The MFSA has on the 12th July 2018 issued a consultation paper on the Virtual Financial Assets rules for VFA agents. The closing date for submission was 31st July 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 VFA agents appointed in terms of the VFA
Act and to applicants seeking registration in terms of the said Act.
The first title of this chapter outlines the high-level principles which should guide VFA agents in the provision of their VFA activity in or from within Malta, while title 2 outlines the registration requirements and the registration process for VFA agents. Title 3 outlines the ongoing obligations which VFA agents must adhere to, while title 4 provides for enforcement and sanctions in the event of misconduct by VFA agents.
This article will discuss the last title of Chapter 1 of the rule book, which deals with the enforcement and sanctions which the MFSA is authorized to impose in terms of the Virtual Financial Assets Act.
Title 4 – Enforcement and sanctions
This title provides the principles which will guide the MFSA when imposing penalties and provides for aggravating and mitigating circumstances in cases of misconduct by VFA agents registered in terms of Article 7 and / or 14 of the Act.
The MFSA has sanctioning powers including imposing administrative penalties against a VFA agent which does not comply with its obligations. In terms of the authority granted to it by Article 48 of the Act, the MFSA may without recourse to a court of law, impose a penalty of up to Eur150,000.
The MFSA shall be guided by the principle of proportionality which will take into consideration the circumstances of the case including:
- The repetition, frequency, gravity or duration of the infringement by the VFA agent
- The degree of responsibility of the person responsible for the infringement
- The financial strength of the VFA agent
- The profits, gains or losses avoided by the VFA agent by reason of the infringement
- The losses incurred by third parties caused by the infringement
- The level of cooperation afforded by the VFA agent to the MFSA
- Previous infringements by the VFA agent and prior sanctions imposed by the MFSA on the said VFA agent
- The good faith, the degree of openness and diligence of the VFA agent in the fulfillment of his obligations
- Any evidence of willful deceit on the part of the VFA agent
- Any potential systematic consequences of the infringement
The MFSA may also impose penalties when a VFA agent fails to file documentation on time. The penalties will consist of an initial penalty and an additional daily penalty.
VFA agents have a right to appeal to the Financial Services Tribunal against sanctions imposed by the MFSA.