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21st – 25th NOVEMBER 2018: 1st MALTA ITALY BUSINESS FORUM

Read the program and see the speakers of the event

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20/10/2018: ESMA – Security and Markets Stakeholder Group – writes a report on Initial Coin Offerings and Crypto Assets. Read Esma Report

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3-5 October 2018: DELTA SUMMIT MALTA

Malta is the first country in the world to have approved a specific regulation on virtual financial assets and the distributed ledger technology and proudly defines itself as Blockchain Island. The country is moving now to the operative level coordination and checks. At the Delta Summit (3-5 October 2018) national institutions, together with the traditional as well as recently established regulatory authorities, operators and professionals in the finance/fintech/banking/cybersecurity/legal sectors convened to take stock of what is being achieved, to discuss ways to move forward and successfully merge valid traditional know-how and best practice with the recent powerful innovations of the fintech world and of the blockchain in particular. Impressively numerous and active participation!

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03/10/2018: BREAKING NEWS! MAURIZIO COHEN, Partner at Demetra Corporate Advisors, has been elected Chairman of STEP Europe

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09/07/2018: BUILDING THE BLOCKCHAIN ISLAND

On the 4th of July, Malta’s Parliament voted unanimously in favour of the three Bills that were piloted by Hon Silvio Schembri and his team. After months of consultation and tweaking, the Bills are amongst the most holistic sets of legislation that any jurisdiction has put forward in the field of virtual financial assets.

This is yet another prime example of Malta’s capacity to use its jurisdiction in order to carve out niche economic sectors. If we just look around at the current economic pillars that sustain our economy and which include financial services and remote gaming, one would easily appreciate the power of regulatory vision and legislative frameworks that Maltese legislators have had in the past. Our present economic success is also built on the strong foundations that these sectors were built upon.

The blockchain island vision has been built around the enactment of these three Bills. However, the development of an ecosystem is not only dependent on the regulatory frameworks. In fact, the legislative dimension is just one of a number of factors that determine the success of any ecosystem.

As one can expect, having a vision and a strategy is key to building any ecosystem. In this respect, one must say that the Maltese Government had a very clear vision to establish Malta as the blockchain island and the setting up a task force, the publication of the National Blockchain Strategy and the enactment of these Bills are a strong testimony to this vision. This vision needs to now permeate into the different levels of government and civil service. We truly need a new era of governance and governing, one which is truly smart and digital. The blockchain offers some unique opportunities for efficiency-gains and cost-reduction and Government needs to now focus on revamping the civil service and ensure that it truly becomes a smart government. A lot of strides have been made in this regard, however there is need for a culture change within government and civil service to truly embrace this new digital era.

The regulatory framework is also key to the deepening of any ecosystem. In this case, the regulatory element does not stop with the legislative acts. It is now crucial for the regulators involved, which include the newly set-up Malta Digital Innovation Authority, the MFSA and the MGA to deliver an efficient and quality-driven level of service to the industry. To this end, they require the resources and capacity to do so. Regulators must also foster an open dialogue with service providers and operators to ensure that feedback loops are present in the system.

The service providers also play a key role in developing the ecosystem. They will be the main touch point that foreign investors will face. They are the prime ambassadors of the jurisdiction and the responsibility is huge. It is therefore imperative that service providers respect the clients but also the jurisdiction itself and they must remain knowledgeable and always give professional advice. This brings us to another main determinant of the successful development of the ecosystem; education and human resources.

As Malta’s labor market remains buoyant, human resources are probably one of the most pressing challenges that the economy is and will continue facing in the foreseeable future. In a sector which is knowledge-intensive, skilled and trained human resources are essential for its future. Our educational institutions become critical in this. The University of Malta is taking a lead in this however more efforts need to be taken to ensure that this sector and others will be adequately resourced in the years to come. Initiatives that were approved by Cabinet last week to bring over more third country nationals are also necessary to sustain Malta’s economy. However, this is not without its own challenges and a holistic plan for human resources and integration of foreign workers is needed.

