Anyone who keeps money or securities with a Maltese investment firm relies, in the background, on a safety net most investors never think about: the Investor Compensation Scheme. It steps in when a licensed firm cannot hand back what it holds for its clients. On 18 August 2026 Malta changed how that safety net is paid for.
Legal Notice 224 of 2026, the Investor Compensation Scheme (Amendment) Regulations, 2026, was published in the Government Gazette that day. It amends the Investor Compensation Scheme Regulations, S.L. 370.09, and was made by the Minister responsible for financial services on the advice of the Malta Financial Services Authority. The Legal Notice carries no separate commencement date, and the consolidated text on legislation.mt shows the amended regulations as the version from 18 August 2026.
The short version: what an investor can recover has not changed. What firms pay into the system has changed a great deal.
Why the Scheme rewrote its funding
The Scheme explained the reason itself. In its notice of 19 August 2026 it said the change in contribution methodology came from the need to strengthen its financial means, which "after extensive analysis, were deemed to be inadequate", particularly for the coverage it must provide to eligible investors in a payout. The stated aims are closer alignment with the EU Investor Compensation Scheme Directive 97/9/EC, a funding method that balances the Scheme's needs against the firms' ability to pay, and further changes described in the earlier consultation.
The Scheme is run by the Compensation Schemes Management Committee, appointed by the competent authority under regulation 5. For how the MFSA itself is organised and what it licenses, the MFSA overview is the starting point, and the 2026 reform article covers this year's changes to the authority.
What an investor is protected for
The trigger: a firm that cannot give your assets back
Under regulation 19(1), the Scheme pays compensation for claims arising out of a licence holder's inability to repay money owed to or belonging to investors and held for them in connection with licensed business, or to return instruments belonging to them that the firm held, administered or managed, or, where that is not possible, their monetary equivalent.
That is a narrow and important point. The Scheme is not insurance against bad investments. Its investor FAQs state plainly that it does not compensate losses caused by market fluctuations or inflation. If shares bought through a Maltese firm fall by half, nothing is payable. If the firm collapses and the shares or the cash it held for you cannot be returned, the Scheme is engaged.
Payment only starts after a determination by the competent authority under regulation 13: either that the firm is unable, for reasons directly related to its financial circumstances, to meet its obligations to investors with no early prospect of doing so, or that a Maltese court has ordered its winding up, whichever comes first.
The limit: 90%, up to €20,000
Regulation 17(1) is untouched by L.N. 224. The total compensation payable to an investor is the lesser of 90% of all claims made by that investor, or €20,000. The amended regulations confirm this in the consolidated text of 18 August 2026.
The Scheme's payment limits page gives worked examples. A client who paid €16,000 for a bond that was never bought receives €14,400. A client who handed over €35,000 for fund units that were never bought receives €20,000, the maximum.
Three further rules shape the number:
- One claim per investor per firm. Under regulation 18(1), an investor submits one claim for all investments with the failed firm, taken together.
- Joint accounts are split. Under regulation 23(1), each joint holder is treated as having a separate share, divided equally unless there is specific evidence of different entitlements. Trustee and nominee holdings are attributed to the beneficial owners under regulation 23(2).
- Other payments are deducted. Regulation 21 requires the Committee to take into account payments from the firm's professional indemnity insurance or under any other arrangement for the same loss.
Regulation 19(2) adds a separate route. Where an investor has obtained a judgment or an award of the Arbiter for Financial Services against a participant for civil liability on licensed business, and a determination has been made, the Scheme settles it up to €20,000 within ten working days of the award becoming final. Any such payment reduces the investor's remaining maximum under regulation 17(1).
Who is excluded
Not every client of a Maltese firm can claim. The First Schedule lists excluded categories, among them investment firms, banks and insurers themselves, collective investment schemes, pension funds, governments, large companies, the firm's own directors, managers and 5% shareholders, their close relatives, and anyone who contributed to the firm's difficulties.
