The Malta Financial Services Authority ("MFSA") has recently issued a circular addressed to all licence holders providing its expectations contingency planning in light of the COVID-19 outbreak and which is applicable to Investment Firms, Custodians, Fund Managers and Collective Investment Schemes (collectively referred to as "Licence Holders").
Business Continuity Plan ("BCP")
Licence Holders are required to have a business continuity process, specifically a Business Continuity Plan, which delineates the management processes put in place to ensure continuity of business and the planning and preparations that are required to minimise loss in case of disruptions and inability to access the offices physically. Licence Holders are to make sure that the BCP is in place and that a formal manual is made available to all their personnel.
The MFSA is encouraging Licence Holders to review, test and update their BCP in order to minimise any potential adverse effects arising from the spread of COVID-19. In this respect, BCPs should also provide for adequate measures regarding communication with customers and investors addressing any possible communication disruptions.
As a minimum disclosure, the MFSA is requiring licence holders to provide in writing at account opening stage and also to post on their website the contingencies to be applied.
Requirement to hold physical board meetings
Licence Holders obliged to hold physical board meetings may continue to do so with the same prescriptive frequency by way of tele or video conferencing. The rationale for holding a board meeting must be recorded and the minutes of the discussions held must also be made.
Communicating with clients and investors
As customers will inevitably increase the use of tele and online customer services, Licence Holders should prepare for any possible disruptions in these communication channels. The MFSA recommends for Licence Holdersto upload a notice on their website providing for alternative contact points while providing ongoing updates on how clients may access their accounts.
Investment firms are still required to comply with the relevant conduct of business requirements, providing investors with comprehensive and factual information on the current scenario. Clients are to be provided with information on the potential effects of volatility in price, fluctuation in interest rates, and movement in exchange rates on the value of their investments. Investment firms are also being reminded to take the necessary measures to prevent unlawful disclosure of inside information and insider dealing. Any inside information should be made public in a manner that enables fast access, is complete and can be properly and timely accessed by the public.
Use of algorithmic trading
Licence Holders making use of computer-driven algorithmic trading systems and pre-set orders are expected to switch off trade executions made on pre-programmed instructions to ensure that market integrity is maintained and to avoid adverse implications on investors.
The MFSA is also encouraging licence holders to consider the potential increase of cyber-attacks due to the use of remote working systems and back-up sites. All necessary measures should be considered to protect the contingency work plan from any disruptions arising from cyber-attacks.
Feel free to contact us if you require any further information in relation to contingency planning.