INVESTOR COMPENSATION SCHEME [ S.L.370.09 1
SUBSIDIARY LEGISLATION 370.09
INVESTOR COMPENSATION SCHEME 
REGULATIONS
21st November, 2003
LEGAL NOTICE 368 of 2003.
Citation.
Scheme Regulations.
Interpretation.
Cap. 370.
"branch" means a place of business which forms a legally
dependent part of a licence holder and from which some or all of
the activities for which the licence holder has been authorised is
conducted; all the places of business set up in any one country by a
licence holder whose head office is in Malta or in another country
shall be regarded as a single branch;
"competent authority" means the competent authority under the
Act;
Cap. 330.
"Financial Services Tribunal" means the tribunal established in
terms of the Malta Financial Services Authority Act;
"instruments" shall have the meaning assigned to the word in
article 2 of the Act;
"investor" means any individual who otherwise than in the
course or for the purpose of a business, trade or profession entrusts
money or instruments to a licence holder in connection with
licensed business;
"licensed business" means the carrying out of any activity in
regard to which there is a licence under the Act;
"licence holder" means any person who holds a licence to carry
out investment services business in terms of the Act;
S.L. 371.09
"Management Committee" means the Compensation Schemes
Management Committee established under regulations 3 and 5 and
referred to in the Depositor Compensation Scheme Regulations;
"Scheme" means the Investor Compensation Scheme established
under regulation 3;
"total revenue" means all gross income received or receivable
from the licence holderis business activities which are licensable
under the Act, whether actually licensed or not;
and the words and expressions which are also used in the Act shall
have the same meaning as in the Act.
Establishment of 
the Investor 
Compensation 
Scheme.
3. (1) There shall be established an Investor Compensation
Scheme.
(2) The Scheme shall be a body corporate having a distinct
2 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
legal personality and shall be capable, subject to the provisions of
the Act and of these regulations, of entering into contracts of
borrowing or otherwise incurring indebtedness for the purposes of
its functions, of acquiring, holding and disposing of any kind of
property for the purposes of its functions, of suing or being sued
and of doing all such things and entering into all such transactions
as are incidental or conducive to the exercise or performance of its
functions.
(3) The Scheme shall be managed and administered by and be
under the general control of the Management Committee appointed
in terms of regulation 5.
(4) The legal and judicial representation of the Scheme shall
vest in the chairperson of the Management Committee:
Provided that, and without prejudice to the foregoing, the
Management Committee may vest any one or more of its members
or of the officers or agents of the Scheme with legal or judicial
representation.
Functions of the 
Scheme.
4. (1) Without prejudice to any other power or function
conferred on it by these regulations or by any other law, it shall be
the function of the Scheme -
( a ) to maintain a fund or funds out of which payments
shall be made to investors and to meet such other
payments or expenses as may be paid out of the fund
or funds in accordance with these regulations;
( b ) to establish and maintain, after consultations with the
competent authority, arrangements for the making of
payments to investors in accordance with these
regulations;
( c ) to process claims for compensation by investors as
expeditiously as possible and to ensure that
compensation is paid out without undue delay; and
( d ) to advise the competent authority on matters relating
to compensation of investors.
(2) The objective of the Scheme is to provide a means of
protection for private investors within the framework of these
regulations. All the members of the Management Committee shall
work in the best interest of the Scheme and shall pursue and
promote its objective.
Composition of the 
Management 
Committee.
5. (1) The Management Committee shall be appointed by the
competent authority and shall consist of a chairperson and six other
members as follows:
( a ) an officer, not below managerial grade, performing
duties with the competent authority, possessing the
necessary expertise and experience in financial
services;
( b ) a person nominated by an association or associations
or other bodies representing persons holding a licence
under the Act which participate in and contribute to
INVESTOR COMPENSATION SCHEME [ S.L.370.09 3
the Scheme in terms of these regulations, and which
are recognised for such purpose by the competent
authority;
S.L. 371.09
( c ) a person nominated by an association or associations
or other bodies representing credit institutions which
participate in and contribute to the Depositor
Compensation Scheme established under the Depositor
Compensation Scheme Reþulations, 2003, and which
are recognised for such purpose by the competent
authority;
( d ) a person nominated jointly by the associations or other
bodies indicated in paragraphs ( b ) and ( c );
( e ) an officer, not below managerial grade, performing
duties with the Central Bank; and
( f ) a person, who because of his experience, qualifications
or activities is considered as being able to state and
represent the point of view of consumers:
Provided that whenever, for any reason whatsoever, the
associations or other bodies representing licence holders and credit
institutions referred to in subregulation (1)( b ), ( c ) and ( d ) fail to
nominate, within the time given to it by the competent authority,
the person it is required to nominate, the competent authority shall
appoint the persons, or the remaining person, at its discretion.
