Chapter 3

Membership

3.01 (i) The membership of the Exchange shall consist of licensed stockbrokers as defined in the Act and regulated by the Statute;

(ii) Stockbrokers and their accredited representatives nominated by the Central Bank in terms of Article 3 (i) of the Statute shall be exempt from the applicability of the following provisions of the Bye-laws :

Bye-laws 3.02, 3.03, 3.06 to 3.18, 3.20 to 3.25, 3.30, 3.31, 4.01 to 4.39.

3.02 A member must be an individual who must conduct his business through a stockbroking firm.

3.03 A member is jointly and severally responsible for the observance of all provisions relating to his stockbroking firm as prescribed in these Bye-laws.

3.04 Subject to the provisions of the Act and the Statute, every candidate for admission to membership shall make an application for a licence in writing to the General Manager. The application shall be in such form as the Council may from time to time by Council Notice establish.

Qualifications to be registered as a Stockbroker

3.05 Subject to the provisions of the Act and the Statute, every applicant for registration as a member shall :

(i) be a citizen of Malta and shall be at least 21 years of age;

(ii) be of financial integrity and reliability;

(iii) not have been convicted of crimes affecting public trust;

(iv) be of good reputation and character;

(v) be efficient and honest;

(vi) be in possession of suitable experience and/or educational or other qualifications;

(vii) not have external financial interests which may be prejudicial to the soundness of his business as a licensed stockbroker;

(viii) not be a person who has been suspended, at any time, from dealing on or expelled from the Exchange, any other stock exchange, or any other financial regulatory authority;

(ix) not be an undischarged bankrupt in terms of law;

(x) not be a director or an employee of an issuer of a listed security.

Disqualification

3.06 Without prejudice to Section 10 of the Act, the Council may cancel a stockbroker's licence, or suspend him from trading if the stockbroker:

(i) has defaulted in payment of any debts due to the Exchange or to a stockbroking firm;

(ii) is found guilty of negligence in the exercise of his business;

(iii) charges brokerage/commission lower or higher than the rates fixed by the Council from time to time;

(iv) conducts his business contrary to accepted practice and against the interest of his clients;

(v) is guilty of conduct prejudicial to the reputation of the Exchange;

(vi) fails to attend, or is not represented at trading sessions of the Exchange without justifiable cause;

(vii) fails to comply with the financial requirements imposed by the Council in respect of the security/indemnity, capital adequacy and prudential regulation of his stockbroking firm;

(viii) is in the opinion of the Council no longer a fit and proper person to carry on the stockbroking business;

(ix) has failed to obtain the relevant exemption in the circumstances set out in bye-law 3.10.

Outstanding Debts, Obligations or Commitments on Registration

3.07 All stockbrokers, including the member intending to resign shall, within 30 days from date of notice of resignation advise the Council of any outstanding debts, obligations or commitments as referred to in Article 3 (xiii)(b) of the Statute.

Other Business Interests

3.08 All members having other business interests shall declare their interest, if any, in writing to the Council. The Council shall have power to determine whether or not such other interests might be continued, and if so, on what conditions and for what period.

3.09 Unless otherwise exempted by the Council, a member shall not be a director of, or a shareholder or debenture holder in, or have any direct or indirect interest in any stockbroking firm other than his own.

3.10 Unless otherwise exempted by the Council, a member shall not be a director or an employee of, or otherwise occupy a position of trust with, or have any direct or indirect interest in the affairs of:

(i) the issuer of a listed security;

(ii) a company which is the holding or subsidiary company of an issuer of listed security or which is a subsidiary company in a group of companies of which an issuer also forms part; or

(iii) any person or persons having the effective control of an issuer of a listed security :-

Provided however that the carrying out of an activity fallying within the permitted business of a stockbroking firm as laid out in bye-law 4.02, shall not be deemed to constitute a direct or indirect interest for the purposes of this bye-law.

General

3.11 Each stockbroking firm may engage one or more accredited representative in order that the firm is properly represented during trading sessions of the Exchange. Before engaging any accredited representative, a member has to submit an application giving the name, address and other relevant data regarding this accredited representative to the General Manager.

3.12 The Council shall, within four weeks, consider such application and shall approve or refuse it as the case may be.

Qualifications

3.13 The Council may refuse permission for an accredited representative to work for a member on the grounds that the accredited representative :

(i) is prohibited from engaging in trading in accordance with Article 4 Subsection (iv) of the Statute;

(ii) does not have the qualifications equivalent to those required in bye-law 3.05 other than those required by bye-law 3.05 (vii).

Other Business Interests

3.14 Accredited representatives are subject to the same conditions in respect of other business interests as are members under bye-laws 3.08 to 3.10.

