructed by the customer or by the competent authority. Cap. 12. Added by: L.N. 398 of 2017.

(3)In the event that any assets held under the control of the subject person are, at the request of any creditor of the subject person, made subject to any precautionary or executive act or warrant granted by any Court in terms of the Code of Organization and Civil Procedure, the customer on whose behalf such assets are being held or the competent authority may, by application to the Court, request the release of the assets from such act or warrant and the Court shall, on production of evidence as it may deem fit, accede to the application without undue delay.

(4)Security interests, liens or rights of set-off over instruments or money belonging to a customer and enabling a third party to INVESTMENT SERVICES ACT (CONTROL OF ASSETS) [ S.L.370.05 5 dispose of the customer’s instruments or money in order to recover debts that do not relate to the customer or provision of services to the customer are not permitted except where this is required by the applicable law in a third country jurisdiction in which the money or instruments belonging to the customer are held.

(5)Where a subject person is obliged to enter into agreements that create such security interests, liens or rights of set-off, it shall disclose that information to customers indicating to them the risks associated with those arrangements. Added by: L.N. 398 of 2017.

(6)Where security interests, liens or rights of set-off are granted by the subject person over instruments or money belonging to the customer, or where the subject person has been informed that they are granted, these shall be recorded in customer’s contracts and the subject person’s own accounts to make the ownership status of customer’s assets clear, such as in the event of an insolvency. Added by: L.N. 398 of 2017. 6.

(1)The delivery of the assets of a customer to a subject person and from a subject person to a customer or another subject person for the purpose of the control of assets in terms of these regulations shall not be deemed to constitute a chargeable transfer for the purposes of the Duty on Documents and Transfers Act and for the purposes of article 5

(1)of the Income Tax Act, where the d eliv ery o f su ch assets d oes no t co n stitu te a ch an ge in t he beneficial owner of the assets. Applicability of Duty on Documents and Transfers Act and Income Tax Act. Cap. 364. Cap. 123.

(2)For the purpose of this regulation, beneficial owner means a person who is the real owner of, or who is otherwise beneficially entitled to, the assets held under control by the subject person, as is provided in regulation 4 of these regulations. Part 3 Control of Assets 7.

(1)A subject person having the control of assets belonging to a customer shall safeguard such assets and the interest of the customer therein.

(2)The subject person shall carry out such functions and duties as shall be required in accordance with these regulations, the terms and conditions of the agreement entered into with the customer, the conditions of any investment services licence, and such other requirements as may be laid down by the competent authority.

(3)The subject person shall maintain proper and adequate records and accounts of all customers’ assets held under control. The records and accounts shall identify the customers to whom such assets belong and shall clearly indicate that the assets of every customer are separate and distinct from the assets belonging to the subject person and from other customers' assets held by the subject person. The records and accounts shall, upon due notice being given to the subject person, indicate where any pledge or other right over assets held under the control of the subject person has been given by the customers to any third parties, and where any order by any Court has been made in connection with such assets. Functions and duties of subject person. Amended by: L.N. 398 of 2017. 6 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) Added by: L.N. 398 of 2017.

(4)The subject person shall maintain accurate records and accounts in a way that ensures accuracy, and in particular their c o r r e s p o n d e n c e to th e in s tr u m e n ts an d m o n e y he ld f o r th e customers and that they may be used as an audit trail. Added by: L.N. 398 of 2017.

(5)The subject person shall conduct, on a regular basis, reconciliations between its records and accounts and those of any third parties with whom customer’s instruments and money have been deposited in accordance with regulations 8 and 9. Renumbered by: L.N. 398 of 2017. Amended by: L.N. 398 of 2017.

(6)The subject person entrusted with the control of assets belonging to customers shall, to every extent reasonably possible, segregate in a proper manner the assets of every customer from the assets belonging to the subject person and from the assets of other customers: Provided that the subject person may, with the written consent of the customer and in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of any investment services licence and such other requirements as may be laid down by the competent authority and without prejudice to the customer's right of ownership over the assets held under control, place and keep such assets in a common pool of identical assets or otherwise deposit them in a clients’ or common account. Renumbered by: L.N. 398 of 2017.

(7)The subject person shall make appropriate arrangements for the protection of customers' assets held under control and shall ensure that such assets are placed under adequate systems to safeguard such assets from damage, misappropriation or other loss and which permit the delivery of such assets only in accordance with the terms and conditions of the agreement entered into with the customer. Renumbered by: L.N. 398 of 2017.