Ecosystems also require support structures to operate effectively. In this case, the blockchain island requires a host of support structures which include an effective and supportive banking structure. Given that the sector will become regulated, it is expected that some of the main banks will service such an industry however Malta requires additional banking players, especially ones with good American correspondent banking facilities. In terms of financing and funding, there have been some positive announcements in this regard with a number of key players launching their own funds and financing facilities which will allow the development of a vibrant business community.

An ecosystem does not only depend only on a regulatory framework, albeit it is central to its sustainability. The blockchain island requires further initiatives to truly materialise and this will continue being work-in-progress. However, Malta has already emerged as a pioneer in this fast-growing industry. It is now the responsibility of all stakeholders, public and private, to ensure that we truly live to the expectation of becoming the blockchain island.

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26/2/2018: UNDER NEW SECRECY RULES, MALTA TRUSTS MUST DECLARE BENEFICIAL OWNERS

The new year has brought about a sea change in anti-money laundering rules, which now make it mandatory to report all beneficial owners of trusts to the Registrar of Legal Persons. In recent legal amendments designed to bring Malta up to date with the 4th Anti-Money Laundering Directive (AMLD4), “beneficial owners” of trusts will now include settlers, trustees, protectors, and any beneficiaries who exercise ultimate control through direct or indirect ownership.

This new definition goes beyond previous versions of the directive, which placed higher thresholds on the identification of trust beneficiaries.

Trusts have been involved in major tax evasion and corruption scandals in the past, and are usually used by elites seeking to hide their assets under the ownership of complex trusts in a bid to avoid tax. More recently in Malta, the Panama Papers revealed the use of two offshore trusts by minister Konrad Mizzi and the PM’s chief-of-staff Keith Schembri connected to their offshore companies in Panama. A EUROPOL representative had told MEPs during a November 2016 hearing on money laundering and tax evasion that trusts were among “the main schemes that were used to hide tax revenue or launder money”. The new law now obliges Malta to require that the identity of all parties to a trust or foundation, be available to be accessed by national tax authorities and EU financial intelligence units, apart from being held in a central register held by the Malta Financial Services Authority.

Malta will have to ensure timely and unrestricted access to the register without alerting the parties of the trust concerned. Where a registered trustee contravenes or fails to comply with any of the provisions of the new rules, the MFSA may impose an administrative penalty of not more than €150,000, unless trustees can prove they exercised all due diligence to comply with the rules. The new rules also apply to all associations established for either a private interest, or social purpose and non-profit associations. Each association will now have to keep updated information on its beneficial owners, with penalties for non-compliance reaching €500, or up to €5,000 and a six-month imprisonment for providing false or misleading information.

However, access to information on a beneficial owner of an association may not be granted, if it can be justified that such access to such beneficial ownership information would expose the owner to the risk of fraud, kidnapping, blackmail, violence or intimidation, or whether the beneficial owner is a minor or otherwise incapable. The register of beneficial owners will be held by the Registrar for Legal Persons, who will be appointed by a government minister. The register will be interconnected with the central registers of other member states.

Since the introduction of harsher anti-money laundering rules at a European level, Maltese banks had already stated extensive due diligence exercises for politically-exposed persons. In one example, HSBC Malta’s CEO informed then Opposition leader Simon Busuttil that a VIP team at the bank would be responsible for the management of PEP due diligence obligations. Hundreds of people across the Maltese islands could be affected under tighter rules to fight money laundering, as the definition of a politically exposed person now includes not just people with political functions, but also their spouses and close associates and relatives. The obligations of customer due diligence for banks are legally binding, and all PEP customers must complete them in order to retain their accounts with the banks.

For PEP relatives, the new AMLD rules will mean that opening a bank account will now be subject to enhanced due diligence measures. Not only politicians, or party executives and directors of government entities will be subject to enhanced due diligence, but also their family members, such as spouses and partners, children, the PEP’s parents, as well as ‘close associates’ who have business relations or joint ownership of companies. This will mean that institutions such as banks or insurance companies will have to obtain senior management approval to even establish a business relationship with such persons, as well as make sure they can establish the source of wealth and funds that PEPs and their associates have. Even after a PEP is no longer entrusted with a public function, banks will still have to continue applying their enhanced due diligence for the next 12 months at minimum, until that person can be considered to be no longer a ‘PEP risk’.