(2) The members of the Management Committee shall be
appointed from among persons who, in the view of the competent
authority, have proven experience and are qualified in financial
services, management, or possess any other relevant professional or
commercial knowledge and expertise.
(3) The members of the Management Committee nominated in
terms of subregulation (1)( b ), ( c ) and ( d ) shall not be eligible for
appointment if they have a financial or other interest as is likely to
affect prejudicially the discharge by them of their functions under
these regulations. Such members of the Management Committee
shall serve in their personal capacity and shall not represent or
receive directives or instructions from the person or entity
nominating them.
(4) Every member of the Management Committee shall hold
office for such period and upon such terms and conditions as may
be determined by the competent authority and indicated in the letter
of appointment. Such term of office shall be of not less than three
years and not more than five years. Every member of the
Management Committee, including the chairperson, shall be
eligible for re-appointment.
(5) A member of the Management Committee may be relieved
of office by the competent authority on the grounds of inability to
perform the functions of his office, whether due to infirmity of
mind or of body, or of misbehaviour; and for the purposes of this
subregulation repeated and unjustified non-attendance of meetings
of the Management Committee may be deemed to amount to
misbehaviour.
4 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
(6) A member of the Management Committee may resign from
office by means of a letter addressed to the competent authority.
(7) The competent authority may fill any vacancy occurring in
the Management Committee for any reason whatsoever, having
regard to the provisions of subregulation (1).
(8) Notice of the names of the members of the Management
Committee (and any resignation, dismissal and new appointment)
shall be published in the Gazette.
(9) The competent authority shall establish any remuneration to
be paid to the members of the Management Committee.
(10) The competent authority shall appoint one of its officers to
serve as secretary to the Management Committee. Such person
shall be responsible to make the necessary preparations for the
meetings of the Committee and to keep the minutes thereof.
(11) For the purpose of subregulations (2), (4), (5), (6), (8) and
(9), "member" shall include the chairperson.
Powers and duties 
of the Management 
Committee.
6. (1) The Management Committee shall have the power to
enter into such reasonable administrative and other expenses as
may be necessary to enable it to fulfil its functions under these
regulations.
(2) The Management Committee may place contributions made
by licence holders in terms of regulation 11 and any other funds
managed and administered by it on deposit or may invest such
contributions, having regard to the need for prudence.
(3) The Management Committee may take out insurance
policies, borrow or otherwise incur indebtedness on behalf of the
Scheme for the purposes of the Scheme’s functions, in any way and
under any terms it may consider appropriate, provided such
borrowings do not exceed 30 per cent of the net asset value of the
Scheme.
(4) The Management Committee shall cause proper books of
account to be kept so that the financial position of the Scheme can
be ascertained with reasonable accuracy at any time.
(5) In exercising its powers and duties, the Management
Committee shall be bound to safeguard and take into account the
general interests of investors entitled to claim under these
regulations.
Investment 
management and 
administrative 
support 
agreements.
7. Without prejudice to regulation 6(1), the Management
Committee shall enter into such investment management and
administrative support agreements as may be approved by the
competent authority.
Publication of 
financial 
statements.
8. (1) The Management Committee shall prepare annual
forecast statements of the expected costs and revenues of the
Scheme, and shall make available such forecast statements to all
participants upon request.
(2) The Management Committee shall submit to the competent
authority an annual report on the discharge of its functions and on
INVESTOR COMPENSATION SCHEME [ S.L.370.09 5
the operation of the Scheme within three months from the financial
year end of the Scheme. Such annual report shall include,  inter
alia -
( a ) a statement showing the payments in and payments out
of the Scheme during its immediate previous financial
year; and
( b ) annual audited financial statements prepared in
accordance with Intemational Accounting Standards.
(3) The annual report shall be made available on the website of
the competent authority.
(4) The books of accounts shall be kept at such place as the
Management Committee thinks fit.
Meetings of the 
Committee.
9. (1) The meetings of the Management Committee shall be
held as often as may be required but not less than once every three
calendar months.
(2) Meetings of the Management Committee shall be convened
by the chairperson either on his own initiative or at the written
request of any two members of the Management Committee.