(8)Where it is not reasonably possible for the subject person to carry out any of the duties specified in this regulation due to the nature of the assets and of the arrangements whereby control is exercised, the said duties may be varied with the written consent of the customer and in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of any investment services licence and such other requirements as may be laid down by the competent authority. Added by: L.N. 398 of 2017.

(9)The subject person shall take the necessary steps to ensure that any customer instruments deposited with a third party in accordance with regulation 8 are identifiable separately from the financial instruments belonging to the subject person and from the instruments belonging to that third party, by means of differently titled accounts on the books of the third party or other equivalent measures that achieve the same level of protection. Added by: L.N. 398 of 2017.

(10)The subject person shall take the necessary steps to ensure that the money belonging to the customer deposited in accordance with regulation 9 with a central bank, a credit institution or a bank authorised in a third country or a qualifying money market fund, are held in an account or accounts separately identifiable from any accounts used to hold money belonging to the subject person. INVESTMENT SERVICES ACT (CONTROL OF ASSETS) [ S.L.370.05 7

(11)The subject person shall implement adequate organisational arrangements to minimise the risk of the loss or diminution of assets belonging to the customer, or of rights in connection with those assets, as a result of misuse of the assets, fraud, poor administration, inadequate record-keeping or negligence. Added by: L.N. 398 of 2017.

(12)If, for reasons of applicable law, including the law relating to property or insolvency, a subject person cannot comply with the provisions of this regulation to safeguard customers’ rights to satisfy the requirements of Articles 16

(8)and

(9)of MiFID, the subject person shall implement arrangem ents to ensur e that customers’ assets are safeguarded to meet the objectives outlined in this regulation. Added by: L.N. 398 of 2017.

(13)The competent authority shall issue Investment Services Rules providing requirements which have an equivalent effect in terms of safeguarding customers’ rights if the applicable law of the jurisdiction in which the money or instruments belonging to the customer are held prevents the subject persons from complying with the provisions of sub-regulation

(9)or

(10)of this regulation: Added by: L.N. 398 of 2017. Provided that when relying on such equivalent requirements as prescribed in sub-regulations

(9)or

(10), the subject persons shall inform customers that in such instances they do not benefit from the provisions envisaged under MiFID and the Commission Delegated Directive. 8.

(1)A subject person may deposit instruments held by it on behalf of its customers into an account or accounts opened with a third party.

(2)The subject person shall exercise all due skill, care and diligence in the selection, appointment and periodic review of the third party and of the arrangements for the holding and safekeeping of those instruments.

(3)The subject person shall, in particular, take into account the expertise and market reputation of the third party as well as any legal requirements or market practices related to the holding of instruments that could adversely affect the rights of its clients.

(4)Where the subject person proposes to deposit customer instruments with a third party, the subject person shall only deposit instruments with a third party in a jurisdiction where the safekeeping of instruments for the account of another person is subject to specific regulation and supervision and that third party is subject to this specific regulation and supervision.

(5)The subject person shall not deposit financial instruments held on behalf of customers with a third party in any jurisdiction that does not regulate the holding and safekeeping of instruments for the account of another person unless one of the following conditions is met: (

1. a)the nature of the instruments or of the investment services connected with those instruments requires them to be Deposit of customer instruments with third parties. Added by: L.N. 398 of 2017. 8 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) deposited with a third party in that third country; or (
2. b)Deposit of client money. Added by: L.N. 398 of 2017. the instruments are held on behalf of a professional client and that professional client requests the subject person, in writing, to deposit them with a third party in that third country.

(6)The provisions of sub-regulations

(4)and

(5)shall also apply when the third party has delegated any of its functions concerning the holding and safekeeping of instruments to another third party. 9.

(1)A subject person shall, on receiving any customer money, promptly place such money with any of the following: (

1. a)a central bank; (
2. b)a credit institution authorised in accordance with the provisions of Directive 2013/36/EU; (
3. c)a bank authorised in a third country; or (
4. d)a qualifying money market fund: Provided that this sub-regulation shall not apply to a credit institution authorised under Directive 2013/36/EU in relation to deposits within the meaning of the aforementioned Directive and held by that institution.

