On the 6 May 2015 the MFSA issued a consultation on the Conduct of Business Rulebook. This follows on from the initial consultation document issued in January 2014 regarding the “Proposed Conduct of Business Rules for the Enhanced Protection of Customers in Investment Services”. It is also a development stemming from the establishment of the new Conduct Supervisory Unit within the MFSA and the appointment of Dr. Michelle Mizzi Buontempo as the first director of this unit as of 1 January 2015.

The Rulebook applies to persons providing investment services (excluding custodians) and to persons carrying on insurance activities, being both insurance undertakings and insurance intermediaries. It is anticipated that other regulated persons will fall within the scope of the Rulebook at a later stage.

The Rulebook is intended to determine the regulatory requirements applicable to regulated persons in relation to their conduct vis-a-vis their clients and this consultation covers the first three draft chapters which address:

(1) Client Disclosure Requirements;

(2) Product Governance and Oversight; and

(3) Conflicts of Interest. Other Chapters of the Rulebook will be issued in due course.

The Chapters being consulted transpose the requirements of a number of directives and the relevant insurance directives are the current Insurance Mediation Directive (IMD I), the proposed new Mediation Directive (IMD II) and certain provisions relating to Solvency II and correponding Level 2 measures. Since the IMD II is still going through the trialogue process, the Rulebook may require amendment to align it to the final published IMD II Directive.

The MFSA has also included certain Guidelines issued by the European Supervisory Authorities (ESMA1, EIOPA2 and EBA3 ) as Rules within the Rulebook. An example are EIOPA’s “Guidelines on Product Oversight and Governance Requirements for Insurance Undertakings.” Where the insurance directives do not address certain areas, the MFSA has also adopted certain opinions and guidelines issued by ESMA and applied them to insurance licence holders. Conversely, certain EIOPA guidelines are applied to persons licensed under the Investment Services Act. However, the Rules do not apply in a uniform manner across all categories of regulated persons and therefore each chapter in the Rulebook indicates the applicability of the rules.

The closing date for this consultation is the 13th June 2015. The MFSA plans to publish the final Conduct of Business Rulebook once all the chapters of the proposed Rulebook have been issued for consultation to the industry. Regulated persons will be granted a transitional period to comply with the requirements emanating from this new Rulebook.

The full consultation document can be found by clicking here.

 

[1] European Securities and Markets Authority

[2] European Insurance and Occupational Pensions Authority

[3] European Banking Authority