(3) The Management Committee shall only conduct business if
at least four members (which shall include the chairperson or, in his
absence, the member nominated by the competent authority) are
present.
(4) For the purpose of decisions of the Management
Committee, each member shall have one vote. Voting shall be by
simple majority of the members present. In the event of an equality
of votes, the chairperson shall have a second or casting vote.
(5) Subject to the foregoing provisions of this regulation, the
Management Committee shall have power to regulate its own
proceedings and may also establish such procedures or make such
rules as it may deem appropriate for the better fulfilment of its
purposes.
(6) The Management Committee may invite any person who in
its opinion possesses specialised knowledge or expertise on a
particular subject, to attend any meeting and take part in the
discussions.
Source and 
application of 
funds.
10. (1) In terms of regulation 4, the Scheme shall establish
and maintain a fund or a number of funds out of which payments to
investors shall be made in accordance with these regulations.
(2) The sources of funding shall include:
( a ) contributions levied from participants of the Scheme
by the Management Committee;
( b ) money paid as administrative fees by all participants,
as may be prescribed;
( c ) money received as income from the investment of the
assets of the fund;
( d ) money borrowed by the Management Committee for
6 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
the purposes of the Scheme;
( e ) money received by the Management Committee on any
insurance policy it takes out; and
( f ) any other money required to be paid in to the fund or
funds, received or recovered by the Management
Committee for the purposes of the Scheme.
(3) There shall be paid out of the fund or funds:
( a ) money determined by the Management Committee as
compensation for investors;
( b ) money required for the repayment of (or interest on or
charges in connection with) any money borrowed or
for the payment of premia on any insurance policies
taken out, for the purposes of the Scheme;
( c ) the costs incurred in administering and managing the
Scheme; and
( d ) any other money paid out by the Management
Committee for the purposes of the Scheme.
(4) The Management Committee shall hold, manage and apply
the fund or funds in accordance with these regulations.
Participants.
S.L. 370.03
11. (1) Every licence holder in possession of a Category 2 or
Category 3 licence in terms of the Investment Services Act
(Licence and Other Fees) Regulations shall participate in and
contribute to the Scheme, including branches of licence holders
operating in other countries:
Provided that licence holders providing investment services
solely and exclusively to persons who do not fall within the
definition of "investor" in terms of regulation 2 shall not be
required to participate in and contribute to the Scheme.
(2) In the case of a participant whose head office is situated in
a country outside Malta, as well as branches of a licence holder
having their head office in Malta but operating outside Malta, and
where there is supplementary cover by a corresponding scheme in
that other country, the Management Committee shall enter into a
bilateral agreement with the authority responsible for the
management and administration of the scheme in that other country
stipulating,  inter alia , the rules and procedures to be followed for
the payment of compensation to claimants.
(3) Participation in the Scheme does not exclude the possibility
that particular licence holders may have to participate also in
another compensation or similar schemes set up under a different
law and governed by another competent authority or other body.
(4) When a licence holder becomes a participant in the Scheme
after the coming into force of these regulations, the Management
Committee shall determine all the relative obligations and
conditions of the new participant in terms of these regulations.
Contributions to 
the Scheme.
12. (1) Participants shall pay such contributions to the
Scheme as prescribed in the Second Schedule.
INVESTOR COMPENSATION SCHEME [ S.L.370.09 7
(2) Participants may be requested to pay to the Scheme such
reasonable administrative fees as may from time to time be
prescribed by the Management Committee.
Determination.
( a ) it appears to the competent authority that a participant
is unable, for the time being, for reasons which are
directly related to its financial circumstances to meet
its obligations arising from claims by its investors and
to have no early or foreseeable prospect of being able
to do so, or has otherwise suspended payment; or
( b ) in respect of a participant which has its head office in
Malta an order has been made by the Courts in Malta
for its winding-up or liquidation under the laws of
Malta;
whichever is the earlier, the competent authority shall, as soon as
practicable, make a determination to that effect.
(2) The competent authority may, by way of guidelines,
establish those circumstances or criteria which it may consider in
arriving at a decision as to whether it will make a determination in
terms of subregulation (1).
(3) As soon as practicable after a determination is made, the
competent authority shall inform the Management Committee in
writing of such determination. The Management Committee may
take additional measures it deems necessary or appropriate within
its powers under these regulations.
