Financial Services Act

This section says the Act is called the Financial Services Act and applies alongside other financial services laws.

This section defines many terms used in the Act, including what counts as a financial institution, financial services law, financial year, and operate.

This section says the Act is meant to regulate and supervise financial institutions in Malawi.

For financial services law, corporate relationship status is determined under the Companies Act as if both bodies corporate were companies.

This section defines who counts as a controlling party of a person or financial institution, and gives the Registrar power to declare and vary related thresholds.

If a financial institution is not a legal person, obligations imposed on it are treated as obligations of the person who operates it.

This provision says the Act and other financial services laws bind the Republic and the Government, unless a financial services law specifies otherwise.

This section appoints a Registrar of Financial Institutions, makes the Governor of the Reserve Bank the Registrar, and gives the Registrar supervisory responsibilities and structural powers.

The Reserve Bank must support the Registrar, and the Registrar must advise the Minister on financial institutions and financial services matters.

The Registrar must carry out supervisory functions to promote safety, soundness, good conduct, fairness, efficiency, orderliness, stability, and deterrence of financial crime in financial institutions.

If the Registrar believes a prudentially regulated financial institution is financially unsound and the situation may threaten financial stability, the Registrar must report it to the Minister and may take actions authorized under financial services law.

The Registrar may use certain funds for supervisory expenditure, and some of those funds must not be used for any other purpose.

The Minister may make regulations about supervisory levies, on the Registrar’s recommendation.

The Registrar may set fees and charges by directive for licences, licence renewals, and other services the Registrar provides in carrying out supervisory functions.

Supervisory levies, penalty levies, fees, and charges are debts owed to the Registrar and can be recovered through court action.

The Registrar must establish an account called the Levies Account.

Money in the Levies Account that is not immediately needed may be invested, and the Registrar decides what is appropriate.

The Registrar must submit an annual report within six months after each calendar year ends.

The Registrar must consult, and may make arrangements with, certain government agencies while carrying out supervisory functions.

The Registrar may delegate supervisory functions to specified people or bodies, subject to conditions, and delegates must follow the delegator’s directions.

A person may not run a financial institution as a business unless it is licensed or registered and complying with licence terms.

This Division applies to financial institutions when they are required to be licensed or registered under this Act or another financial services law.

The Registrar may grant or renew a financial institution’s licence or registration on application, but the applicant must submit the prescribed materials and fee, and the Registrar cannot grant unless satisfied of several listed criteria.

A licensed or registered financial institution must tell the Registrar as soon as practicable after it learns that a licence or registration condition has been breached, and must provide any further information the Registrar asks for.

If the Registrar grants a licence or registration application, the Registrar must issue the relevant document and publish notice in the Gazette. Licensed or registered financial institutions must display a copy of their licence at all business places in Malaŵi.

The Registrar may vary, suspend, or revoke a licence or registration of a licensed or registered financial institution, and must publish suspension or revocation notices in the Gazette.

The Registrar may vary, suspend, or revoke a licensed or registered financial institution’s licence or registration if specified grounds exist, but usually must give written notice and 21 days for representations.

The Registrar may publish a Gazette notice exempting a person from this Part, in whole or in part, or declare that the Part applies with modifications.

Every prudentially regulated financial institution must have a board of directors; the directors need the Registrar’s approval, and the board must be chaired by a non-executive director.

Appointments of executive officers and managers need the Registrar’s approval, and those officers and managers must live in Malawi after appointment if they work for a prudentially regulated financial institution.

The Registrar may disqualify and require removal of an executive officer or manager of a prudentially regulated financial institution if the person is considered unsuitable, and must notify the institution in writing and allow 15 days for representations.

A prudentially regulated financial institution must not enter into transactions with related parties, unless the transaction value is normal or immaterial and the institution’s criteria are approved by the Registrar.

This section defines when a person or entity counts as a related party of a prudentially regulated financial institution, and lets the Registrar designate additional related parties in some cases.

The Registrar may issue directives for financial institutions and financial groups, and people must comply with directives that apply to them.

The Registrar may give written directions requiring certain financial institutions and related persons to provide or publish information.

The Registrar may issue directives requiring listed financial-sector persons to report and provide information or documents; noncompliance can lead to an administrative penalty, and retaliation against reporters is an offence.

A prudentially regulated financial institution must submit audited financial statements to the Registrar within three months after year-end, publish the balance sheet and profit and loss account within four months unless exempted by the Registrar, and display the audited statements and external auditor’s report at all places of business.

The Registrar may share information or documents with requesting authorities, but only if the request is in writing and the Registrar is satisfied the material is needed and protected by safeguards.

The Registrar may issue written directions to a licensed or registered financial institution, and the institution must comply with any direction given.

A section 39 direction cannot be used to end or cancel certain contracts, speed up debt, or close out transactions with the financial institution.

The Registrar may appoint an examiner. The examiner may inspect a licensed or registered financial institution, enter relevant premises, copy records, and require information. The institution and specified insiders must cooperate, and non-compliance can be an offence with penalties.

