As of early October 2026, the Malta Financial Services Authority (“MFSA”) has issued its key findings from the 2026 mystery shopping exercise examining the distribution of insurance-based investment products (“IBIPs”) and retirement products by tied insurance intermediaries (“TIIs”).
The exercise focused mainly on the pre-contractual stage of the customer journey and assessed how products were presented to prospective clients, including customer assessments, product comparisons, disclosure of risks and costs, and whether communications remained within the boundary between factual product information and regulated investment advice. The exercise was limited to TIIs that are not authorised to provide investment services and therefore cannot provide investment advice.
The MFSA identified recurring weaknesses in the way TIIs conducted and documented the sales process. These included shortcomings in demands and needs and appropriateness assessments, insufficient pre-contractual disclosures and explanations of costs and risks, unsubstantiated product comparisons, communications that could be perceived as investment advice, and an overemphasis on tax-related incentives.
The MFSA identified weaknesses in how TIIs assessed and documented customers’ demands and needs, including instances where products were discussed before sufficient information had been gathered regarding the customer’s circumstances and risk profile. In certain cases, there was also insufficient documentation showing how the information obtained had been assessed or why particular products were considered appropriate.
TIIs are therefore expected to complete and properly document demands and needs assessments before proposing products or discussing them in detail. Insurance Undertakings should also ensure that appropriate records are maintained so that there is a clear audit trail demonstrating the basis on which products were discussed and how they aligned with the customer’s requirements. The audit trail should also evidence any appropriateness assessment required under the MFSA’s Conduct of Business Rulebook
The MFSA also raised concerns regarding the manner in which certain product comparisons were presented. In some cases, comparisons were based on incomplete information, isolated product features or unsupported statements concerning competing products and providers.
The Authority expects comparisons to be fair, accurate and transparent, and to be based on objective, current and verifiable information. Firms should also ensure that comparisons take account of the overall characteristics of the relevant products, including costs, risks, contractual terms and investment objectives.
The exercise found that the distinction between factual product information and regulated investment advice was not always sufficiently clear. In some interactions, the language used could reasonably have been interpreted as a personal recommendation, for example where particular products were described as the “most suitable” option or customers were steered away from alternative solutions without an objective explanation.
The MFSA also identified encouragement to reduce contributions, take premium holidays or reallocate investments without adequate explanations of the consequences.
TIIs that are not authorised to provide investment advice must remain strictly within the scope of their regulatory permissions. Customer communications should therefore be factual, objective and balanced and should not create the impression that a personal recommendation is being provided.
The MFSA observed that tax incentives and government benefits were, in most instances, given greater prominence than the underlying nature, risks and long-term features of the product itself. This created a risk that customers could misunderstand the product’s purpose or eligibility for particular benefits.
Firms are expected to ensure that tax-related information is accurate, relevant and properly contextualised. Where flexibility, withdrawal options or other product features are highlighted, these should also be accompanied by a balanced explanation of any applicable conditions, restrictions and financial implications.
The exercise also identified shortcomings in the timely provision of Key Information Documents (“KIDs”) and other mandatory pre-contractual documentation. In most cases, customers received only limited supporting material, while in others no quotations, product literature or explanatory documentation were provided.
The MFSA expects relevant documentation to be provided sufficiently in advance of any commitment so that customers have a meaningful opportunity to consider the information supplied. Documentation should complement verbal explanations, and records should evidence compliance with disclosure obligations. Customer communications should also be clear and appropriate to the customer’s level of understanding, with product features, risks and contractual implications properly explained.
The Authority further found that cost disclosures were not always sufficiently complete or proactive, while potential returns were frequently given greater prominence than the associated risks. Firms should therefore ensure that customers receive comprehensive information regarding costs and charges proactively and before making an investment decision, while projected or illustrative returns should be properly contextualised by explaining their underlying assumptions and making clear that investment performance is not guaranteed, and balanced by explanations of market volatility, potential capital loss and product limitations. Verbal explanations should remain consistent with KIDs and other formal product documentation.
Beyond individual customer interactions, the MFSA emphasised that Insurance Undertakings remain responsible for compliance where products are distributed through TIIs. Firms should maintain effective oversight of their distribution networks, identify both positive and negative target markets and communicate these to distributors, monitor distribution against those markets, and periodically review their governance, compliance monitoring and quality assurance arrangements. Products should be distributed only within the identified positive target market.
Training should extend beyond product knowledge and should also cover customer assessments, disclosure requirements, record-keeping, product comparisons and the distinction between factual product information and regulated investment advice. The MFSA has also encouraged Insurance Undertakings to consider conducting their own periodic mystery shopping exercises as a means of identifying conduct risks and improving sales and disclosure practices.
The same conduct of business requirements apply regardless of whether products are distributed face-to-face, remotely, by telephone or through digital platforms. Firms should therefore ensure that equivalent standards of information, disclosure and customer protection are maintained across all distribution channels.
The MFSA expects Insurance Undertakings and TIIs to treat the findings as an opportunity to strengthen their conduct frameworks, customer assessments, disclosure practices and sales processes. Firms should review their existing documentation, customer-facing communications, training and oversight arrangements against the areas highlighted by the Authority, particularly as the MFSA has confirmed that it will continue monitoring industry practices through supervisory activities, including further mystery shopping exercises, and may consider regulatory action against TIIs and their principles where shortcomings are identified.
Should you require further information on the MFSA’s findings or assistance in reviewing your organisation’s distribution practices, documentation and regulatory compliance arrangements, please contact us at info@gtg.com.mt