Mangion calls for financial services marketing body

Opposition finance spokesman Charles Mangion said yesterday that Malta needed a body to market Malta's financial services abroad.

It was not good enough to put in place modern legislation and advantageous concepts if potential investors and operators abroad did not know about them, Dr Mangion said during the debate on the Securitisation Bill in Parliament.

Malta needed to better exploit the advantages it offered, such as competitive costs, skilled manpower and, possibly, tax advantages.

International marketing plans should therefore be part and parcel of the development of new laws and mechanisms. Last year Malta approved new legislation on trusts which everybody had praised. But had there been any international drive for this facility to be known abroad? He did not think so. Clearly there was a need for a structure, which was not the regulator, to market Malta's financial services and ensure that Malta fully exploited the potential it offered.

Dr Mangion observed that the Bill provided for the setting up of special purpose vehicles to handle the transfer of assets from an originating individual or company. It was important that such assets were "clean," had real value and that such transfers were transparently regulated, particularly when property was involved. In this way, the rights of third parties, such as debtors, could be protected. Notification of such transfers needed to be made not just in a newspaper but according to a formal structure, Notary Mangion said.

Josè Herrera (MLP) said there was no doubt that the financial services sector was doing well. The number of newly registered companies was rising significantly.

He stressed, however, that Malta should take a firm stand against any moves within the EU for tax harmonisation, including harmonisation of company taxes, saying this would be greatly detrimental to the Maltese financial services sector. The Maltese government needed to make its position clear and take a more vigorous stand within the EU. Malta, like other countries, had veto powers in this sector and it should never give them up, Dr Herrera said.

There were now between 5,600 and 6,000 people who were directly employed in financial services along with a good number of lawyers, accountants and economists. Were it not for this sector, half of the lawyers in Malta and two thirds of the accountants would be registering for employment.

Last year 2,400 new companies were registered, slightly less than the year before, but last year's number included 60 trusts. This was no mean feat considering the country's population.

Several banking licences were issued and more such institutions were in the pipeline. It was good that both sides had similar policies in the sector.

Dr Herrera spoke on the concept of securitisation and also pointed out that Malta was one of very few countries where if a person went bankrupt, he could never start again. Other countries had legal structures where if a person went bankrupt, his assets were sold, he would remain liable for a certain time but then was given time to start again. Malta needed a good Bankruptcy Act and this should be given priority.

He said that the law being debated had the necessary safeguards to prevent fraud. The most positive thing was that it would create more liquidity at little risk, making it easier for companies to operate and providing more funds for investment.

Concluding, Dr Herrera urged the government to consider new initiatives to further encourage financial business in Malta.

Mario de Marco (PN) said this was an important Bill for the financial services sector. It was a pity that Malta had taken so long to legislate on securitisation. Other countries had been operating securitisation for many years, and Malta therefore may have lost out. One had to acknowledge, however, that the Maltese financial services sector was young and the learning curve was long.

The Nationalist MP welcomed the fact that the new law was based on the Luxembourg model, but there was a stronger accent on flexibility. The Bill was vast in the type of assets that could be securitised and flexible in the way assets were transferred from the originators to special purpose vehicles.

The Bill was also very flexible on the legal form securitisation could take. It was proposing several means of securitisation including investment companies, commercial societies, trusts and any other legal structure which the competent authority could permit to be used for such operations. This was a wise step.

Dr de Marco observed that notwithstanding the provisions of the Civil Code, in view of the international nature of this Bill, in case of an assignment of a securitisation asset to a securitisation vehicle, the debtor would be deemed to be notified of this assignment if notification was made to the debtor in writing, or publication was made in a daily newspaper in Malta, or when the debtors were mostly resident abroad, in a daily newspaper abroad. When there was doubt on where the majority of the debtors lived, notice could be made in a daily newspaper which had wide international circulation.

The flexibility provided in this Bill could also be seen in the way parties to a securitisation transaction were free to choose any law to govern contracts.

Similarly, the parties were free to delegate the everyday administration of the assets involved to any third party, including the originator.

Such provisions and the professionalism in the way the Bill was drawn up were sure to be attractive to investors, Dr de Marco concluded.

Joe Brincat (MLP) said the Bill lacked a proper definition of "securitisation" and "securitisation vehicle", leaving room for interpretation.

This Bill could end up being studied by courts abroad. The English text would prevail, and it was important that it was clear. He urged the minister to clear up obscure definitions.

Dr Brincat said the issue over privileges concerned him in this Bill. One was not clear which privilege took a higher priority over a privilege granted under another law. When a securitisation vehicle owed money to the government, would the government enjoy a privilege?

Interjecting, Parliamentary Secretary Tonio Fenech said privileges to workers did not come into this matter.

Dr Brincat said a securitisation vehicle could be a company which could have privileged debts in favour of the government. And couldn't such a company have employees?

In the case of assignment of debt and credit, there needed to be a system which was in line with systems in continental Europe on the notification of the parties. Procedures such as notices in newspapers were alien to such systems.

The Bill also needed to be clear on the applicability of professional secrecy and confidentiality provisions. The Bill stated that "no law relating to professional secrecy or confidentiality shall be construed as to restrict or limit in any way a securitisation transaction". What did this mean, he asked.