Encouraging Fair, Efficient and Transparent Capital Markets – The MFSA Capital Markets Strategy
APRIL 09, 2021

Last month, the MFSA launched a consultation on its proposed Capital Markets Strategy, the ultimate objectives of which are to provide equal and fair opportunities to market players, safeguard the stability and integrity of the financial markets, and protect investors. Capital markets are vital in any modern economy for the facilitation of movement of capital and its allocation, as well as in the process of fostering economic growth.

Capital markets gain further importance when the economy faces challenges such as those caused by the coronavirus pandemic. The effects of the current pandemic have clearly indicated the need of having a strong local capital market to assist businesses in accessing funds in these challenging times and to ensure a rapid economic recovery.

The Maltese capital market is a retail market, mainly consisting of, on the one hand, companies seeking funds to grow, and on the other, non-professional investors who want a stable return at low risk to generally supplement their pension or savings. The MFSA is conscious of the potential and need for growth of the local market and that it may spearhead such growth through the introduction of various novel proposals which may not currently fall within the parameters which are generally deemed to be acceptable to it.

The proposed Capital Markets Strategy encompasses all the players in the market and aims to create a holistic approach to the local capital markets eco-system. Although clear and modern rules are important, the strategy does not focus only on rules, but considers other aspects including risks, the role of the investors and intermediaries, such as the Sponsor to protect market integrity.

The Strategy document aims to establish the MFSA’s risk appetite when considering applications for admissibility to listing; enhancing the legal framework to improve efficacy, efficiency, and effectiveness; strengthening the Sponsors regime; building supervisory capacity; and setting out a strategy for investor education; with the aim of encouraging fair, efficient and transparent capital markets.

Doreen Balzan, head of Securities and Markets at MFSA said: "the ultimate objectives of the proposed strategy are to provide equal and fair opportunities to market players from businesses to investors and intermediaries, safeguard the stability and integrity of the financial markets, and protect investors."

The consultation period ended on the 5 April. The MFSA is currently reviewing and considering the responses provided by stakeholders and shall publish a feedback statement as soon as this exercise is completed.