The Registrar may appoint an investigator, and investigators may inspect, copy, seize, and direct production of relevant evidence; financial institutions and related people must give full access, and unlawful noncompliance can lead to an administrative penalty.

Investigators or examiners acting under this Division have the powers and protections of a commissioner under the Commissions of Inquiry Act.

The Registrar must give each examiner and investigator an approved identity card, and they must produce it for inspection on reasonable demand while exercising powers under the Act.

The Registrar may declare a person to be a self-regulatory organization, but only after making arrangements for regulatory or supervisory functions.

A self-regulatory organization may make rules for matters within its supervisory functions, but the rules must not conflict with financial services laws and have no effect unless approved by the Registrar.

A self-regulatory organization must not make a decision that harms a person’s rights unless it first lets the person make representations, or it reasonably thinks delay could harm client protection.

A self-regulatory organization must notify the Registrar, as prescribed, as soon as practicable after appointing a director or executive.

The Registrar may revoke a declaration, but only with the organization’s consent or after notice, reasons, and at least 14 days for representations. Revocation does not remove a person’s right to seek review by the Appeals Committee.

Changes to a self-regulatory organization’s memorandum, articles, or other constituent documents have no effect unless the Registrar approves them.

Certain self-regulatory bodies and their personnel are not liable for losses or damage caused by acts or omissions done in good faith while carrying out supervisory functions.

Self-regulatory organizations must file an annual report with the Registrar within 90 days after the end of the financial year, and the report must include specified governance, supervisory, and audited financial information.

This section limits share ownership in prudentially regulated financial institutions and lets the Registrar approve share classes, larger holdings, trust holdings, and voting-right restrictions.

People who want to become, or remain after changing, controlling parties of a prudentially regulated financial institution need Registrar approval or timely reporting, or they risk an administrative penalty.

Management of every prudentially regulated financial institution must appoint a suitably qualified and experienced internal auditor, unless the Registrar exempts them.

Shareholders of a prudentially regulated financial institution must appoint an external auditor at the first and each annual meeting, unless the Registrar exempts them, and the appointment needs Registrar approval.

The Registrar may require an external auditor to report on audit procedures and may direct the auditor to expand the scope of the examination.

The Registrar may, when necessary, arrange meetings with the external auditor of a prudentially regulated financial institution.

External auditors must tell the Registrar about certain insolvency or compliance concerns, and must verify returns or reports when the Registrar requires it.

A prudentially regulated financial institution cannot replace its external auditor before the term ends unless the Registrar gives prior written approval.

This Part applies alongside other financial services laws.

A person must not engage in misleading or deceptive conduct in relation to financial services, and must not make specified false or misleading representations about those services.

The Registrar may declare certain pricing or service practices in financial services to be prohibited, but must usually consult a relevant advisory body first. Financial institutions that engage in a prohibited practice commit an offence and can be fined K10,000,000 and imprisoned for four years.

The Registrar may issue directives, and those directives may require disclosure of information about financial services to clients or other persons.

This section says Part VIII applies to all prudentially regulated institutions and does not limit the Registrar’s power to issue directives.

Certain regulated financial institutions must give the Registrar copies of court applications and related documents before they are filed or sent. The Registrar may be heard in court proceedings, and the Court cannot make a related order unless the Registrar has approved the compromise or arrangement in writing, except for interlocutory or similar orders.

A prudentially regulated financial institution may not transfer or amalgamate licensed business unless the scheme has been approved by the Registrar.

The Registrar may place a prudentially regulated financial institution under statutory management, and must quickly appoint an auditor and notify the public once that happens.

A statutory manager needs the Registrar’s approval, must manage the institution, and must follow Registrar directions.

Legal proceedings against a prudentially regulated financial institution in statutory management are barred unless the Court gives leave for exceptional hardship or the Registrar gives prior written consent.

The Registrar must keep a statutory manager appointed for a prudentially regulated financial institution until one of the stated end points is reached, and may close the institution if statutory management has lasted more than 120 days.

Winding-up steps for a prudentially regulated financial institution need the Registrar’s approval, and the Registrar controls who may apply to court and who may act as liquidator.

The Registrar may accept and publish written undertakings, and must delete requested sensitive information from published copies when the stated conditions are met.

People who lose money because of a breach of financial services law may sue for the loss, and the Registrar can bring a representative action for claimants in some cases.

The Registrar may impose administrative penalties when satisfied on reasonable grounds that a person contravened a financial services law.

The Court may make orders to enforce financial services law when a person is, or may be, acting in contravention of it.

The Registrar may, by Gazette notice, exempt a financial institution from a financial services law or declare that the law applies with modifications.

This section establishes the Financial Services Appeals Committee and requires it to review Registrar decisions and carry out any other functions given by law.

The Appeals Committee must have three members appointed by the Minister, including a Chairperson. Members serve for three years, may be re-appointed, and may receive fees and allowances set by the Minister.

A member of the Appeals Committee may resign by giving one month’s written notice to the Minister, and the Minister may terminate a member’s appointment by notice on listed grounds.

