Malta: Country and Foreign Investment
The Malta Stock Exchange
The Malta Stock Exchange Act 1990 led to the opening of a stock exchange towards the end of 1992. Management of the exchange is in the hands of a Council, headed by the Chairman. The Council is responsible for approval of applications for listing and for supervising performance of the ongoing obligations of listed companies. Prospectus and listing requirements are in line with EU standards.
Trading on the Exchange, which had a rather slow start, was on a weekly basis until 1998, when the listing of Maltacom led to daily trading.
In 2001 the Exchange saw the introduction of remote trading and the relocation to new premises. The trading floor disappeared and stockbrokers now trade directly from their offices, enabling them to provide a better and more immediate service to their clients. There was a considerable increase in the number of primary listings of Collective Investment Funds, while secondary listings rose steadily throughout the year. The number of licensed stockbrokers increased from 15 up to 20 with another four financial intermediaries being authorised by the Council for a total of 14 by the end of the year.
During 2001 the Exchange obtained Associate Membership of the Federation of European Securities Exchanges after undergoing a rigorous evaluation process by the Federation itself covering, in particular, regulatory and trading operations as well as compliance with EU Directives.
The number of equity listings and corporate bond listings on the Exchange has risen steadily over the years and numbered nineteen and forty-three respectively by the end of 2009.
Despite a sharp decline in 2008, market capitalization at the end of 2012 stood at EUR2.75bn, up by EUR113 million on 2011.
The inclusion of Malta’s equity market within FTSE’s Global Equity Index Series (GEIS) in 2008 was an important step for the sector.
The Exchange is careful to monitor activity for possible money-laundering, and submitted itself to inspection by the Financial Action Task Force in 1998, with positive results.
Amendments made to the Malta Stock Exchange Act in 2002 provided for virtually the complete removal of the Exchange’s regulatory functions in particular those concerning admission to listing and licensing of stockbrokers; these functions are now the responsibility of the Financial Services Authority.
The investment fund sector in Malta is quite small. However, the growing success of the stock exchange in attracting mutual fund listings may well lead to an increase in the number of funds actually based in Malta. Investment Funds in Malta are licensed by the Malta Financial Services Centre under the Investment Services Act 1994. Licensed funds are exempt from taxation, although they can choose to pay tax at 25%, in which case generous deductions can be claimed against income and the fund has access to Malta's network of double taxation treaties (see Offshore Legal and Tax Regime and Double Taxation Treaties.)
The Prevention of Financial Markets Abuse Act, 2005, repealed the Insider Dealing and Market Abuse Offences Act and updated rules regarding inside information and disclosure.
The new laws put in place more detailed provisions against market manipulation, and lay down rules concerning the dissemination of information by journalists and researchers pertaining to financial instruments, in addition to stating that all interests and conflicts of interests must be fully declared.
The Act also covers issuers and their managers, ordinary investors, national statistics bodies, competent authorities in Malta and abroad, operators of recognised investment exchanges and other insiders.
The new provisions legislate for administrative sanctions by the competent authority as well as criminal sanctions imposed by the courts, and introduce the concept of the freezing of funds, which may be carried out upon the request of the Attorney General in a written statement known as a freezing order.
With effect from December 29, 2005 the UK HM Revenue and Customs designated the Exchange as a Recognised Stock Exchange under Section 841(10(b) – Income and Corporation Taxes Act of 1998. With effect from the same date the Exchange was also regarded as a recognised stock exchange for Inheritance Tax purposes.
The Malta Stock Exchange was accepted as a full member of the Association of National Numbering Agencies, or ANNA in November 2006.
The objective of ANNA is to make available to its members and the securities industry as a whole, a standardised and uniform structure for use in any application for the trading and administration of securities in the international securities industry.
The Malta Stock Exchange’s relationship with ANNA originally started in 1992, when the ISO Standard for International Securities Identification Number (ISIN) was adopted for all securities listed and traded on the Malta Stock Exchange.