S.L. 370.23 Art. 5Request which may be made by ESMA.

(1) If any of the activities of the AIFMs cause or aggravate a substantial threat to the orderly functioning and integrity of the financial market or to the stability of the whole or a part of the financial system in the European Union and there are cross-border implications, and if the competent authority fails to take measures to address such threat or if the measures taken do not sufficiently address the threat, ESMA may, subject to the requirements set out in sub-regulations (2) and (3), request the competent authority to take any of the following measures, as appropriate:

(a) prohibit the marketing in the European Union of units or shares of AIFs managed by third country AIFMs or of third country AIFs managed by EU AIFMs without the authorisation required in Article 37 of the AIFM Directive, or without the notification required in Articles 35, 39 and 40 of the AIFM Directive, or without being allowed to do so by the competent authority in accordance with Article 42 of the AIFM Directive;

(b) impose restrictions on third country AIFMs relating to the management of an AIF in case of excessive concentration of risk in a specific market on a cross-border basis;

(c) impose restrictions on third country AIFMs relating to the management of an AIF where its activities potentially constitute an important source of counterparty risk to a credit institution or other systemically relevant institutions; or

(d) in the interest of investors, in exceptional circumstances and after consulting the AIFM, require third country AIFMs that are marketing in the European Union AIFs that they manage, or European AIFMs managing third country AIFs, to activate or deactivate the liquidity management tool referred to in point (1) of Annex V of the AIFM Directive, as transposed into the Investment Services Rules, where there are risks to investor protection or financial stability that, on a reasonable and balanced view, necessitate such activation or deactivation.

(2) The measures adopted by the competent authority in terms of sub-regulation (1) shall:

(a) effectively address the threat to the orderly functioning and the integrity of the financial market or to the stability of the whole or a part of the financial system in the European Union or significantly improve its ability to monitor the threat;

(b) not create a risk of regulatory arbitrage; and

(c) not have a detrimental effect on the efficiency of the financial markets, including reducing liquidity in those markets or creating uncertainty for market participants, in a way that is disproportionate to the benefits of the measures.

(3) Before requesting the competent authority to take or renew any measure referred to in sub-regulation (1), ESMA shall consult, where appropriate, the ESRB and other relevant authorities.

(4) In both cases where Malta is the Member State of reference of a third country AIFM or where Malta is the host Member State of such AIFM, the competent authority shall be notified by ESMA of its decision to request such competent authority to impose or renew any measure referred to in sub-regulation (1). The notification shall at least specify the following details:

(a) the AIFM and the activities to which the measures apply and their duration; and

(b) the reasons why ESMA is of the opinion that it is necessary to impose the measures in accordance with the conditions and requirements set out in this regulation, including the evidence in support of those reasons. In both cases where Malta is the Member State of reference.

(5) ESMA shall review the measures undertaken by the competent authority in terms of this regulation at appropriate intervals and at least every three months and if a measure is not renewed after that three-month period, it shall automatically expire. Any renewal shall be carried out in the process referred to in this regulation.

(6) If Malta is the Member State of reference in terms of the Investment Services Act (Alternative Investment Fund Manager) (Third Country) Regulations, of the non-EU AIFM against whom a measure in terms of this regulation was imposed, the competent authority may request ESMA to reconsider its decision in the manner set out in the second sub-paragraph of Article 44(1) of Regulation (EU) No 1095/2010.