(2)Where the subject person does not deposit customer money with a central bank, it shall exercise all due skill, care and diligence in the selection, appointment and periodic review of the credit institution, bank or money market fund where the money are placed and the arrangements for the holding of such money. The subject person shall furthermore, consider the need for diversification as part of its due diligence.

(3)Where the subject person deposits customer money in accordance with sub-regulation

(2), it shall, in particular, take into account the expertise and market reputation such institutions or money market funds with a view to ensuring the protection of the rights of its customers as well as any legal or regulatory r e q u i r e m e n t s o r m a r k e t p r a c t ic e s r e l a t e d t o t h e h o l d in g o f customers’ money that could adversely affect such rights.

(4)The subject person shall ensure that customers give their explicit consent to the placement of their money in a qualifying money market fund. Furthermore, for the purposes of ensuring that this right to consent is effective, the subject person shall inform customers that money placed with a qualifying money market fund will not be held in accordance with the requirements for safeguarding customer money prescribed in the Commission Delegated Directive and these regulations. INVESTMENT SERVICES ACT (CONTROL OF ASSETS) [ S.L.370.05 9

(5)Where the subject person deposits customer money with a credit institution, bank or money market fund of the same group as the subject person, it shall limit the money deposited with any such group, entity or combination of any such group entities so that money does not exceed 20% of all such monies.

(6)The requirement prescribed in sub-regulation

(5)can be waived by the Authority where the subject person is able to demonstrate that, in view of the nature, scale and complexity of its business, and also the safety offered by the third parties considered in sub-regulation

(5)and including in any case the small balance of c u s to m e r m o ne y th e s ub je c t p e r s on h o ld s , th e r e q u ir e m e n t prescribed in sub-regulation

(5)is not proportionate.

(7)The subject person shall periodically review the assessment made in accordance with sub-regulation

(6)and shall notify the initial and reviewed assessments to the competent authority. 10.

(1)A subject person shall not enter into arrangements for securities financing transactions in respect of instruments which it holds on behalf of a customer nor shall the subject person otherwise use such instruments for its own account or for the account of any other person or customer of the subject person, unless both of the following conditions are met: (

1. a)the customer has given his prior express consent to the use of the instruments on specified terms, as clearly evidenced in writing and affirmatively executed by signature or equivalent; and (
2. b)the use of that customer’s instruments is restricted to the specific terms to which the customer consents.

(2)The subject person shall not enter into arrangements for securities financing transactions in respect of instruments which are held on behalf of a customer in an omnibus account maintained by a thir d party, nor sh all the subject per son otherwise use instruments held in any such account for its own account or for the account of any other person, unless, in addition to the conditions set prescribed in sub-regulation

(1), at least one of the following conditions is met: (a) each customer whose instruments are held together in an omnibus account has given prior express consent in accordance with sub-regulation

(1)(a); or (b) the subject person has in place systems and controls which ensure that only instruments belonging to customers who have given prior express consent in accordance with subregulation

(1)(a) are so used.

(3)The records of the subject person shall include details of each customer on whose instructions the use of instruments has been affected as well as the number of instruments belonging to Use of clients’ instruments. Added by: L.N. 398 of 2017. 10 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) each customer who has given his consent, so as to enable the correct allocation of any loss.

(4)The subject person shall take appropriate measures to prevent the unauthorised use of customer instruments for its own account or the account of any other person, such as: (

1. a)the conclusion of agreements with customers on measures to be taken by the subject person in case the customer does not have enough provision on its account on the settlement date, such as borrowing of the corresponding securities on behalf of the customer or unwinding the position; (
2. b)the close monitoring by the subject person of its projected ability to deliver on the settlement date and the putting in place of remedial measures if this cannot be done; and (
3. c)the close monitoring and prompt requesting of undelivered securities outstanding on the settlement day and beyond.

(5)The subject person shall adopt specific arrangements for all customers to ensure that the borrower of customer instruments provides the appropriate collateral.

(6)The subject person shall monitor the continued appropriateness of the collateral referred to in sub-regulation

(5)and take the necessary steps to maintain the balance with the value of customer instruments. Inappropriate use of title transfer collateral arrangements. Added by: L.N. 398 of 2017.

(7)The subject person shall not enter into arrangements which are prohibited under Article 16

(10)of MiFID. 11.

(1)The subject person shall properly consider the use of t it le t r an s f e r c o ll at er al ar r an g e m en t s i n t h e co n tex t o f t h e relationship between the customer ’s obligation to the subject person and the cu stom er ’s as sets su bjected to title transfer collateral arrangements by the subject person. The subject person shall furthermore be able to demonstrate that it has carried out such considerations.

