Issue link: https://maltatoday.uberflip.com/i/1264355
10 maltatoday | SUNDAY • 28 JUNE 2020 COMMERCIAL Could you explain the process that leads to the MFSA taking enforcement action? The enforcement process has two broad aspects: the investigative part, and the en- forcement aspect. When it comes to the investigative part, under our enforcement function we receive information to aid our investigations from various sources, both internal and external. As part of the investigative process, we use various tools. For instance, we can carry out surprise inspections, where li- cence holders would not be aware that the regulator is going to come to their offices to check and verify certain infor- mation. We also carry out interviews with key functionaries within licensed entities, and at times we also extract data. Once we have all the needed informa- tion in hand, an analysis of that infor- mation commences, to verify whether it appears, from a preliminary review, that there are possible breaches of financial services legislation. If, in view of the en- forcement function, there are such prima facie breaches, the second aspect of the process is then triggered – enforcement. The person under investigation is given ample opportunity to submit any rep- resentations before the MFSA takes a final decision. Moreover, as part of the process, we not only indicate to the per- son/s under investigation what evidence we have, but we also inform them which laws we deem have been breached, and which action we are proposing to take. We do this to ensure the persons con- cerned have sufficient opportunity to de- fend themselves adequately. Any enforcement action, depending on the severity of the breaches, should serve as a future deterrent both for the person/s in respect of whom enforcement action is taken as well as others. Our ultimate aim is not only to protect market integrity, but also to protect the consumer. This is at the core of why the MFSA exists. Which are the greatest challenges for the regulator when it comes to the area of enforcement? One of the major challenges is keep- ing up with the ever-changing landscape within which we operate. We deal with some very complex business models with- in our authorised entities, with licence holders which operate not only in Malta but also in other jurisdictions. This adds complexity and is also reflected in the types of cases which are being handled by enforcement. Half the cases we han- dle are, in fact, complex cases. In order to mitigate this and to overcome challenges, we have invested heavily in resources and in having the right skillsets when it comes to our staff. In practice, as an enforcer, one of the possible types of breaches which pose more of a challenge to detect are licensa- ble activities being carried out by persons who are not authorised by the MFSA, and which we would not be aware of. When it comes to breaches by licence holders, there are various sources where we can get information from. But in the case of unauthorised activity, the regulator needs to rely more heavily on intelligence it re- ceives – even information from the gen- eral public. If I could make an appeal on this point, I would like to advise consumers that if they are approached to purchase a finan- cial product, they should first verify with the MFSA – by consulting with our web- site or calling us – to make sure that the person providing that product is author- ised. If it results that the person who ap- proached the consumer is not authorised, it is then essential that such information is passed on to us for further investiga- tion. I should also underline that the enforce- ment process does not end when the MF- SA takes enforcement action. In truth, most of the time this is only the start of a different phase, since a number of per- sons who are sanctioned by the MFSA, in effect, file an appeal, which they, of course, have a right to do. In the case of certain types of enforcement action, such as when the MFSA cancels a licence, if an appeal is lodged by the licence-holder, the regulator's decision does not become op- erative. It would only become operative once the appeal process is concluded, de- pending on the outcome. In this respect, I should highlight that it is in the interest of consumers that the judicial review is carried out as swiftly as possible. The Supervisory & Effectiveness Dash- board on the MFSA's website shows that the number of enforcement actions tak- en by the Authority dropped from 23 in 2017 to 14 in 2019. This year, there has been a considerable increase. How do you explain this? As part of the operational and organi- sational changes carried out within the Authority, a decision was taken to set up a specific Enforcement Directorate, made up of staff with the right skillsets focusing on investigations and enforcement action. In 2019, the main focus was on attract- ing such people and training them. We are now seeing the results of this. In the first few months of 2020, we managed to conclude more enforcement action than all actions taken in 2019 and 2018. By 22 June this year, we have already taken 22 enforcement actions, as opposed to 14 in 2019 and 19 in 2018. At the moment, we are also looking at around 80 other cases, half of which are complex. Apart from unauthorised business, the Authority also tackles issues related to in- vestigations which could lead to persons, previously approved by the MFSA, to not be deemed "fit and proper" any longer. We could also cancel a licence, which is the strongest enforcement action we can take. What role does the MFSA have in instill- ing a more robust compliance culture within the financial services industry? The Authority plays a very important role in ensuring that there is the right culture within our licensed entities. The regulator is doing this by engaging at the Michelle Mizzi Buontempo has occupied the role of Chief Officer Enforcement at the MFSA since March this year. Her academic background is in law, with a specialisation in financial services. Mizzi Buontempo has been employed at the MFSA for the past 21 years, with her main involvement being in the area of supervision of financial services. For the past five years, she headed the regulator's function responsible for consumer protection, within the Authority's conduct supervision arm, before being appointed to her current position on 1 March Protecting the financial market's integrity If I could make an appeal on this point, I would like to advise consumers that if they are approached to purchase a financial product, they should first verify with the MFSA – by consulting with our website or calling us – to make sure that the person providing that product is authorised