MFSA

The Malta Financial Services Authority (MFSA) is the single regulator for financial services in Malta. Since Malta joined the European Union in 2004, an MFSA investment services licence carries MiFID passporting rights, which means a Malta-licensed broker can serve clients across the European Economic Area under a single authorisation. That passport is the commercial reason a number of brokers chose Malta.

What the licence requires

Brokers dealing on own account against retail clients hold a Category 3 Investment Services Licence; Category 2 covers firms that hold client money but do not deal as principal. Capital requirements follow the EU Investment Firms Regulation, and firms must appoint locally resident directors and compliance, risk and internal audit functions. The MFSA reviews business plans, shareholders and outsourcing arrangements before granting a licence, and conducts on-site supervision afterwards.

Client money is held under MiFID client asset rules, segregated with credit institutions and reconciled, with annual client assets reporting.

Leverage and retail protections

ESMA's product intervention measures apply in full and have been made permanent in national law. Retail leverage is capped at 30:1 on major currency pairs, 20:1 on non-major pairs, gold and major indices, 10:1 on other commodities and non-major indices, 5:1 on individual equities and 2:1 on cryptocurrencies. Margin close-out at 50% of required margin is mandatory, negative balance protection is guaranteed on a per-account basis, and standardised risk warnings showing the percentage of losing retail accounts must appear in communications.

Clients meeting the MiFID elective professional criteria may opt up and lose those protections.

If a broker fails

Malta operates an Investor Compensation Scheme that pays eligible retail claims where a licensed firm cannot return client assets, up to a statutory ceiling per claimant. That backstop, plus the ESMA protections, is what separates an MFSA licence from the offshore alternatives — and it is the reason ProForexBrokers.com weighs an EU licence above an equivalent-sounding offshore one even when the trading conditions look worse on paper.

Verifying a licence

The MFSA publishes a Financial Services Register showing licence category, status and permitted activities, alongside a warnings list. Confirm the entity, the category and that your account agreement names the Malta company rather than a non-EU affiliate.

Who an MFSA broker suits

An MFSA licence suits EEA residents who want full MiFID protections and compensation cover, and who accept capped leverage as the price. Traders seeking high leverage will find the same brands offering it through non-EU entities — with none of the protections described above.