(2)When considering, and documenting, the appropriateness of the use of title transfer collateral arrangements, the subject person shall take into account all of the following factors: (

1. a)whether there is only a very weak connection between the customer’s obligation to the subject person and the use of title transfer collateral arrangements, including whether the likelihood of a customer’s liability to the subject person is low or negligible; (
2. b)whether the amount of customer money or instruments subject to title transfer collateral arrangements far exceeds INVESTMENT SERVICES ACT (CONTROL OF ASSETS) [ S.L.370.05 11 the customer’s obligation, or is even unlimited if the customer has any obligation at all to the subject person; and (
3. c)whether all customers’ instruments or money are made subject to title transfer collateral arrangements, without consideration of what obligation each customer has to the subject person.

(3)Where using title transfer collateral arrangements, the subject person shall highlight to professional clients and eligible counterparties the risks involved and the effect of any title transfer collateral arrangement on the customer’s instruments and money. 12.

(1)The subject person shall appoint a single officer of sufficient skill and authority with specific responsibility for matters relating to the compliance by the subject person with its obligations regarding the safeguarding of customer instruments and money.

(2)The subject persons shall decide, whilst ensuring full compliance with Commission Delegated Directive, whether the appointed officer is to be dedicated solely to this task or whether the officer can discharge responsibilities effectively whilst having additional responsibilities. 13. The subject person shall ensure that its external auditors report at least annually to the competent authority on the adequacy of the subject person’s arrangements under Article 16

(8),

(9)and

(10)of MiFID and Chapter II of the Commission Delegated Directive as transposed in these regulations. 14.

(1)The subject person shall make information pertaining to customers’ instruments and money readily available to the following entities: (

1. a)the competent authority; (
2. b)appointed insolvency practitioners; and (
3. c)the resolution authority.

(2)The information to be made available in terms of subregulation

(1)shall include the following: (

1. a)related internal accounts and records that readily identify the balances of money and instruments held for each customer; (
2. b)where customer money are held by the subject person in accordance with regulation 9, as well as details of the accounts where customer money are held and the relevant agreements with those entities; (
3. c)where instruments held by the subject person in accordance with regulation 8, as well as details of Governance arrangements concerning the safeguarding of customer assets. Added by: L.N. 398 of 2017. Reports by external auditors. Added by: L.N. 398 of 2017. Provision of information. Added by: L.N. 398 of 2017. 12 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) accounts opened with third parties and the relevant agreements with those entities; Liability of the subject person. Renumbered by: L.N. 398 of 2017. Amended by: L.N. 398 of 2017. (
4. d)details of third parties carrying out any related outsourced tasks and details of any outsourced tasks; (
5. e)key individuals of the subject person involved in related processes, including those responsible for oversight of the subject person’s requirements in relation to the safeguarding of customer assets; and (
6. f)agreements relevant to establish customer ownership over assets. 15.

(1)A subject person having the control of assets belonging to customers shall be liable for any loss or prejudice suffered by the customers due to the subject person’s fraud, wilful default or negligence including the unjustifiable failure to perform in whole or in part the subject person’s obligations arising under these regulations, the terms and conditions of the agreement entered into with the customers, the conditions of any investment services licence or such other requirements as may be laid down by the competent authority.

(2)For the purposes of this regulation, subject person includes such other subject person to whom functions, duties or assets may be delegated or entrusted in terms of regulation

1. Subject person may delegate functions and duties or entrust assets to another subject person. Amended by: L.N. 113 of
2. Renumbered by: L.N. 398 of
3. 16.

(1)A subject person may delegate part of the functions and duties under regulation 7 to another subject person which is qualified and competent to take the control of customers’ assets; and may entrust or deposit all or part of a customer’s assets held under control with such other subject person.

(2)The liability of the subject person for its own acts or omissions under regulation 8 shall not be affected or reduced as a result of the subject person delegating functions and duties, or entrusting all or part of the assets belonging to a customer, to another subject person.

(3)Where the subject person delegates or entrusts functions, duties or assets in terms of subregulation

(1)to a person which is a group company, without prejudice to the liability of such person, the subject person shall be liable for any loss or prejudice suffered by the customers as a result of the acts, omissions or insolvency of such person.

