By Matthew Vella
A bill to transpose the European Union Market Abuse Directive is set to better safeguard investor confidence with updated rules and hefty fines applicable to inside information and disclosure.
The Maltese Parliament is set to debate the new measures to prevent abuse in the financial markets in the coming weeks.
The primary objective of the bill, besides ensuring the implementation of updating measures designed to safeguard investor confidence, will repeal the Insider Dealing and Market Abuse Offences Act.
It will also make more detailed provisions against market manipulation.
The new bill also lays down rules concerning the dissemination of information by journalists and researchers pertaining to financial instruments, and states that all interests and conflicts of interests must be fully declared.
Most importantly, the bill strengthens the investigative powers of the Malta Financial Services Authority, which will be able to demand access to documents and phone records, and to summon persons for hearings.
The MFSA will be given more powers by conducting investigations into any behaviour amounting to market abuse. The authority will have the power to access to any documentation from any person in possession of any relevant information, as well as telephone and existing data traffic records.
Legal advisor David Fabri told The Malta Financial and Business Times that the Insider Dealing Act will be adjourned to come into line with EU law. “It is meant to keep our markets clean. In financial markets you want to see people invest more money in companies but also to invest it sensibly. This updating of the law will encourage more safeguards when it comes to investment advice. Conflicts of interests for example, will have to be disclosed.
“Malta is such a small place that so many people are usually wearing different hats. We want to see that the financial market for companies on the stock exchange is a level playing field, clean and transparent.
“In the case of insider information, anybody who has confidential information which is used for their profit or to minimise losses will be held liable for such an offence. Anyone who dispenses investment advice on particular instruments and companies has to be licensed by the MFSA under the Investment Services Act.”
Penalties of up to Lm400,000 (EUR 925,000), or up to three times the profit made or the loss avoided through the committal of the offence will be issued for violations of the law.
The provisions of the bill describe inside information as “information of a precise nature which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, including information regarding any take-over offer for a company”.
The bill proposes that any person who produces or disseminates research concerning financial instruments or issuers of financial instruments, such as journalists, or persons who produces or disseminates other information on investment strategy, have to take “reasonable care to ensure that such information is fairly presented and shall disclose his interests or indicate conflicts of interest concerning the financial instruments to which that information relates.”