(4) The competent authority shall, as soon as possible, inform
any other compensation scheme relating to financial services
activities, as may be established under any other law and regulated
by other competent authority or other body, which it believes may
be effected by such determination.
(5) In making a determination in accordance with subregulation
(1), the competent authority shall have regard to any report of an
officer or officers authorised by it on the state of affairs of the
licence holder, and any other information in its possession.
Application for 
compensation.
14. (1) On being informed by the competent authority that a
determination has been made under regulation 13(1), the
Management Committee shall publish a notice in at least two local
newspapers, informing investors of the licence holder concerned of
such determination and of the manner in which claims supported by
documentary evidence are to be submitted.
(2) The right of an investor for compensation shall not be
forfeited if the investor is able to prove that he was unable to assert
his right to compensation within any prescribed time-limits as may
be provided by the Management Committee.
(3) The Management Committee may, following an application
for compensation being made to it by an investor, accept or refuse
to provide compensation in accordance with these regulations.
(4) The Management Committee shall proceed to pay
8 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
compensation for verified claims within three months of the date of
the determination given in terms of regulation 13(1):
Provided that the Management Committee may, in
exceptional circumstances, apply to the competent authority for an
extension of this period by a further period of up to three months,
and up to two further periods of up to three months each thereafter.
Verification of 
claims.
15. (1) The Management Committee shall make its own
administrative arrangements for verifying claims. These
arrangements shall include:
( a ) providing an application form for claimants both in
English and in Maltese;
( b ) providing for the exercise of the Management
Committee’s right of subrogation under regulation 22;
and
( c ) requiring claimants to give:
(i) their identity and address;
(ii) the capacity in which they claim;
(iii) evidence of the investments; and
(iv) any other information as may be required by the
Management Committee.
(2) The Management Committee may refuse to make a payment
for compensation until the claimant informs the Management
Committee as to the capacity in which he is the beneficial owner of
the investment and provides satisfactory documentary evidence and
information to allow the Management Committee to determine the
amount of compensation payable.
Cap. 373.
(3) The Management Committee may decide to delay payment
to a claimant until determination of any criminal charge brought
against the claimant, investor, or any person entitled to or
interested in respect of an investment under the provisions of the
Prevention of Money Laundering Act or a corresponding law of a
country outside Malta.
(4) Where in the opinion of the Management Committee
circumstances so warrant, the Management Committee may effect
part payments to claimants eligible for compensation under these
regulations.
When funds appear 
to be inadequate.
16. Whenever it appears to the Management Committee that
the funds for the time being held by the Scheme are inadequate for
the Management Committee to exercise its functions, the
Management Committee may require a contribution to be made to
the Scheme by licence holders out of, but not exceeding, funds
reserved for this purpose by the licence holder in accordance with
the Second Schedule. Such further contributions shall be provided
to the Scheme within thirty calendar days of their being requested.
Limit of 
compensation.
17. The total amount of compensation that may be paid out to
an investor shall be the lesser of ninety per cent (90%) in respect of
all claims which have been made by such investor, or up to the
Maltese liri equivalent of 20,000 Euros converted on the basis of
INVESTOR COMPENSATION SCHEME [ S.L.370.09 9
the official closing middle rate issued by the Central Bank of Malta
prevailing on the date of settlement of the claim:
Provided that the total compensation paid by the Scheme in
any one year shall not exceed 75 per cent of the net asset value of
the Scheme as shown in the latest audited financial statements and
which shall also include variable contributions held by licence
holders in reserves as required in terms of the Second Schedule. In
this proviso, "net asset value" shall include any funds belonging or
due to the Scheme, including the fixed and variable contributions in
terms of the Second Schedule:
Provided further that where the funds of the Scheme are
insufficient to satisfy the claims in full, payments to claimants shall
be made  pro rata .
Claimants.
definition of "investor" in regulation 2 may make a claim against
the Scheme in terms of these regulations. An investor may only
submit one claim in respect of all his investments, taken in
aggregate, with the licence holder concerned.
(2) The following individuals are excluded from claiming
under the Scheme:
( a ) directors and managers of the relevant licence holder
and members of the licence holder with personal
liability, persons holding five percent or more of the
capital of such licence holder, the auditors of the
licence holder and persons of the same description
with respect to a company forming part of the same
group of companies as the licence holder;
( b ) close relatives, that is ascendants, descendants or the
spouse of the persons referred to in paragraph ( a );
( c ) investors who, in the view of the Management
Committee, have any responsibility for or have taken
advantage of certain facts relating to a licence holder
which gave rise to the licence holderis financial
difficulties or contributed to the deterioration of its
fmancial situation;
Cap. 373.
