Clarification on the Reporting Obligations of Non-financial Counterparties

On the 19th November 2020, the Malta Financial Services Authority (“MFSA”) issued a circular as a follow up to their previous publication to provide a clarification to counterparties which fall within the definition of ‘non-financial counterparty’ (“NFCs”) in terms of the Securities Financing Transactions Regulation (EU) 2015/2365 (“SFTR”).

As provided in the SFTR, the definition selected for non-financial counterparties is an exclusionary one, as any undertaking which has its place of business in the European Union or in a third country and which is not defined as a financial counterparty, would fall under the term of non-financial counterparty.

As stated in the previous circular, NFCs are required to report to the MFSA on their use of Securities Financing Transactions (“SFTs”) through the submission of Annex I attached to the same circular. The MFSA reminds license holders to notify entities with whom they have a business relationship, and which might fall under the definition of NFCs, of their reporting obligation which will come into effect as of the 11th January 2021.

As a clarification, the MFSA held that Annex I should be submitted by the NFCs themselves, should they enter, or have the intention to enter into SFTs. Nevertheless, the MFSA noted that it would find no objection should an undertaking elect to submit Annex I on behalf of an NFC. Furthermore, the MFSA suggests that NFCs not currently entering SFTs should assess their businesses to determine whether they will enter SFTs in the future.

The MFSA also advised NFCs that Annex I should be submitted by not later than 30th November 2020.

Feel free to contact us should you require any further information on the reporting obligations of NFCs.