An Appeals Committee member with a conflicting interest must disclose it and must not take part in the matter unless the Minister approves.

A person aggrieved by certain Registrar decisions may appeal to the Appeals Committee within 21 days after notice.

Once a review application is made to the Appeals Committee, the decision cannot be changed except by the Appeals Committee or with the required consents.

The Chairperson of the Appeals Committee must make sure the reviewed body and the Registrar are notified, the Registrar may be a party to the review, and parties may have legal representation.

This section sets flexible procedure rules for Appeals Committee proceedings and lets the Chairperson issue and change directions.

The Appeals Committee must hold a hearing on a review application, unless the Chairperson decides the matter can be decided without the parties and they agree. The Committee may also hear matters in private and restrict publication of evidence.

Parties before the Appeals Committee must be given a reasonable chance to present their case and inspect documents, and the Committee must consider specified materials when hearing an appeal.

The Appeals Committee has review powers, including affirming, varying, or setting aside a decision, and the Chairperson can summon people and require or administer oaths at a hearing.

People appearing before the Appeals Committee as legal practitioners or witnesses get the same protection, immunity, and related liabilities as they would have in court proceedings, subject to this Act.

People served with a summons must attend, comply with document summonses, answer required questions, take an oath or affirmation when required, and not give false or misleading evidence, unless they have a reasonable excuse.

The Appeals Committee must issue written decisions with reasons, findings, and supporting evidence, and serve a copy on each party. The decision takes effect when given unless the Committee sets a later date.

A party to an Appeals Committee proceeding may appeal to the Court on a question of law, and the appeal must be filed within 21 days after notice of the decision is served.

The Registrar must promote complaint resolution schemes for financial institutions and may direct certain financial institutions or a self-regulatory organization to develop and implement one.

Complaint resolution schemes must be set up and run to resolve client complaints informally and quickly, free of charge, with unresolved matters decided by an independent person, and changes or implementation need Registrar approval.

The Registrar may establish advisory bodies to help with supervisory functions.

The Registrar may issue guidelines, bulletins, and other information for administering financial services laws.

If the Registrar has information that someone is carrying on financial services business or posing as a financial institution without a licence, the Registrar must investigate and take appropriate action.

The Registrar and related persons are protected from damages for good-faith acts or omissions under this Act or any financial services law, unless bad faith is proved. Financial institutions and their officers, employees, or agents are also protected from actions over information given to the Registrar or an approved person in compliance with financial services law, unless bad faith is proved.

Certain examiners, investigators, and Registrar staff must not disclose protected financial-institution business information, except for duty, court, or legal requirements. The Registrar may publish information or data collected under the Act.

Financial institutions must verify and record customer identity, and promptly report suspected money laundering to the Financial Intelligence Unit. Directors, managers, officers, and employees can commit an offence if they process transactions without proper identity checks or despite suspicion of illegal funds.

A person who, without reasonable excuse, refuses to answer a question from the Registrar, an examiner, or an investigator about the Bank’s supervisory functions commits an offence.

A person must not make, give, produce, or authorize misleading statements, information, or documents to the Registrar, examiner, or investigator in connection with supervisory functions or a financial services law.

A person who, without reasonable excuse, fails to comply with a direction, order, or requirement given under a financial services law can be liable to administrative penalties.

A person required under a financial services law to answer or produce something cannot refuse just because doing so may incriminate them or expose them to a penalty.

A person must not describe or hold themselves out as a licensed or registered financial institution unless they are licensed or registered, and must not let someone else do so.

Any person must not destroy, falsify, conceal, or dispose of documents or things relevant to the Registrar's functions or powers.

It is an offence to obstruct or hinder the Registrar, the Registrar’s staff, examiners, investigators, or a statutory manager while they are performing their functions.

A person must not knowingly hinder or prevent compliance with a direction, order, or requirement made under financial services law.

The Registrar may grant an extension of time for compliance or for a prescribed period under a financial services law, if someone applies.

A written statement signed by the Registrar can be used as evidence of whether a named person was licensed, registered, an examiner, or an investigator at a specified time.

For a body corporate, its state of mind can be shown by the conduct and state of mind of a director, employee, or agent acting within actual or apparent authority.

If a body corporate commits an offence under this Act or another financial services law, its directors, employees, or agents are also guilty and may receive the same penalty unless the director can show reasonable precautions and due diligence.

If a body corporate is convicted of an offence against a financial services law, the court may impose a pecuniary penalty, but only if it thinks fit, and the amount cannot exceed five times the maximum penalty for an individual for the same offence.

If part of an offence-related act happens in Malawi and part outside Malawi, the person who does any part in Malawi may be tried and punished under the financial services law.

If this Act conflicts with the Companies Act, this Act takes priority to the extent of the conflict.

The Minister may make regulations for this Act and other financial services laws, after consulting the Registrar, but not on matters where Registrar’s directives may be issued.

Financial institutions must meet the Act’s requirements when the Act commences. The Registrar may allow a transition period to help with compliance.