Green Bonds Regulations: MFSA Powers and EU Alignment

In furtherance of the Financial Markets Act, Green Bonds Regulations (the “Regulations”) have been issued to align with Regulation 2023/2631 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds. The Regulations transpose articles on the supervision and powers of competent authority, administrative penalties and other administrative measures, the right of appeal, and the publication of decisions imposing an administrative penalty and other administrative measures.

Green bonds are bonds that are marketed as environmentally sustainable and as sustainability-linked bonds as may be amended from time to time and includes any implementing measures that have been or may be issued. The competent authority for the purposes of this Regulation shall be the Malta Financial Services Authority (the “MFSA”).

The MFSA, in accordance with the Regulations, shall supervise:

1. issuers of European Green Bonds;
2. issuers that use common templates for the purposes of post-issuance disclosures; and
3. originators with regard to compliance with their obligations.

Moreover, the MFSA shall not supervise issuers of European Green Bonds that consist of: (i) non-equity securities issued by a Member State or by one of a Member State’s regional or local authorities, by public international bodies of which one or more Member States are members, by the European Central Bank or by the central banks of the Member States; and (ii)securities unconditionally and irrevocably guaranteed by a Member State or by one of a Member State’s regional or local authorities.

In furtherance to the Financial Markets Act, the MFSA shall be able to impose any of the following administrative penalties and measures:

1. a public statement indicating the infringing person and the nature of infringement;
2. an order requiring the responsible person to cease the infringing conduct;
3. an order prohibiting the person from issuing European Green Bonds for a period not exceeding 1 year.
4. the maximum administrative penalty of at least twice the amount of profits gained or losses avoided resulting to the infringement;
5. in the case of a legal person, a maximum administrative fine of €500,000 or 0.5% of the total annual turnover of that legal person according to the most recent available financial statements;
6. to prohibit or cease advertisements;
7. to publicize the fact that an issuer is failing to comply with the Regulations and require the issuer to publish such information on its website;
8. to prohibit an issuer from issuing European Green Bonds for a period not exceeding 1 year in the event of repeat infringement;
9. to make public the fact that the issuer is no longer in compliance with Regulation 2023/2631 and require the issuer to publish this information on its website; and
10. carry out on-site inspections or investigations at sites other than those of private residence of natural persons for the purpose of proving infringement of Regulation 2023/2631.

Any person who feels aggrieved by a decision taken by the competent authority under this Regulation or Regulation 2023/2631 may appeal to the Financial Service Tribunal.

For any information or assistance please contact us at info@gtg.com.mt

Author: Dr Neil Gauci