THE VFA RULES FOR VFA ISSUERS (7)

The MFSA has on the 30th July 2018 issued a consultation paper on the Virtual Financial Assets rules for issuers of Virtual Financial assets.  The closing date for submission was 13th August 2018 and now the MFSA is expected to issue the official chapter after taking into account the submissions which it has received as well as other consultations with relevant stake holders which it has carried out.

This paper is intended to form part of a rule book which will be entitled the ‘Virtual Financial Assets Rulebook’ and which will be divided into three chapters.  This chapter applies to issuers of Virtual Financial Assets.

The first title of this chapter outlines the high-level principles which should guide issuers when issuing Virtual Financial Assets while title 2 sets out the general requirements for issuers which includes that the issuers must be legal persons and that the business is directed by two persons.  Title 3 outlines the initial and ongoing requirements applicable to initial VFA offerings, which mainly related to the requirements to register their white paper as well as the conditions to admit VFA assets on a DLT exchange.  Title 4 provides details with regards to the administrative penalties and sanctions as well as the principles which will be guiding the MFSA when imposing administrative penalties.

This chapter also includes the MFSA’s interpretation on the transitory provisions provided for under Article 62(1)(a) of the Virtual Financial Assets Act.

This article will deal with Title 4 of Chapter 2 of the rule book which provides details with regards to the administrative penalties and sanctions as well as the principles which will be guiding the MFSA when imposing administrative penalties.

Title 4 – Enforcement and Sanctions

Where an issuer breaches a rule, the MFSA is empowered to impose administrative penalties without recourse to a Court of law, up to a maximum of Eur150,000.

The MFSA shall be guided by the principle of proportionality which will take into consideration the circumstances of the case including:

  1. The repetition, frequency, gravity or duration of the infringement by the issuer

  2. The degree of responsibility of the person responsible for the infringement

  3. The financial strength of the issuer

  4. The profits, gains or losses avoided by the issuer by reason of the infringement

  5. The losses incurred by third parties caused by the infringement

  6. The level of cooperation afforded by the issuer to the MFSA

  7. Previous infringements by the issuer and prior sanctions imposed by the MFSA on the said issuer

  8. The good faith, the degree of openness and diligence of the issuer in the fulfillment of his obligations

  9.  Any evidence of willful deceit on the part of the issuer

  10. Any potential systematic consequences of the infringement

The MFSA may also impose penalties when an issuer fails to file documentation on time.  The penalties will consist of an initial penalty and an additional daily penalty.

Issuers have a right to appeal to the Financial Services Tribunal against sanctions imposed by the MFSA.

How can we help? 

Please contact us for a free initial consultation on how we may be able to assist you.  We can assist you in setting up your company in Malta, setting up a bank account for the Malta company, drafting and / or reviewing the white paper which would have already been prepared.  We can also assist by providing you with the initial legal advice on the type of token which you intend issuing i.e. whether the token is a financial instrument, a virtual token, electronic money or a Virtual Financial Asset.  We can also assist you in the preparation and submission of the application and the supporting documentation to register your white paper in terms of the VFA Act and / or to obtain a licence to operate a crypto currency exchange in or from Malta.

We are also publishing on a regular basis updates about blockchain, DLT, VFA exchanges and ICOs and encourage you to get in touch with us if you would like us to keep you duly updated about regulatory development in this area.  If you would like to receive such updates, or if you have any queries, please do not hesitate to contact us on info@act.com.mt.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on info@act.com.mt.  

Disclaimer  

This article contains general information only and is not intended to address the circumstances of any particular individual or entity. ACT, by means of this article is not rendering any accounting, business, financial, investment, legal, tax, or other professional advice or service. This article is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on this article.  

17th September 2018

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