Existing businesses in Malta were given a six-month transition period to comply with the pension reform, ending on 1 July 2019.
While firms setting up business on the island after the 1 January 2019, needed to abide by the rules immediately.
But the changes have created some confusion within the industry, Stewart Davies, chairman of the Malta Association of Retirement Scheme Practitioners (Marsp) told International Adviser.
“The regulations and the rules imposed on the Maltese pension companies are to ensure that the underlying member, the member of the pension scheme, is receiving suitably qualified advice, investment advice, in country where they are resident,” he said.
Many professionals interpreted the regulation as meaning they were supposed to be regulated in Malta in order to advise clients.
But Davies said this is definitely not the case.
Quality of advice
“If I’m sitting next to an adviser in France, I’m not necessarily going to see if my adviser is regulated in Malta. I want to know that he’s able to give me advice when I’m sitting down in front of him,” Davies said.
“Pension companies in Malta will deal with dozens and dozens of territories. So, an adviser in Singapore, that is advising a client in Singapore, is not going to obtain passporting rights or investment advice authorisations in Malta.”
The main concern for the Maltese regulator is that the adviser is able to provide regulated advice in the jurisdiction where they and their clients are based.
Davies added: “So, if a [pension scheme] member is resident in Singapore, then he is quite rightly going to seek advice from a Singapore adviser regulated under the Monetary Authority of Singapore (MAS), and that is the key thing.
“The rules make sure that the member is receiving regulated advice in the country where they are based.”
Matthew Brincat, general secretary of Marsp, told IA: “The Malta pensions industry has discussed this very point with the Malta regulator and a number of solutions have been discussed, all of which will not prejudice the position of the member of the pension scheme, but will address the fact that the member will not and cannot be ‘advised’ by an unregulated person going forward.”
But what would happen if a client fails to switch to a regulated adviser?
That would be a matter the pension scheme itself would need to decide on, Davies said.
“Ultimately, the thrust of the new rules is to develop greater consumer protection. And clearly, the consumer is protected on a far greater scale in engaging with a regulated adviser in the territory.”
But if that condition is not met, the scheme’s trustees would have to intervene.
“The trustees would need to consider whether they continue to engage with a member.
“Obviously, as a trustee, you can’t just resign your position, somebody else needs to take your place. And if it’s a Maltese pension scheme, they’re going to have the same issue,” Davies added.