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9/2/2018: Demetra Corporate Advisors Ltd. on MSE Newsletter

We are proud to be part of this successful initiative, dedicated to the SMEs as an efficient and cost effective way to raise capital. As Corporate Advisors, we are continuously working with the candidate companies towards strenghening the corporate governance and the information transparency, aiming to protect the interests of all the stakeholders. Read the Newsletter MSE

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10/10/2017: The following is a list of terms that are essential for anyone operating in the financial services and related sectors:

Fintech:

Financial technology is broadly defined as any technological innovation in financial services. Those engaged in the industry develop new technologies to disrupt traditional financial markets. Various start-ups have been involved in the process of creating these new technologies, but many of the world’s top banks including HSBC and Credit Suisse have been developing their own fintech ideas as well.

Fintech companies utilize technology as widely available as payment apps to more complex software applications such as artificial intelligence and big data.

Cryptocurrency:

A cryptocurrency is a decentralized digital currency which uses encryption – the process of converting data into code – to generate units of currency and validate transactions independent of a central bank or government.

Bitcoin and Ether are the most common form of digital currencies. But there are other forms of virtual cash, such as Litecoin, Ripple and Dash.

Bitcoin:

Bitcoin is the first and one of the most prominent cryptocurrencies used by traders in the world of fintech.

It all began when an unknown person(s), under the pseudonym Satoshi Nakamoto, designed bitcoin as a peer-to-peer (P2P) payment network without the need for governance by any central authority.

In an introductory white paper introducing the virtual currency, Nakamoto defined bitcoin as: “A purely peer-to-peer version of electronic cash (which) would allow online payments to be sent directly from one party to another without going through a financial institution.”

Blockchain:

Blockchain is a form of distributed ledger technology (DLT). This means that it maintains records of all cryptocurrency transactions on a distributed network of computers, but has no central ledger. It secures the data through encrypted ‘blocks’.

Various blockchain experts believe the technology can provide transparency for a multitude of different industries, not just the financial services. The original blockchain network was created by bitcoin-founder Nakamoto to serve as the public ledger for all bitcoin transactions.

Ethereum:

Ethereum is another type of blockchain network. It was proposed by a 19-year-old Russian-Canadian programmer, Vitalik Buterin, in 2013.

Ethereum differs to the original blockchain in that it is designed for people to build decentralized applications. These are applications which allow users to interact with each other directly rather than having to go through any middlemen. Ether is the value token of the Ethereum blockchain. It is traded on cryptocurrency exchanges.

Disruptive innovation:

Disruptive innovation happens whenever new technologies alter the way markets operate.

Though not exclusively a fintech term, it is often used to describe events in the financial services where technological developments force financial institutions to rethink their approach to the industry.

Initial Coin offering:

An initial coin offering (ICO) is a crowdfunding measure for start-ups that use blockchain. It involves the selling of a start-up’s cryptocurrency units in return for cash.

ICOs are similar to initial public offerings (IPOs), where the shares of a company are sold to investors for the first time.

But ICOs differ to IPOs in that they deal with supporters of a project rather than investors, making the investment more similar to a crowdfunding experiment.

Last month China banned ICOs over concerns that the practice is not regulated and can be opened up to fraudsters.

Open Banking:

Open banking refers to an emerging idea in the financial services and fintech which stipulates that banks should allow third party companies to build applications and services using the bank’s data. It involves the use of application programming interfaces (APIs) – codes which allow different financial programs to communicate with each other – to create a connected network of financial institutions and third party providers (TPPs).

Proponents of open banking believe that an “open API ecosystem” will allow fintech start-ups to develop new applications such as mobile apps to allow customers greater control over their bank data and financial decisions.

Smart contracts:

Smart contracts are computer programs that automatically execute contracts between buyers and sellers. Smart contracts are often blockchain-based and can save huge amounts of time and costs involved in transactions which usually require a human to execute them.

In Ethereum for example, the contracts are treated as decentralized scripts stored in the blockchain network for later execution.

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6/10/2017 – Malta praised for its economic performance

The Maltese economy keeps on being strong despite the global shocks, the turbulence in the world economy and the instability of the financial market: the growth has been steady over the last few years, with an average of 4% per year, which allowed the current growth level, equal to 6,4%. It means that Malta has once again reached  the growth record among the EU Countries, thus tripling the 2,2% European average growth.

