Your investment firm

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You should make up your mind as to your preferred firm and preferred products after you have obtained and understood all the information which is provided to you. This can consist of information obtained during your discussions with the intermediary and other information from brochures and product documentation. Remember, part of making the right investment decision is finding the investment firm that best meets your personal financial needs.

Be careful of firms who urge you to immediately purchase a product or service from them. If you are still in doubt, it will be useful to continue asking questions. Remember that ultimately it is up to you to decide whether to invest or not. Take your time and do not rush. The decision that you will make today will have an effect on your income in the future.


 

“Investment services” is a general term used to describe a whole range of activities related to investments. It includes, for example, the provision of advice on investing in a range of securities, such as share, bonds and units in collective investment schemes. It can also include the purchasing of such securities on your own behalf.

Such services may only be provided by a person or entity – an investment firm – who has to be authorised by the MFSA. You should invest your money by seeking assistance only from authorised firms.

No. The MFSA is prohibited from providing investment services to the public. The role of the MFSA is to license, regulate and supervise those persons or entities who provide such services. That is why the MFSA is defined as a regulator. The MFSA is therefore not in a position to provide you with any advice on investments.

All firms authorised by MFSA undergo a rigorous and lengthy process before they are authorised to service your investment requirements. The MFSA must be satisfied that these firms are professional, knowledgeable and trained. Moreover, the MFSA goes into great lengths to ensure that such firms are of the highest integrity.

When a person or company is authorised by MFSA, a licence is issued which includes all those services the firm is allowed to provide. You can, for your peace of mind, to request to see this licence from your firm.

Moreover, a firm is required to state that it is authorised by MFSA to conduct investment services on its letterheads, business cards, stationery and adverts.

The best advice that we can give you about how to choose an investment firm is to ask questions. Do not hesitate to ask questions about how your firm proposes to invest your money. It does not matter if you are a beginner or have been investing for many years – it is never early or too late to start asking questions.

All firms will welcome your questions, no matter how basic. After all, investment firms would prefer you asking them questions before you invest rather than having to confront your uncertainties after your investment. So never feel intimidated or shy. Remember, it is your money!

Before you make an investment, you must decide which firm to use. We have prepared some notes which may assist you in the course of making your decision:

 

  1. Think about your investment objectives. For example, you could ask yourself:- Do I need my investment to provide me with periodic income or do I wish my capital to grow over a period of years? What financial commitments do I already have or plan to have? What is my appetite for risk – should I go for risky or safe products? These are some basic questions which a potential investment firm may ask you – usually at the beginning of your meeting. Have your answers prepared in your mind or, better still, written down. It does not matter if there are some aspects which are not clear – you can always discuss them later with your potential firm.

  2. Do not hesitate to talk to two or more different firms. It would be useful for you to enquire about their investment experience and professional background. If possible, meet them face to face at their offices. Ask them as to what they are allowed to do under their licence. If you can, do shop around for products available. It is in your interest to learn about the number of products available on the market.

  3. Not all investment firms offer or charge the same for their services. Understand how the firm is paid by asking for a copy of its tariff schedule. Ask what “fee” or “charges” you will be required to pay when buying or selling a security and when opening, operating and closing an investment account. More information about fees and charges is found under the "Compare tariffs and charges" section of this website.

  4. Make sure that your firm is suitable for your requirements and is in a position to provide you with the service that you want. Nearly all firms are able to sell products from a range of different companies. Some of these firms are also representatives of one or more products, such as collective investment schemes.

  5. Some firms may only sell the products of the companies they represent. In this case, the choice of products can be rather limited. In any case, firms must ensure that the products they suggest really suit your interests and needs.

  6. Certain firms are authorised to hold your money and investment on your behalf in their own name – that is providing ‘nominee services’. A private investor would not usually require to have his monies and investments held in the name of the investment firm. You may however find it convenient to have your investments held in this way. After you determine whether you need the services of an investment firm providing ‘nominee services’, make sure that the benefits and pitfalls of having your investments held by the firm in its own name are explained clearly at the outset.
     
  7. Ask how your investments could be affected, if at all, if the firm or his agent (such as a foreign broker) ceases to trade.

We would not like to complicate things for you but it is important to note that not all investment firms licensed by the MFSA are the same or offer the same services. Some firms are authorised to provide you with a range of products and services; others will only be able to sell you a product or service from one company.  All firms are authorised under four ‘categories’ – from Category 1 to 4. Of these five categories, Category 4 would be of the least interest to you because firms licensed under this category provide services to collective investment schemes and not to retail investors.

We hope that the following notes help you understand better the type of services which the various categories of investment firms in Malta are able to offer you.

Category 1: Typically provides information, advice and executes instructions of the investor BUT would not be able to hold your money or your assets in his own name or otherwise. Therefore, if you avail yourself of the services of a Category 1 investment firm:

  • You should be offered to choose from a range of products, although this may be limited. There can be instances where the firm is a representative of a particular product, such as a collective investment scheme;

  • You cannot allow your firm to have discretion over your portfolio. Therefore, the firm has to consult you, and obtain your approval, before making a transaction on your own behalf;

  • Contract notes of any purchase or sale should show that the investments are registered in your own name;

  • Payments will have to be made to the company (such as the fund manager of a collective investment scheme) and not to the investment firm;

  • The firm would not be able to accept cheques or other means of payment in its own name or in the name of officials working at the firm;

  • Commission is usually shared with the (local or foreign) agent through which your transaction will be processed.

Category 2: Typically provides information, advice, gives recommendations, manages portfolios and executes instructions of the investor BUT would be able to hold your money or your assets in his own name or otherwise. Therefore, if you avail yourself of the services of a Category 2 investment firm:

  • You should be offered to choose from a range of products, although this may be limited. There can be instances where the firm is a representative of a particular product, such as a collective investment scheme;

  • Investments can be registered either in your own name or, upon your request, in the name of the firm (if permitted to do so by MFSA – please ask the investment firm). If you opt for your investments to be registered in the name of your firm, the investment will still belong to you even though they will not be registered in your name. Your firm can explain more about this. In any event, you should be given a contract note to show how much you have invested;

  • The firm may be authorised by MFSA to have discretion in the management of your portfolio. In which case and subject to your agreement, the firm will be entrusted to manage your investments without having to obtain your prior consent before effecting changes to your portfolio;

  • Payments can be made to the firm direct. Cheques or other means of payment should be payable to the firm and not to its representative;

  • Commission is usually shared with the (local or foreign) agent through which your transaction will be processed.

Category 3: This is very similar to a Category 2 firm except for one aspect. In this category, the firm would have a fairly large amount of securities from which to sell to individuals or institutions, and may also buy securities from investors, intermediaries or banks acting as a market maker.



Last updated: Sep 07, 2016