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MFSA ISSUES CIRCULAR TO COMPLIANCE OFFICERS OF INVESTMENT SERVICES LICENCE HOLDERS

October 2016 - TMT ( Technology, Media & Telecoms). Legal Developments by GVZH Advocates.

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The Securities and Markets Supervision Unit has recently carried out a thematic review consisting of a desk based review of the best execution policies and procedures and an onsite visit at a number of licensed investment firmsin order to access their implemented Best Execution policies and procedures.

The main findings identified during this thematic review are set out below:

CONTENT OF THE BEST EXECUTION (‚ÄėBE‚Äô) POLICY

The Authority has noted that the BE policies were too generic in nature and not specific to the investment firms‚Äô strategy and that not all the BE policies which were reviewed included details of the choice of execution venues which are used by the investment firm.

ON-SITE VISIT

During the on-site visits, the Authority found that investment firms making use of one execution venue were not in a position to prove the effectiveness of this arrangement.

The Authority has also noted that in certain instances, manual adjustments were effected on the clients’ order form without suitable evidence supporting the authorisation of the changes. The MFSA has emphasised that investment firms must ensure that all forms relating to a client order are kept on file and are filed in chronological order. In addition, manual adjustments must be initialised and backed up with evidence supporting the rationale of the change.

The Authority recommends that Compliance Officers ensure that procedures which are in line with Part BI of the Investment Services Rules for Investment Services Providers, specifically SLC 2.54 to SLC 2.82, are in place within their respective investment firm and that regular monitoring is carried out to ensure that suitable compliance with respect to BE is maintained at all times.