MFSA- The CSP Reform – Your Questions Answered

The post The CSP Reform – Your Questions Answered appeared first on MFSA on the 11th May 20121

The Company Service Providers (Amendment) Act, Act No. L of 2020 came into force on the 16March 2021. The requirement to obtain MFSA authorisation to provide corporate services has been extended to those previously exempt from authorisation and supervision under the Company Service Providers (CSP) Act, namely warranted professionals, as well as persons operating under the De Minimis Rule.

The Authority has issued several documents to facilitate this application process namely, revised Rules for Company Services Providers, Guidance Notes, Frequently Asked Questions, a specific application form and a Guidance note about the application process.

The Authority also embarked on an extensive campaign to reach out to those CSPs who were previously exempt. Two webinars were organised by the Authority, attended by over 500 stakeholders, focusing on the implementation and application process, where participants could submit their questions during the Q&A session.

A recording of the webinar and the Q&A sessions can be viewed here.

These were the replies to the most frequently-asked questions during the MFSA’s outreach initiatives. Is one of them yours too?

Q1:  If an accounting or law firm (not authorised as a CSP) is providing names and details of  persons who are willing to provide directorship services, does the accounting or law firm require an authorisation in terms of the CSP Act?

 A1: Providing names of potential candidates for directorship roles to clients does not constitute a regulated activity and does not fall within the services that require authorisation in terms of the CSP Act. However, the Authority would like to point out that the accounting or law firm being either a legal person or an individual, needs to be clear with its clients that this is just information and should not be considered as a service.

In such situations, the Authority would expect clear separation of services, whereby;

·        the directorship agreement will have to be with the individual acting as a director and no reference to the accounting or law firm is to be made on the agreement;

·        the choice as to who will be appointed as a director needs to be that of the clients; and

·        the accounting or law firm does not receive any form of remuneration when providing information on the potential candidates, both directly or indirectly.

Q2:  If a person is providing services as an investment committee member, valuation officer, portfolio manager, or similar posts, does this count as an involvement when determining the under-threshold Class B requirements?

A2: Such appointments do not fall within the definition of Company Services and therefore these do not require authorisation in terms of the CSP Act and therefore do not count as involvements.

Q3: Can an existing Class C CSP which forms part of a large group use a group risk management function? In this case, does an individual need to be named for this or can it be assumed to be a group function?

 A3: When setting up the Risk Management function, the CSP is expected to take into account the nature, scale, and complexity of its business, and the nature and range of the activity being undertaken in the course of that business. As prescribed in Rule R3-7.2 a CSP holding a Class C authorisation is required to establish and maintain a risk management function that independently carries out the following tasks:

·        the implementation of the policy and procedures referred to in Rule R3- 7.1; and

·        the provision of reports and advice to senior management

If a CSP forms part of a Group and wishes to propose a set-up which is already in place at a group level, this is an acceptable proposal. However this is something that needs to be discussed with the Authority and such approval will only be granted on a case-by-case basis. In addition, a CSP would need to appoint a Risk Officer who will be responsible for the oversight of the risk function and who also needs to be approved by the Authority.

Q4: Do persons who are already PQ’d need to submit a new PQ for this process?  

A4: A fresh PQ has to be submitted, since the PQ is tied to the role being assumed by the individual within the CSP applying for authorisation. If the PQ was already submitted electronically then this can be uploaded and updated accordingly.

Q5: If a sole practitioner or civil partnership which was formerly exempt, now wishes to continue providing services under a new legal entity (corporate form), which application form must be submitted?

A5: The Authority is aware that with the coming into force of Act L of 2020, local entities having an existing CSP business, and which were previously exempt from authorisation, such as civil partnerships, individuals, etc may opt to consolidate the CSP business with the business of another entity or create a separate legal entity.  In such cases, the sole practitioner/civil partnership has to submit an application form in terms of the transitory period and a different application form for the legal entity. The application form in terms of the transitory period is required so that the current providers are able to continue servicing existing clients during the six months period after the closure of the application period, i.e. between the 17 May and the 16 November 2021.

The ‘Guidelines to the New CSP Regime Application Process’ with particular reference to Title 4 provides detailed information on the steps one needs to take to consolidate the business whilst continuing to provide CSP services.

What happens if you do not apply by the 16 May 2021?

If you are a CSP and you do not apply by the 16 May 2021, you will need to cease your operations. After this date, you can still become an authorised CSP, but you will need to submit a fully-fledged application together with supporting documents and relevant personal questionnaires. You will also need to contact your clients and inform them that you will not be able to continue providing them with your services until you are fully authorised. Finally, you have to show the MFSA that you will be abiding by these conditions. May we remind you that this is a different application process and it is in your interest and that of your clients to apply before the 16 May in terms of the transitory provisions.

Following the webinars, the Authority updated the Frequently Asked Questions to include the above and other common questions received.

We encourage prospective applicants to visit the dedicated webpage on the MFSA website. It is only CSPS who submit their applications before the 16 May 2021 who will be able to avail themselves of the transitory provisions.