( d ) investors in respect of transactions in connection with
which a criminal conviction has been obtained for
money laundering in terms of the Prevention of Money
Laundering Act; and
( e ) nominees or other third parties acting on behalf or in
the interest of the persons referred to in paragraphs ( a )
to ( d ).
(3) The categories listed in the First Schedule are also excluded
from claiming under the Scheme.
(4) In the event of doubt as to whether an investor is excluded
from submitting a claim to the Scheme the matter shall be
conclusively determined by the Management Committee for all
purposes of these regulations.
(5) An investor may not claim against more than one scheme in
10 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
respect of a single claim. Where a claim has been made under two
or more compensation schemes, the Management Committee shall
conclusively determine under which scheme the claimant is eligible
for compensation.
(6) Claims shall be made in such form, and shall be
accompanied by such documentation or information, as the
Management Committee may determine and make public from time
to time.
Claims. 19. (1) The Scheme shall provide for the payment of
compensation in respect of claims arising out of a licence holder’s
inability to:
( a ) repay money owed to or belonging to investors and
held on their behalf in connection with licensed
business; or
( b ) return to investors any instruments belonging to them
and held, administered or managed on their behalf in
connection with licensed business or, where this is not
possible, their monetary equivalent or value.
(2) The amount of an investoris claim shall be calculated by the
Management Committee after taking into account any or all of the
following factors:
( a ) legal and contractual conditions;
( b ) counterclaims;
( c ) market value; and
( d ) surrender value.
Eligibility for 
compensation.
20. Where the Management Committee is of the opinion that
an investor is not eligible for compensation in whole or in part in
terms of these regulations, the Management Committee shall give
notice in writing to such investor of that opinion and the reasons
therefor.
Compensation paid 
to be deducted 
from compensation 
payable.
21. (1) In considering compensation to any investor for any
payment under these regulations, the Management Committee shall
take into account any payments made under a policy of professional
indemnity insurance, if any, held by the licence holder or any
payments made under any other law or arrangement in respect of
the same losses.
(2) The Management Committee shall deduct such amount of
compensation paid from the amount of compensation that may be
payable to the investor in respect of any or all of the circumstances
arising from this regulation.
Subrogation. 22. (1) Where the Scheme has made a payment to a claimant,
the Scheme shall be subrogated to the rights and remedies of that
claimant against the licence holder.
(2) Prior to payment, investors shall confirm in writing to the
Management Committee that:
( a ) they have not received any payment from any other
scheme or from the licence holder concerned in respect
INVESTOR COMPENSATION SCHEME [ S.L.370.09 11
of the same loss;
( b ) they will provide any assistance the Management
Committee may require to enable the Management
Committee to exercise its rights and remedies against
the licence holder; and
( c ) their rights in respect of any money or instruments
comprising the claim shall be subrogated in favour of
the Management Committee.
Establishment of 
the level of 
compensation.
23. (1) Where two or more persons are jointly entitled to an
investment account, each of these persons shall be treated as having
a separate account of an amount produced by dividing the amount
of the investment to which such persons are jointly entitled by the
number of persons so entitled, unless there exists specific evidence
or special contractual provisions determining the particular
entitlements of such persons in which case such evidence shall be
taken into account in determining their entitlements.
(2) Where a person is acting as trustee or nominee for one or
more persons under a deed of trust or other similar agreement, the
amount comprising the claim shall be deemed to belong to the
beneficial owners equally, unless there exists specific evidence or
special contractual provisions determining the beneficial interests
of such persons in which case such evidence shall be taken into
account in determining their entitlements, and provided in any
event that ownership is proved to the entire satisfaction of the
Management Committee.
Consumer 
information.
24. The Management Committee shall ensure that the general
public is adequately informed about the operation of the Scheme
arrangements.
Advertisements.
intending investors adequate and clear information concerning the
applicability of the Scheme together with such other particulars as
may from time to time be specified by the competent authority in a
manner and form specified by the competent authority:
Provided that a licence holder shall not advertise or cause
to be advertised the fact that money or instruments placed with a
licence holder are protected by or through the Scheme except with
the prior written consent of the competent authority.
(2) The competent authority may, from time to time, specify
the information that licence holders are to provide to investors
regarding the Scheme and its operations, as well as the manner and
form in which such information should be provided.
Power of the 
Management 
Committee to 
obtain information.