L.N. 224 rewrites item 18 of that list. It now excludes "other categories of professional and institutional investors, including but not limited to elective professional investors and eligible counterparties", as determined by the Management Committee. The new definitions of retail investor and professional investor in regulation 2 follow the MiFID II categories of Directive 2014/65/EU. An individual who asked to be treated as a professional client to access certain products should assume that the opt-up can cost the compensation cover.
How a payout runs
The process steps are in regulations 14, 15 and 22:
- Once informed of a determination, the Committee publishes a notice in at least two local newspapers explaining how to submit claims with documentary evidence.
- Claimants give their identity and address, the capacity in which they claim, evidence of the investments and any other information requested. The application form is provided in English and Maltese.
- Verified claims are to be paid within three months of the determination. In exceptional circumstances the Committee may ask the competent authority for an extension of up to three months, and up to two further three-month extensions after that.
Two process rules are new in 2026.
Payment is always in euro. The substituted regulation 17(2) says all compensation is paid in euro. Where money or instruments owed to an eligible investor are in another currency, the conversion uses the European Central Bank's euro reference rate on the date of the determination. The previous text required computation and payment in the currency of the investment. Anyone holding a US dollar or sterling portfolio carries the currency movement up to the determination date, and the payout is fixed in euro from then on.
Subrogation is automatic. The substituted regulation 22 provides that on paying compensation the Scheme is immediately and automatically subrogated into the investor's rights against the firm and any third party, up to the amount paid, and decides at its absolute discretion which recoveries are worth pursuing. Before payment, eligible investors must confirm in writing that they have received nothing from another scheme or the firm for the same loss, that they will assist the Scheme, and that their rights in the money or instruments claimed pass to the Scheme.
Who must now participate
The old regulation 11 brought in every holder of a Category 2 or Category 3 licence under the Investment Services Act fee regulations. The new regulation 11(1) uses the EU prudential classes instead. Participants are:
- investment firms holding a Class 1, Class 1 Minus, Class 2 or Class 3 licence in terms of Regulation (EU) 2019/2033 and Directive (EU) 2019/2034;
- credit institutions authorised to provide investment services;
- fund managers authorised to provide ancillary MiFID services to retail clients.
Firms that serve only non-retail clients need not participate but may now ask to join voluntarily. A Maltese branch of a firm licensed outside the EEA must participate unless the Scheme has an agreement with the home scheme confirming equal or better cover; a branch of an EEA firm may join only to top up where Malta's cover exceeds its home scheme's.
What licence holders now pay
The old Second Schedule, with its two-tier fixed fee and revenue-based reserve, has been deleted. The new regulation 12 replaces it with five elements. All contributions are non-refundable, and newly licensed participants contribute from their second year of licensing. The Scheme's user guidelines of 18 August 2026 set out the same structure in table form.
Fixed Contribution
Under regulation 12(4), every participant pays an annual Fixed Contribution:
- Class 3 investment firms: €5,000;
- Class 2 firms and credit institutions not authorised to deal on own account, and fund managers: €7,000;
- Class 2 firms and credit institutions authorised to deal on own account: €22,000;
- Class 1 and Class 1 Minus investment firms: €40,000.
The previous figures were €2,911.72 for Category 2 and €17,470.30 for Category 3 licence holders. The categories do not map one to one onto the new classes, so a direct comparison depends on the firm. The deadline moves from 30 April to 31 July each year, or within 30 calendar days of becoming liable. Pro rata formulas apply to firms that join part way through a year and to licence upgrades.
Variable Contribution and the Investor Compensation Scheme Reserve
The Variable Contribution stays at 0.1%, but its base changes. Under regulation 12(8), it applies to the increase in "investment services activities related revenue" each year. That revenue is defined in regulation 2 as revenue from licensed investment services activities as reported in the audited financial statements; for fund managers it means retail-related management, administration and advisory fees as reported in Appendix 2B. The previous base was total revenue from licensable business.
