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News | Detailed Guidance Note on the “Fit and Proper” Assessment issued by the MFSA

Alexia Pollacco 03 Jul 2019

The ‘Guidance on the Fitness and Properness Assessment’ published by the Malta Financial Services Authority (MFSA) on the 2nd July 2019 is intended to provide further clarity for VFA Agents seeking to carry out the Fitness and Properness Assessment for prospective VFA Issuers and Service Providers as required by the Authority.

This Guidance Document provides a structural overview of the requirements sought by the Authority in scrutinizing applicants to ensure that there are the necessary safeguards in place and that appropriate standards are met. The fitness and properness assessment is based on four main pillars; competence, reputation, conflicts of interest and independence of mind, and time commitment. The Guidance Document specifies the requirements under each of these pillars, namely:

  • Competence is assessed on theoretical knowledge gained through training and education in the financial services sector and professional experience gained through previous work experience.
  • Reputation is assessed on the basis of the applicant’s integrity and solvency. The Authority will scrutinize the applicant’s reputation by considering factors such as; whether the applicant was subject to criminal and civil proceedings or sanctions by local or foreign regulatory authorities, as well as whether any adverse media articles were clarified and addressed in relation to the applicant’s reputation in the financial services sector. Furthermore, the applicant must prove financial soundness through the provision of a detailed business plan.
  • Conflicts of Interest and Independence of Mind are essential criteria in the Authority’s opinion and if it is not satisfied that the applicant is taking the necessary measures to prevent or control conflicts of interest, then the Authority may impose certain restrictions in this regard. The applicant must inform the Authority of any conflicts of interest and its course of action to such potential conflicts of interest.
  • Time Commitments are assessed through both qualitative and quantitative checks. The applicant must prove that they will be able to dedicate adequate time to fulfilling the role to the best of their abilities.

Other obligations impose an onus on the VFA Agent to keep the MFSA informed with regards to any changes that may take place throughout the service offering. The VFA Agent must ensure completeness of the information provided to the MFSA to ensure that the Authority has full visibility through the applicant’s full transparency. The Guidance Document can be downloaded from the MFSA’s website.

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