26. (1) The Management Committee may request participants,
either directly or through the competent authority, to provide such
information which the Management Committee may consider
relevant for the proper administration of the Scheme, within a
period of time as may be established by the Management
Committee. The request may be addressed to the participant or to
any of its directors or officials who are in possession of such
information.
12 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
(2) Without prejudice to any provision of these regulations, a
participant or any director or official thereof, who fails to comply
with the Management Committeeis request for information within
the period of time established by the Management Committee in
terms of subregulation (1), or who knowingly or recklessly
furnishes information, or makes a statement which is inaccurate,
false or misleading in any material respect, shall be liable to an
administrative penalty not exceeding one thousand liri as may be
imposed by the competent authority by means of a notice in writing
and without recourse to a court hearing.
(3) Where an administrative penalty has been imposed by the
competent authority in terms of subregulation (2), an appeal shall
lie to the Financial Services Tribunal in accordance with articles 6
and 19 of the Act.
Respect for 
confidentiality.
Cap. 377.
27. (1) Members of the Management Committee and persons
appointed under regulation 6(1) shall be subject to the provisions of
the Professional Secrecy Act and shall keep confidential any
information obtained by them in the course of performing their
duties under these regulations, and shall not reveal any information
to any person, credit institution, association or entity except as may
be allowed by these regulations or any other law or by Court order.
(2) The duty of confidentiality shall not be contravened in the
case of:
( a ) exchange of information between the Management
Committee and competent authorities in other
countries, or the competent authorities for the
management and administration of corresponding
schemes in other countries, provided that the relevant
information is necessary for the discharge of their
duties under these regulations; and
( b ) any use or disclosure as may be required to enable the
Management Committee and its officers or agents to
perform their duties and carry out their functions under
these regulations.
Failure to comply 
with obligations.
28. (1) Where a licence holder fails to comply with its
obligations under these regulations, the Management Committee
shall notify and consult with the competent authority and shall
agree on the appropriate measures to be taken by the competent
authority, including the imposition of penalties, to ensure that the
licence holder complies with such obligations.
(2) If these measures fail to secure compliance on the part of
the licence holder, the Management Committee shall report the
matter to the competent authority for any further measure to be
taken at law, including the possible restriction or withdrawal of the
licence holderis licence.
(3) After the restriction or withdrawal of a licence, cover shall
continue to be provided in respect of licensed business up to the
date of restriction or withdrawal of the licence.
INVESTOR COMPENSATION SCHEME [ S.L.370.09 13
Procedures to 
investigate 
complaints.
29. The Scheme shall establish and maintain adequate internal
procedures to investigate complaints against it by licence holders
and by investors.
Power to issue 
guidelines.
30. (1) The competent authorit ma issue guidelines to licence
holders for the purposes of these regulations.
(2) Such guidelines may contain such incidental,
supplementary and consequential provisions as appear to the
competent authority to be expedient for the purpose of these
regulations.
Exemption from 
liability for 
damages.
31. The Management Committee and officers and agents of the
Scheme shall not be liable in damages for anything done or omitted
in the discharge of functions under these regulations unless it is
shown that the act or omission was in bad faith.
Financial year end 
of the Scheme.
32. The financial year end of the Scheme shall be an
accounting period of twelve months ending on the thirty-first day
of December of each year.
Audit.
with International Standards on Auditing by auditors appointed by
the Management Committee from among persons who are qualified
to be appointed as auditors of a company under the law for the time
being in force in Malta.
Cooperation with 
other authorities.
34. The competent authority and the Management Committee
shall consult the relevant competent authorities and the persons
responsible for compensation schemes in other countries outside
Malta and seek to reach agreement with those authorities and
persons about:
( a ) the procedures to be followed if a participant defaults;
( b ) the amounts of compensation payable, after deductions
if any, under each scheme; and
( c ) any other aspect which is deemed appropriate for the
proper management and administration of the
schemes.
Transitory 
provision.
S.L. 371.09
35. (1) The Management Committee established under
regulation 3 of the Depositor Compensation Scheme Regulations
and the Management Committee referred to in these regulations are
one and the same. The Management Committee established under
regulation 3 of these regulations shall continue in the personality of
the Management Committee established immediately before the
coming into force of these regulations and accordingly shall
succeed to all its rights and obligations.
L.N. 6 of 2003.
