The MFSA has issued a new General Code of Conduct for Decision Makers within the financial services sector, reinforcing the important role of such individuals in safeguarding the interests of stakeholders while facing complex regulatory, ethical, and operational challenges. The publication of the Code follows a consultation exercise that was held at the end of last year.
The term “decision makers” is considered to include board members, executive and senior management, but also any other individuals holding decision making responsibilities. It applies to any such individuals within entities which are authorised, licensed or otherwise by the MFSA as well as listed entities, on the basis of the principle of proportionality.
The new Code of Conduct aims to enhance the governance capabilities of such Decision Makers, whether approved by the MFSA or otherwise, by emphasising on five core values:
Decision Makers are expected to balance diverse interests, consider risks carefully, maintain a commitment to ethical behaviour in all actions and to be capable of handling challenging situations including those involving stakeholders and peers.
Decision Makers are expected to operate with the highest levels of integrity, ensuring their actions serve the best interests of their entity, the industry, and society at large. Decisions must thus be taken with honesty and transparency.
Decision Makers must provide accurate, clear information to the MFSA, other authorities and stakeholders, ensuring that financials, products, services or risks are never misrepresented. They are responsible for identifying, disclosing, and mitigating any personal, financial, or external interests that could impair their impartiality. This includes managing relationships or affiliations that might influence professional judgment.
Furthermore, Decision Makers cannot use their professional role to gain any direct or indirect improper advantages, whether for themselves or for associated parties.
The role of Decision Makers requires a balance of professional diligence, transparency, and independent judgment. They are required to lead by example, embodying the financial entity’s values. Crucially, they must maintain the independence to challenge colleagues, including the Chairperson, CEO and other Decision Makers, to ensure the best outcomes for stakeholders and the industry.
Effective choices are rooted in comprehensive data analysis and risk assessment. Decision Makers are thus expected to consult experts when necessary and dedicate sufficient time to prepare for meetings, ensuring all actions are well-informed and objective. Their decisions should prioritise the long-term interests of shareholders, employees, clients, regulators and the industry as a whole. Transparency is essential; the rationale for decisions must be documented and shared with relevant parties.
They must also have a clear understanding of their specific duties and the relevant regulatory environment. This includes staying informed about the entity's dealings and being prepared to revisit past choices if new ethical or legal concerns arise. In cases where a Decision Maker holds multiple positions within an entity, they must clearly distinguish between these roles to maintain operational clarity and integrity.
Decision Makers are held to strict standards of accountability and transparency to ensure ethical governance and institutional trust. They must accept full responsibility for both successes and setbacks, ensuring every decision aligns with their duty to the entity.
They are also responsible for presenting a "true and fair view" of the entity’s financial position. Financial statements must be accurate, complete, and disclosed to the public in a timely manner. It is prohibited to act in any way that causes material misstatements or to materially mislead stakeholders involved in the preparation of the financial statements.
Decision Makers must ensure full adherence to all applicable laws and regulations, setting a professional benchmark for the entity as a whole. To this end the Code of Conduct specifies the importance of staying informed on core regulations such as AML, data protection, and anti-corruption measures, while maintaining robust internal compliance frameworks.
Commitment also involves staying abreast of emerging global trends, such as ESG, sustainable finance, and cyber and digital risks, to ensure policies and decisions evolve alongside the regulatory landscape.
If non-compliance is identified, Decision Makers must ensure swift corrective action and immediate, transparent disclosure to regulators and relevant stakeholders.
Furthermore, protecting the confidentiality of all non-public information regarding the entity, its business, clients or suppliers is mandatory, except where disclosure is legally required or authorised.
Respect is the foundation of a collaborative, inclusive and positive culture. Decision Makers must therefore treat all stakeholders, employees, clients, shareholders and the community, with fairness, empathy, and consideration.
Valuing diverse perspectives and encouraging open debate leads to more robust, well-rounded decisions. Furthermore, demonstrating sensitivity to cultural differences and individual rights builds loyalty and motivates performance.
By prioritising these values, Decision Makers strengthen relationships and enhance the entity’s overall reputation and team cohesion.
The MFSA expects all Decision Makers to internalise and demonstrate adherence to the principles outlined in this Code by ensuring their conduct reflects the outlined values and objectives.
This new Code of Conduct represents a modern shift in governance, moving beyond mere compliance to a proactive, ethical mindset for the discerning director. Although this new Code is intended to govern Decision Makers within the financial services sector, including listed entities, its principles are expected to impact corporate governance across the board and setting new standards for all companies regardless of their regulatory status. By unifying legal rigor with cultural integrity, the new Code of Conduct offers a timely, holistic framework that redefines professional accountability and leadership excellence in today’s evolving financial landscape.
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Author: Dr Cherise Abela Grech