Achieving balance in Malta’s capital markets

Malcolm Naudi
Lorraine Vella

The Malta Financial Services Authority (MFSA) is stepping up its efforts to develop Malta’s capital markets through a holistic programme focused on growth, liquidity, transparency and market integrity. Lorraine Vella, Head of Capital Markets Supervision at the MFSA, (above photo Darrin Zammit Lupi) outlines how a dedicated function, new consultations and enhanced supervisory tools are being deployed to support the local capital market and its participants.

A dedicated Capital Markets Supervision function

The Capital Markets Supervision function was carved out of the Securities and Markets Supervision function in 2022 with a clear brief: to focus more closely on the local capital market and to support its growth. What began as a small team of three a decade ago has expanded more than seven-fold to 23 professionals, including accountants, lawyers, economists, data scientists, specialists with AI experience and Chartered Financial Analysts.

The function is organised around two main areas:

  • Issuers and ongoing supervision – authorising issuers of equities and bonds before admission to trading on the Malta Stock Exchange and supervising listed entities on an ongoing basis. This includes monitoring both financial and non-financial disclosure, corporate governance and engagement with stakeholders.
  • Market infrastructure and reporting – overseeing trading venues and crowdfunding platforms, together with the reporting obligations linked to derivatives trading and securities financing transactions under the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR).

A separate stream focuses on market integrity, with resources dedicated to daily monitoring and investigation of suspicious trading in line with the Market Abuse Regulation.

Beyond liquidity: transparency and corporate governance

While market liquidity is a key concern, Ms Vella emphasises that it “is just a part of it”. Addressing liquidity also means tackling transparency and corporate governance, with the MFSA advocating a cultural shift among listed entities.

Many listed companies still tend to limit their disclosures to the bare legal minimum, often using heavy legal language and extensive disclaimers which can make communications difficult to understand. Although a small number already provide meaningful business information and hold market briefings, the Authority is encouraging more issuers to adopt similar practices.

In 2025, two initiatives were launched to support this shift:

  • a workshop for listed entities held in February; and
  • a “Dear CEO” letter was sent to boards of directors, following a thematic review of company announcements on the Malta Stock Exchange’s Official List. The was published on the MFSA website in July

Ms Vella points to the regular publication of passenger traffic data by one operator as a straightforward example of how operational information can give the market a clear indication of performance. For many family-owned businesses, particularly newer issuers, such openness requires a change in mindset.

Free float, liquidity providers and a holistic approach

The Capital Markets Supervision function launched several consultations aimed at improving liquidity and strengthening Malta’s capital markets framework:

  • Free Float Requirements – part of the EU Listing Package initiative to boost trading. The consultation, which ran until 31 July 2025, proposes facilitating equity listings by issuers of a certain size while maintaining a good distribution among small investors. Ms Vella expects that this may encourage more companies to list and increase the overall volume of public shares, including larger entities that currently find it difficult to offer 25% of their share capital to the public.
  • Liquidity Provider Guidelines – Guidelines are being drafted, in collaboration with the Malta Stock Exchange (MSE), to give more clarity on the Authority’s position when considering market abuse in view of liquidity contracts[MN1] [LV2] . These guidelines are designed to respect fundamental principles of market integrity, ensuring a robust, fair, liquid and adequately transparent market in which investors can trade at competitive prices, reflecting available market information.
  • Sponsors’ Regime – A new framework under which sponsors will be specifically recognised and authorised by the MFSA, with defined responsibilities for checks on issuers and overall quality assurance. This went fully live with the updated Capital Markets Rules and relevant artefacts being published on the MFSA’s website on 6 January 2026.

The free float discussion highlights differing perspectives: stockbrokers and issuers generally support greater flexibility in the percentage of shares held by the public, while smaller shareholders express concern that their ability to influence corporate direction could be weakened. Ms Vella notes that the aim is to find “the right balance”, potentially by introducing conditions where less than 25% of share capital is offered to the public so that both market efficiency and investor protection are addressed.

All these initiatives form part of a holistic lifecycle approach to capital markets, covering the entire journey of an equity or bond from initial application through to delisting.

Enhancing the listing process and investor disclosures

When reviewing listing applications, the Capital Markets Supervision function assesses three main aspects:

  1. Financial soundness – understanding the financial situation of the company and ensuring a minimum level of financial robustness.
  2. Transparency – confirming that the prospectus is accurate, complete and reflects the company’s true position.
  3. Corporate governance – evaluating structures and practices.

Over the past two years, the MFSA has been developing a risk-based tool to analyse companies’ projections and identify red flags or areas requiring closer scrutiny. The aim is to ensure that the prospectus captures the right information and presents a true picture of the issuer.

At the same time, the Authority recognises that prospectuses can be lengthy and may not always be the most effective tool for prospective investors. Within the EU’s simplification and burden-reduction workstream, the MFSA is exploring ways to improve prospectus-related disclosures, although this work is still at an early stage.

Corporate governance work now also includes outcomes-based supervision, with meetings held on a sample basis with Audit Committee members from issuers – currently 15 out of 94 issuers on the MSE, with a stronger focus on equity issuers. These discussions help gauge how audit committees are functioning in practice and provide a forum for sharing views and best practices.

Building quality through a new sponsors’ regime

The consultation on the sponsors’ regime is another key plank in the MFSA’s strategy. Until now, stockbrokers acting as sponsors have operated under the Capital Markets Rules but without a specific authorisation as sponsors. Under the proposed regime, sponsors would be recognised and authorised by the MFSA, with explicit responsibility to conduct checks on issuers and to help ensure the quality of listings.

This framework is intended to complement the Authority’s own efforts and resources, scaling up the overall effectiveness and efficiency of the application process. Sponsors, in turn, will be required to demonstrate that they have appropriate resources, systems and processes in place to fulfil these obligations.

Towards a stronger, more robust capital market

Across these initiatives – from free float reforms and liquidity provider guidelines to enhanced prospectus scrutiny, outcomes-based supervision and a strengthened sponsors’ regime – the MFSA’s Capital Markets Supervision function is working to promote quality among issuers and preserve market integrity.

As Ms Vella concludes, the aim is to build “a stronger and more robust capital market – one that not only safeguards investors but also attracts high-quality issuers, thereby expanding the range of investment products available”.

Editor’s note: This article was first published in the Malta Stock Exchange Business Review 2025 last November. It has been updated to reflect the forward-looking elements in the article.