(2) All appointments, decisions, contributions, claims,
payments or other acts made or taken under the Investor
Compensation Scheme Regulations, 2003, before the coming into
force of these regulations, shall continue in force and shall be
deemed to have been made or taken under these regulations, and
any reference in any law to the Management Committee shall be
deemed to be a reference to the Management Committee
established under regulation 3.
14 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
Compensation 
Fund.
Cap. 345.
36. The Compensation Fund established by bye-laws in terms
of the Schedule to the Financial Markets Act shall become
absorbed as an integral part of the Scheme in accordance with the
provisions of the Third Schedule.
INVESTOR COMPENSATION SCHEME [ S.L.370.09 15
FIRST SCHEDULE
Exclusions
(Regulation 18)
For the avoidance of doubt, the following are excluded from claiming under the
Scheme and shall not be deemed to be investors for the purpose of these regulations:
(1) Sole traders, companies and other commercial partnerships;
(2) Professional and institutional investors, including:
( a ) Persons holding an investment services licence under article 6 of the
Act;
( b ) Credit institutions carrying on the business of banking under the
Banking Act;
( c ) Financial Institutions as defined in article 2 of the Financial Institutions
Act;
( d ) Companies authorised to carry on the business of insurance under the
Insurance Business Act;
( e ) Collective investment schemes as defined in article 2 of the Act;
( f ) Retirement funds as defined in the Special Funds (Regulation) Act; and
( g ) Other categories of local and/or foreign professional and institutional
investors, whether resident or non-resident in Malta, as may be
determined by the competent authority from time to time;
(3) National and international institutions, governments and administrative
authorities;
(4) Local and municipal councils or authorities; and
(5) Debt securities issued by the same licence holder and liabilities arising out
of own acceptances and promissory notes.
SECOND SCHEDULE
Contributions in terms of regulation 12
1. Contributions
( a ) Licence holders shall, every year, be obliged to contribute to the
Scheme a Fixed Contribution and a Variable Contribution.
( b ) The Fixed Contribution shall be paid to the Scheme annually, in every
calendar year.
2. Fixed Contribution
( a ) Every licence holder which participates in the Scheme shall pay a Fixed
Contribution as follows:
(i) Lm 1,250 in the case of Category 2 Investment Services Licence
Holders; and
(ii) Lm 7,500 in the case of Category 3 Investment Services Licence
Holders.
16 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
( b ) The first contribution for calendar year 2003 due by licence holders who
held a licence in terms of the Act at the time of the coming into force of
the Investor Compensation Scheme Regulations, 2003 shall be due
before the end of November 2003.
( c ) In subsequent years, payment of the Fixed Contribution to the Scheme
shall be made by the 30th April of each year.
( d ) In the event that a new participant joins the Scheme between 1st January
and 31st December, 2003, such participant shall only be obliged to pay
a proponion of the Fixed Contribution covering the period in calendar
year 2003 in respect of which the participant has been in possession of a
licence under the Act.
3. Variable Contribution
( a ) The Variable Contribution is calculated by applying a percentage rate to
the total revenue of the licence holder on an annual basis. The
percentage rate for the Variable Contribution is set at 0.1 per centum.
( b ) The Variable Contribution shall be accounted for in the financial year
when the Fixed Contribution is paid.
(i) Investor Compensation Scheme Reserve
The Variable Contribution shall be held by the licence holder in a reserve so
that the funds will be made available within thirty calendar days from the time when
the Scheme makes a call on such funds in terms of regulation 16.
Funds in this reserve, which shall be called the "Investor Compensation
Scheme Reserve" in all accounts and documents, shall be invested by the licence
holder with a third party approved in writing by the Management Committee. Such
third party shall hold the funds on pledge in favour of the Scheme and shall
specifically acknowledge the rights of the Scheme as pledgee, and shall notify the
Scheme in writing accordingly.
If the Investor Compensation Scheme Reserve is more than the Variable
Contribution, no transfer to the Investor Compensation Scheme Reserve shall be
made. This implies that when a V ariable Contribution is higher than the Investor
Compensation Scheme Reserve, the licence holder shall be required to make a
Variable Contribution for the difference to ensure that the higher amount is always
on reserve.
The Investor Compensation Scheme Reserve shall never be less than
Lm300.
(ii) Investments of funds on reserve by the licence holder
Funds comprising the Investor Compensation Scheme Reserve can only be
invested in listed bonds (debt instruments) and/or placed in an interest bearing bank
account subject to the following:
• Minimum 25 per cent of the total amount has to be maintained in an
Lm-denominated interest bearing bank account (maximum 60 day call).