(4)Where the subject person delegates or entrusts functions, duties or assets in terms of subregulation

(1)to a person which is not a group company, without prejudice to the liability of such person, the subject person shall be liable for any loss or prejudice suffered by the customers as a result of the acts or omissions of such person unless the subject person can prove that such person was and remains qualified and competent to carry out the functions a n d d u ties d e leg a t ed a n d th a t th e s ub je c t p e r s on e xe r c i sed reasonable care to oversee that the functions and duties delegated INVESTMENT SERVICES ACT (CONTROL OF ASSETS) [ S.L.370.05 13 were undertaken by such person competently.

(5)The liability of the subject person under subregulations

(3)and

(4)may be varied or reduced with the written consent of the customer and in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of any investment services licence and such other requirements as may be laid down by the competent authority: Provided that the subject person discloses fully to the customer any risks that may be associated with the nature of the arrangements whereby control is to be exercised and that the agreement with the customer shall clearly define the extent of liability of the subject person.

(6)Where the subject person delegates or entrusts functions, duties or assets in accordance with specific written instructions from the customer, the subject person shall not be liable for any loss or prejudice suffered by that customer as a result of the acts or omissions of the person to whom functions, duties or assets are delegated or entrusted as requested by the customer.

(7)For the purposes of this regulation, "group company" in relation to a subject person means any body corporate which is the subject person’s subsidiary or parent company or a subsidiary of the subject person’s parent company, and the terms "parent" and "subsidiary" shall be construed in accordance with article 2

(2)of the Companies Act. 17.

(1)Where reasonably required by the nature of the assets and of the arrangements whereby control is to be exercised, a subject person may, with the written consent of the customer and in accordance with the terms and conditions of the agreement entered into with the customer, the conditions of any investment services licence and such other requirements as may be laid down by the competent authority, make use of any market clearing system, settlement system, dematerialised book entry system, centralised custodial depository or similar system for the purpose of the control of assets in terms of these regulations. Cap. 386. Use of clearing, settlement and de-materialised systems and settlement risk. Renumbered by: L.N. 398 of 2017.

(2)Such systems as are provided for in subregulation

(1)may also be used to effect all transactions including conveyance, assignment, transfer, transmission and pledging of assets held under the control of the subject person and the law of the country in which the system is maintained shall apply to the validity of such transactions notwithstanding the provisions of any other law.

(3)The agreement with the customer shall clearly define the extent of liability of the subject person for any losses that may be incurred by the customer as a result of the use of such systems.

1. The subject person shall have the right to charge fees to the customer and to be reimbursed for expenses in accordance with the terms and conditions of the agreement entered into with the customer. The subject person may, if authorised to do so by the terms and conditions of the said agreement, exercise a right of retention over the customer ’s assets held under control, to the extent of any lawfully due but unpaid fees and expenses, until such Subject person’s fees. Renumbered by: L.N. 398 of
2. 14 [ S.L.370.05 INVESTMENT SERVICES ACT (CONTROL OF ASSETS) fees and expenses are paid. Termination of the control of assets. Renumbered by: L.N. 398 of
3. 19.

(1)Without prejudice to any requirements as may be laid down by the competent authority, an agreement for the control of assets belonging to a customer may be terminated by the customer, by the subject person, or by order of the competent authority.

(2)Upon the termination of an agreement for the control of assets, the subject person shall convey for no consideration the assets held for the customer, as instructed by the customer or by the competent authority, without prejudice to the subject person’s right to payment of any lawfully due fees or expenses in terms of the agreement entered into with the customer and to any obligations arising in favour of the customer thereunder. Part 4 Administrative Penalties, other administrative measures and Appeals Administrative Penalties, other administrative measures and Appeals. Added by: L.N. 398 of 2017. L.N. 401. 20.

(1)Where a person falling within the scope of these regulations fails to comply with any provisions of such regulations or any rules issued thereunder further implementing such regulations, the competent authority may, by notice in writing and without recourse to a court hearing, impose on such person an administrative penalty and other administrative measures in accordance with the provisions of the Investment Services Act and B a n k in g Act ( M i FI D an d M iF I R A d m in is tr a ti ve P e n a lt ie s, Measures and Investigatory Powers) Regulations, 2017.

(2)A right of appeal to the Financial Services Tribunal shall lie from the decisions which the competent authority shall take under these regulations and the provisions of article 19 of the Act shall apply mutatis mutandis.