The Malta Financial Services Authority (“MFSA”) has circulated a consultation document that proposes a comprehensive revision of the Capital Market Rules applicable to the Institutional Financial Securities Market (“IFSM”). The exercise is intended not only to modernise and streamline the existing framework, but also to create a definitive pathway for the issuance and listing of sukuk. Sukuk are securities structured in accordance with Shariah principles. If implemented, the measures would reinforce Malta’s profile as a regulated EU jurisdiction capable of accommodating Islamic finance.
Operated by the Malta Stock Exchange, the IFSM is reserved for wholesale, non-equity securities carrying a minimum denomination of €100,000. Participation is limited to professional investors or to clients who receive regulated investment advice, thereby ensuring that the platform is accessed exclusively by parties possessing the requisite expertise. The MFSA’s proposals seek to clarify the market’s scope, eliminate redundant provisions, and align the regime fully with EU legislation, while placing the amendments before stakeholders for comment.
A principal change involves the deletion of Chapter 2, which formerly transposed the Prospectus Directive into local law. The Directive has been rendered obsolete by Regulation (EU) 2017/1129 (the “Prospectus Regulation”), whose provisions apply directly across Member States. Consequently, the MFSA proposes to excise the superfluous text. The consultation also introduces a refined definition of “professional securities”, limiting admissibility to non-equity instruments with a face value of at least €100,000 that are acquired or traded solely by qualified investors or professionally advised clients.
A further structural adjustment replaces Listing Agents with MFSA-registered Sponsors. Sponsors will assume responsibility for guiding issuers through the admission process, confirming the accuracy and completeness of prospectus documentation, and overseeing post-listing compliance. The proposal harmonises the IFSM with prevailing international practice yet remains proportionate to the market’s wholesale character.
The most material innovation is the explicit incorporation of sukuk into the rulebook. Although Islamic finance has experienced significant global expansion, Maltese capital-market legislation has, until now, lacked dedicated provisions for Shariah-compliant instruments. The proposed amendments remedy this omission by assigning sukuk the same baseline listing requirements as other wholesale securities, supplemented by criteria that address their distinctive legal and economic structure.
Under the draft framework, an issuer must appoint an independent and suitably qualified Shariah Adviser, whose duties extend to certifying compliance with Islamic jurisprudence and providing continuous guidance where structural modifications arise. Any potential conflict of interest pertaining to the Adviser must be disclosed together with mitigation measures. The issuer is also required to engage a trustee, or an equivalent safeguarding arrangement, to ensure that the assets underpinning the sukuk remain properly segregated, administered, and protected for the benefit of certificate-holders.
Prospectus disclosure obligations have been tailored accordingly. The document must describe the sukuk structure in detail, set out the legal and beneficial ownership of the underlying assets, explain the methodology for calculating and distributing returns, and outline the procedure to be followed in the event of default or restructuring. Additional statements must confirm that proceeds will be applied in a Shariah-compliant manner and that any subsequent amendment to the contractual terms is subject to both holder approval and Shariah review.
Once admitted to listing, issuers of sukuk will assume continuing obligations designed to preserve market integrity. They must submit an annual report on the performance of the underlying assets and obtain a fresh Shariah certification within four months of financial year-end. Any material development that might affect Shariah compliance, whether arising from the assets, the contractual arrangements, or the status of the Adviser, must be notified to the MFSA without undue delay.
The proposed reforms form part of Malta’s broader strategy to diversify its capital markets and attract specialised forms of finance. By offering a clear, EU-aligned regulatory environment for sukuk, Malta stands to appeal to sovereign, corporate, and institutional issuers seeking cost-effective access to European investors under Shariah-compatible structures
Interested parties are invited to submit observations on the consultation by 8th of August 2025. While the text remains subject to refinement, the proposals affirm the MFSA’s commitment to expanding the IFSM’s capabilities and to fostering a regulatory ecosystem that accommodates both conventional and Islamic capital-raising activities.
For any additional information or assistance, please contact us at info@gtg.com.mt
Author: Dr Neil Gauci