• Maximum 75 per cent invested in listed debt instruments of which:
- minimum 50 per cent (in this case 37.5 per cent of the total
Reserve) has to be invested in Malta Government Stocks;
- the balance (37.5 per cent of the total Reserve) may be invested in
debt instruments issued by local or international entities, with an
investment grade of not lower than A (Moodyis or Standard &
Pvoris), where applicable.
INVESTOR COMPENSATION SCHEME [ S.L.370.09 17
[For the sake of clarity, should a licence holder choose to hold 40% of the Reserve
in a bank account, the remaining 60% may be invested in listed debt instruments, of
which a minimum of 50% (in this case 30% of the total Reserve), to be invested in
Malta Govemment Stocks, and the balance in other listed bonds as indicated above.]
The above parameters are only indicative and may be changed by Guidelines
issued by the competent authority, upon consultation with the Management
Committee and licence holders.
(iii) Financial reporting of the reserve
The licence holders shall be required to insert a suitable note in the annual
financial statements as to the market value of the instruments in which the reserve
has invested, together with a maturity schedule according to the type of instrument.
The amount on reserve will be deducted in full as an illiquid adjustment for
the purposes of calculating the licence holderis financial resources in its fmancial
return submitted in terms of its licence conditions.
4. Maximum limit of payment
Licence holders will be required to contribute to their Investor
Compensation Scheme Reserve each year until such time that aggregate fixed
contributions paid to the Scheme and accumulated reserves held by licence holders
by way of the Variable Contribution amount to Lm1,000,000.
THIRD SCHEDULE
(Regulation 36)
The Compensation Fund and the Select Committee established by Bye-laws
in terms of the Schedule to the Financial Markets Act shall cease to be in effect as
from the date of the coming into force of these regulations and the Compensation
Fund shall as from such date become absorbed as an integral part of the Scheme
subject to the following provisions of this paragraph:
(1) The Bye-laws as in force immediately before the coming into force of these
regulations, shall mutatis mutandis continue to regulate any claim made by an
investor in terms of Bye-law 7.03 with reference to events occurring prior to 3rd
January, 2003 and any reference to the Council shall be deemed to be a reference to
the Management Committee established under these regulations.
(2) ( a ) The portion of the Compensation Fund comprising the payments made
by the Malta Stock Exchange in terms of Bye-law 7.12( b ) shall be transferred back
to the Malta Stock Exchange:
Provided that the Malta Stock Exchange shall keep such portion of the
Compensation Fund separate and distinct from any other funds or assets;
( b ) The Malta Stock Exchange shall provide an indemnity in favour of the
Scheme, up to the amount of funds kept separate and distinct in accordance with the
proviso to the immediately preceding sub-regulation and in proportion to the
percentage of the funds constituting the Compensation Fund that have been
transferred back to it, and it shall remain responsible in accordance with the
provisions of the first proviso to paragraph ( b ) of subregulation (3), up till 3rd
January, 2008, for any claims that may arise with reference to events occurring prior
to 3rd January, 2003.
18 [ S.L.370.09 INVESTOR COMPENSATION SCHEME
(3) ( a ) The portion of the Compensation Fund that had been paid by the
members of the Malta Stock Exchange in terms of Bye-law 7.12( a ) and any other
remaining funds pertaining to the Compensation Fund shall be transferred to the
Scheme and shall become an integral part thereof:
Provided that a moratorium shall be allowed in favour of members of the
Malta Stock Exchange who had paid such portion to the Compensation Fund as in
force immediately before the coming into force of these regulations, so that their
respective contributions to the Compensation Fund shall be set off against
contributions now due by them to the Scheme;
( b ) The Scheme shall be responsible for claims made against the
Compensation Fund by investors in terms of Bye-law 7.03 and arising out of or with
reference to events occurring prior to 3rd January, 2003:
Provided that claims accepted for settlement by the Management Committee
shall be settled out of funds transferred from the Compensation Fund to the Scheme
and the Malta Stock Exchange pro rata:
Provided further that the liability of the Scheme shall not exceed the amount
of funds transferred in accordance with the provisions of paragraph ( a ) of
subregulation 3, and the responsibility of the Scheme shall expire on 3rd January,
2008.
(4) Any reference in any law to the Compensation Fund established by Bye-
laws in terms of the Schedule to the Financial Markets Act, shall henceforth be
deemed to be a reference to the Scheme.
