MALTA Law and Practice Contributed by: Ian Gauci and Cherise Abela Grech, GTG Legal
3.3 Issues Relating to Best Execution of Customer Trades No information is available in this jurisdiction on the best execution of customer trades.
Furthermore, in October 2021 the European Commission requested advice from ESMA on preparing a legislative proposal in relation to sev - eral focused areas, including robo-advisers. A final report was provided by ESMA in April 2022, with a specific section detailing the effects of robo-advisers. Acknowledging the risks posed by robo-advisers for investors (including lim - ited access to information due to limited human interaction), ESMA analysed the advantages and disadvantages posed by such systems through a call for evidence. Robo-advisory services have not taken off in the EU due to barriers on investor reliance on human interaction and the cost of implementa - tion. Furthermore, while investors may be more honest without the human element (as they do not feel judged), impulsivity and biased choices are heightened due to the faster access. In its report, ESMA found that the current regu - latory framework is appropriate due to the lim - ited growth and lack of significant evolution, with no need for specific provisions addressing robo-advisers. Companies exploring the use of robo-advisory services may also benefit from the MFSA’s Fintech Regulatory Sandbox. It is also important to bear in mind that the imple - mentation of the EU’s AI Act is likely to have an impact on service providers utilising robo- advisers, and an assessment of the Regulation’s impact on their operations is thus essential. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers No information is available in this jurisdiction on legacy players’ implementation of solutions introduced by robo-advisers.
4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities
Online lending remains uncommon in Malta, with more traditional forms of lending being used. The Maltese lending market continues to be dominated by retail banks, which adopt a risk- averse approach to transactions. The regulation of lending occurs without distinction as to the recipient of the loan. 4.2 Underwriting Processes The act of regular or habitual lending is regulated and requires a licence from the MFSA under the Financial Institutions Act, Cap 376 of the Laws of Malta (FIA). However, if the activity includes financing from consumer deposit taking, a licence under the Banking Act, Cap 371 of the Laws of Malta (BA) would be required. It should also be noted that underwriting processes for online lenders are not dictated by law. 4.3 Sources of Funds for Fiat Currency Loans The EU Crowdfunding Regulation (Regulation (EU) 2020/1503) includes within its scope both investment-based crowdfunding and lending- based crowdfunding. In relation to lending- based crowdfunding specifically, the Regulation applies to crowdfunding services that consist of the facilitation of the granting of loans, including services such as presenting crowdfunding offers to clients and pricing or assessing the credit risk of crowdfunding projects or project owners. The
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