The international rating agency “Standard and Poor’s” reaffirmed Malta’s A- long-term rating (the same agency increased this rating at the end of 2016). S&P registered in Malta a “strong growth performance coupled with consistent current account surpluses, as well as by narrowing government deficits and improving fiscal management”. Moreover, the agency has noted that the country’s macroeconomic growth continued to outpace the Eurozone average, and it also commented positively, stating that investments in energy, healthcare and education, made in the past three years, have been important drivers of growth factors, thus leading to a further future export growth.

The field of financial services remains the cornerstone of the economic growth, as it has become more attractive, wider and various. The strength of this field is also due to a solid government structure, which is based on a prudential supervision, a consumer protection and on anti-money laundering prevention measures. This positive trend creates new job opportunities in the field of direct financial intermediation and also in the market segmentation related to professional services.

Malta is the ideal place to set up investment vehicles for retail and institutional investors, but it has become even more attractive thanks to the developments in regulations as for the “Innovation through Regulation Programme”, with the introduction of the “Notified Alternative Investment Fund”, regulated by the directive “Alternative Investment Fund Managers”.

To conclude this brief general framework, it is important to highlight that the “World Economic Forum Competitiveness report 2016-2017” ranked Malta at the 16th place out of 140 Countries for its banking system solidity.

Source: BOVInfolink

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September 15, 2017 – The second annual event organized by Demetra Corporate Advisors: Educational Clinic on PROSPECTS, hosted in Valletta by Malta Stock Exchange. 

Among speakers: Kenneth Farrugia – Chairman of FinanceMalta and Chief Business Development Office of Bank of Valletta, who illustrated the range of business opportunities in the financial services of Maltese jurisdiction and the important growth the financial services industry recorded over the last 10 years, also thanks to the entry of foreign financial operators into the market;  Simon Zammit,  CEO of Malta Stock Exchange, confirmed the implementation of a number of important measures to attract international operators and investors (China, Turkey, Italy, Spain, Eastern Europe and the Middle East) as well as companies seeking access to capital as an alternative to bank financing.

During the morning session, the presentations and the debate were centered on the “Ten commandments of the company seeking admission on PROSPECTS” – a suite of substantial and formal factors essential for admission – with interventions by a dozen Italian and Maltese professionals, as well as the testimony of representatives of companies already admitted to PROSPECTS.

In the afternoon session, the debate was continued through a round table that analyzed the benefits and applications of PROSPECTS on specific areas and operational situations: succession planning of SMEs, real estate development, internationalization of business.

Particularly important and appreciated the Focus dedicated to sporting companies who plan to realize their own stadium: Testimony of a successful attempt and the specific advantages of PROSPECTS

Next stage: a workshop with the participation of MSE, hosted by Udinese Calcio at the Club House of Udinese Dacia Arena.

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IT’S AN ITALIAN COMPANY THE FIRST TO BE ADMITTED ON PROSPECTS PLATFORM. Watch the video below:

12th MAY 2017: MALTA, THE “SILICON VALLEY” TO LIST DEVELOPING AND INNOVATIVE SMEs. Read the Invitation

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foto demetra 112/04/2017: PRESS RELEASE BY THE MINISTRY FOR FINANCE: Minister for Finance inaugurates the first two listings on the MSE Prospects platform – read article

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05/04/2017: FIRST COMPANY ADMITTED ON PROSPECTS PLATFORM – read article foto demetra 5 (002)

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MALTA STOCK EXCHANGE QUARTERLY NEWSLETTER: read the MSE-Newsletter

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Demetra Corporate Advisors on Finance Malta – read article

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The Malta Stock Exchange has created a Blockchain Committee which will consist of members of the Exchange’s Board, its Chairman and Chief Executive and outside experts who will assist in the formulation of a strategy geared towards addressing this emerging technology. Blockchain is a method of recording and confirming transactions where participants hold complete records of transactions through peer to peer verification, without the need for a central clearing house. Many stock exchanges throughout the world are investigating and identifying applications, considering blockchain will allow investors and brokers to receive their money 15 minutes after a trade is executed (the Scottish Stock Exchange and the Australian Stock Exchange are building blockchains as a replacement for their current platform for clearing and settlement of trades). Source: MSE news