The money still does not go to the Scheme. It is held in an Investor Compensation Scheme Reserve, invested with a third party approved by the Committee and pledged in the Scheme's favour, or deposited directly with the Scheme without interest. At each financial year end, the reserve must be worth at least the higher of 0.1% of that revenue and the minimum of €698.81, topped up within one month if it falls short. The investment rules remain: at least 25% in euro bank deposits of up to 30-day call or Malta Treasury Bills, and of the rest, at least half in Malta Government Stocks or local SICAVs investing mainly in them, with the balance in listed, dematerialised debt rated at least "A". The reserve cannot sit with the firm itself or a group bank, and it is deducted in full as an illiquid asset when calculating the firm's financial resources.
One feature of the old regime is gone with the Second Schedule: firms used to build the reserve only until fixed contributions and reserves across the industry reached €2,329,373.40. The new regulation 12 contains no such ceiling.
Emergency Drawdown Reserve
This is the largest new item for most firms. Under regulation 12(25) to (29), participants must keep an Emergency Drawdown Reserve equal to 1% of their investment services activities related revenue, in cash and cash equivalents, available within 30 calendar days of a call. It does not shrink if revenue falls in a later year. It must be disclosed in a note to the annual financial statements, which go to the Scheme within four months of year end, and it is also deducted in full as an illiquid adjustment.
Extraordinary Contribution
In circumstances the Committee deems exceptional, participants pay an Extraordinary Contribution of 0.15% of that revenue within 30 days of notification (regulation 12(30) to (32)). With the consent of the competent authority the Scheme may require more, including to replenish its funds after a payout.
Management Expenses Contribution
Under regulation 12(33) to (36), the Scheme may levy a Management Expenses Contribution at least once a financial year if it expects its funds to be insufficient to cover running costs. That money pays management expenses only and is never counted as funds available for compensation.
Firms that serve only professional clients and join voluntarily are exempt from everything except the Fixed Contribution (regulation 12(2)). The Committee may also, after internal evaluation, suspend or resume collection every five years.
When the Scheme calls the money
The substituted regulation 16 ties this together. When the Committee considers the Scheme's funds inadequate during a compensation event, it may call on the Variable Contribution reserve, the Emergency Drawdown Reserve and an Extraordinary Contribution, each payable within 30 calendar days of the request.
A rough sense of scale
Take a Class 2 firm not authorised to deal on own account, with €2 million of investment services related revenue. On the figures in regulation 12, it pays a €7,000 Fixed Contribution each year, keeps a reserve worth at least €2,000 pledged to the Scheme, and holds €20,000 in cash and cash equivalents as its Emergency Drawdown Reserve. If the Scheme declares an exceptional situation, a further €3,000 Extraordinary Contribution follows. Both reserves are deducted in full from the firm's financial resources, so they also feed through to its capital position.
What to take from it
If you hold assets with a Maltese investment firm, nothing in your cover has increased. The Scheme is a backstop for a firm that cannot return client money or instruments, capped at 90% and €20,000 per investor per firm, paid in euro at the ECB rate on the determination date. If you have opted up to professional status, check whether that has taken you out of the Scheme altogether. Regulation 25 also bars firms from advertising Scheme protection without the competent authority's prior written consent, so treat marketing claims with care. How authorised nominees and trustees hold assets, and how the Maltese banking system treats residents, are part of the same picture.
If you run or plan a Maltese investment firm, the Fixed Contribution, the new revenue definition and the 1% Emergency Drawdown Reserve belong in the business plan and the capital planning from the second year of licensing. Regulation 12(7) sets 31 July as the annual deadline for the Fixed Contribution, and the Legal Notice was published after that date in 2026. The user guidelines say fixed and variable contributions are paid following the Scheme's communication and by the deadline it sets, so watch for that communication.
Work with Sebastian
If you are holding investments through a Maltese firm or setting up a licensed business in Malta and want to understand what the new compensation rules mean for you, book a consultation.