3.15 In the eventuality of an accredited representative being appointed or elected a director or becoming an employee or otherwise occupying a position of trust with or having any direct or indirect interest as provided in bye-law 3.10 he shall:-

(i) undertake not to carry on any trading on the Exchange;

(ii) undertake not to, directly or indirectly, arrange, manage or give advice, nor participate in discussions among the directors, shareholders and employees within his stockbroking firm in connection with the affairs of:-

(a) the issuer of a listed security as set out in bye-law 3.10;

(b) other issuers of listed securities belonging to the same business sector or industry as the issuer referred to in sub-paragraph (a) of this paragraph; and

(c) other issuers of listed securities having a close business relationship with the issuer referred to in sub-paragraph (a) of this paragraph; and

(iii) undertake to declare his interest when the affairs of issuers of listed securities having close business relationships with the issuer of a listed security as set out in bye-law 3.10; are to be discussed at any meeting and to withdraw from such meetings. Furthermore, the accredited representative shall undertake not to seek nor obtain information from any of the directors or employees in this regard.

3.16 The directors and shareholders of the stockbroking firm whose accredited representative falls subject to the provisions of bye-law 3.15, shall, jointly and severally bind themselves and undertake to cooperate in every way in order to ensure that the conditions undertaken by the accredited representatives in accordance with bye-law 3.15 are adhered to in all respects.

3.17 Each stockbroking firm shall ensure that its members, accredited representatives, all its employees and officers comply with the Act, Statute and Bye-laws.

3.18 The Exchange may require at any time that the name, terms of employment, and actual duties of any person employed by a stockbroking firm shall be furnished to the Exchange, together with such other information with respect to such employee as it may deem appropriate to permit it to enforce compliance with the Act, Statute and Bye-laws.

Register of Members and Employees

3.19 The Exchange will compile and maintain a Register of Members and Accredited Representatives.

3.20 A stockbroking firm shall not, without the consent of the Council being first obtained, employ in its business a former member of the Exchange who has defaulted, or has been expelled, for any reason, from membership.

3.21 A stockbroking firm shall report immediately to the Exchange any employee who has been suspended or dismissed from its service for dishonesty.

3.22 No person shall be accepted as a financial intermediary unless the said person holds an investment services licence under the Investment Services Act, 1994.

3.23 The Council shall, on the recommendation of a licensed stockbroker, accept a person to act as a financial intermediary.

3.24 The Exchange shall maintain a Commission Sharing Register containing the name, address and qualifications of any persons who have been accepted to act as a financial intermediary.

3.25 The stockbroking firm shall pay to a financial intermediary :

(i) 50% of the brokerage/commission if the person acting as Financial Intermediary is a Bank; or

(ii) 25% of the brokerage/commission to any other person acting as Financial Intermediary

whose names have been included on the Commission Sharing Register.

3.26 In the conduct of his stockbroking business, a member must promote high standards of integrity and fair dealing, and should act with due skill, care and diligence in providing any service which he provides or holds himself out as willing to provide.

3.27 A member must subordinate his own interests to those of his clients and must act fairly in relation to anything done for them.

Prohibitions

3.28 A member shall conform in all respects with the Code of Conduct as outlined in Appendix A.

3.29 Non-compliance with any of the provisions contained in bye-laws 3.26 to 3.28 shall render the responsible member liable to any of the penalties stipulated in Section 4 of the Statute

Restrictions on members' dealing

3.30 A stockbroker, acting on behalf of his firm, may take a position as principal in order to facilitate trading in unmatched minority balances of Initial Calls. These principal positions may only be entered into at the Additional Call Stage and priority will be given by the Market Official to the stockbroker who made the Initial Call.

3.31 A stockbroker may take a position as principal to acquire holdings of securities, including equities for long-term investment purposes in the interest and on behalf of his firm subject to an aggregate maximum amount not exceeding at any time the level of reserves as shown in the firm's latest audited accounts.

3.32 All applications for principal trading in accordance with bye-law 3.31 have to be submitted in writing and on the appropriate form to the General Manager of the Exchange not later than 24 hours before the next trading session and such permitted trades shall be applicable for that session or such further trading sessions as may be authorised by the General Manager.

3.33 All acquired investment must be subject to a period of tenure of at least six months from date of acquisition provided that this period may, on application by the stockbroking firm, be shortened by the Council.

3.34 No permission will be granted to a stockbroking firm to bid in its own interest as principal during the first trading session of dealing in a newly listed security. The General Manager may continue to withhold permission to deal in a newly listed security if it is considered that the market in that particular security has not yet settled.

3.35 A stockbroker may buy or sell securities for his own investment purposes in his own name through his stockbroking firm.

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