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European Stock Exchanges Gearing Up For Change

Emerging markets are on the rise but in terms of overall market capitalization, the historical powers are still the largest. With over 60 major stock exchanges throughout the world accumulating a total value of 69 trillion dollars, the competitive nature of this dynamic technological business is prodigious. Stock exchanges are, by design, solitary in nature as the performance of national stock exchanges are often taken as a proxy for the health of a nation’s economy, or at least investor enthusiasm for the country’s prospects. While stock exchanges all share the common gal of providing a marketplace where investors can buy and sell stocks, each exchange has its own unique characteristics and niche. Many national exchangesplay an under-appreciated policy role in deciding the listing and compliance standards for companies that wish to go public. On top of all that, there is a nebulous but real sense that national pride is often somehow tied to stock exchanges.

The transformation of exchanges throughout Europe has been compelling. Growth and change has shown that regulation within the sector has indeed worked. It does not always work as intended but it does affect behaviour. European regulators have always encouraged stock exchange competition and, after the 2008 crisis, pushed banks to use clearing houses to curb risk. Exchanges altered course as their old business grew tougher and another one expanded.

Another reason for growth and transformation within the exchanges is that capitalism is now highly adaptable. The world of stock exchanges was dominated for decades by entrenched institutions, particularly those in global financial centres such as London and New York. Changes in regulation and financial markets undermined that position so they adapted quickly. Over 93% of global stock value is divided over three continents, with Europe holding a 19,5% slice of the cake. The mighty NYSE, itsel bigger than 50 of the world’s smallest exchanges, today still represents $18,5 trillion in market capitalization, or about 27% of the total market for global equities. 16 exchanges that form part of the “$1 Trillion Dollar Club” have more than $1 trillion in market capitalization. This elite group, with familiar names such as the NYSE, Nasdaq, LSE, Deutsche Borse, TMX Group and Japan Exchange Group, comprise 87% of the world’s total value of equities. With over 17 stock exchanges in Europe and the tally rising, the performance and transformation of the Malta Stock Exchange (MSE), now in its 25th year, is an encouraging and positive example of what is and can happen in exchanges throughout Europe. The MSE Index closed 2015 at 33% over the previous year, one of the world’s best performing indices. This performance was a testimony to the Maltese economy being one of Europe’s best performers. Consumer confidence is also quite strong, which, along with other positive economic fundamentals, should augur well for the Maltese Equity Market. As competition grows, stock exchanges are also working hard to take advantage of the global opportunities that arise in this environment whether by pursuing new listings from abroad or accessing foreign capital markets through mergers, acquisitions and strategic alliances and products. Business leaders today have many options to consider when selecting a stock exchange for an initial public offering and stock exchanges are aware of this. Technology innovation has been a fundamental driver of stock exchange competition. As technological advances constinue to make trading faster and cheaper and accessible from any place in the world, the local market dominance enjoyed by incumbent exchanges wil quickly erode if not acted on with clear vision for change and modification. Article written by J. O’Brien, Exante’s Communication Director/Journalist


4Aim Sicaf –  an investment vehicle acting as meeting point between professional investors and small and medium enterprises, which focuses on investments in listed and listing companies on AIM Italy and other EU MTFs – has submitted the admission request for listing shares and warrants on AIM Italy.

Source: aimnews.it


The Financial Reporting Council (“FRC”) has issued an update on the discussion paper it issued in June 2015 on improving the quality of reporting by smaller listed and AIM companies. Respondents: urged the FRC to avoid introducing additional regulatory burdens; agreed IFRS should continue to apply to the sector; welcomed the FRC issuing annual reminder letters highlighting hot topics; encouraged the development of practical guidance for audit committees; and welcomed the suggestion of providing support for preparers of accounts. The FRC will continue to focus on the issues raised to improve the quality of reporting by smaller companies “Update on Discussion Paper Improving the Quality”

Article dated June 2016


FRC has developed a new Corporate Governance Code in order to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of companies. For further details see “UK Corporate Governance Code – April 2016”

Article date April 2016