Consolidation of Malta’s Fund Frameworks

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On 1st April 2016, the Malta Financial Services Authority (hereinafter referred to as ‘the Authority’) circulated its intention of consolidating and reducing the number of fund frameworks that are currently available to fund promoters under Maltese legislation, with the aim of improving Malta’s fund frameworks.

The Addition of a New Fund Framework

In addition to the twelve fund frameworks that are currently available in Malta, which can be categorised into Retail Schemes, Professional Investor Funds (PIFs), and Alternative Investment Funds (AIFs), fund promoters are now witnessing a new fund framework, namely the Notified AIFs (hereinafter referred to as ‘NAIFs’).

NAIFs have been introduced into Maltese legislation by means of Legal Notice 219 of 2016, the Investment Services Act (List of Notified AIFs) Regulations 2016.

NAIFs are alternative investment funds that are compliant with the requirements under the Alternative Investment Fund Managers Directive. A NAIF is established through a notification by the AIFM to the Authority, once the pertinent conditions outlined in the regulations and the applicable Investment Services Rules are fulfilled.

As per Article 3 of the abovementioned Legal Notice, an AIFM may submit a request to the Authority for the inclusion in the List of Notified AIFs as an AIF established in Malta, provided that the AIFM fulfils at least one of the following conditions:

  • The AIFM is in possession of an investment services licence granted in terms of Maltese law to provide fund management services to AIFs established in Malta; or
  • The AIFM is authorised to provide services to an AIF established in Malta in accordance with the pertinent regulations of the Investment Services Act (Alternative Investment Fund Manager) (Passport) Regulations.

 

Forthcoming Changes to Malta’s Fund Frameworks

Subsequent to an assessment of the current frameworks which are available to fund promoters, a number of fund frameworks shall be discontinued and the frameworks outlined hereunder shall remain.

Retail Schemes

Such Schemes will include UCITS and Retail AIFs. It is to be noted that non-UCITS retail schemes shall be subject to the following considerations.

Non-UCITS retail schemes

  • Such schemes shall be gradually phased out.
  • No new collective investment schemes licences will be issued under this category.
  • Existing licence holders will be allowed to continue operating under the current regime.

 
Overseas-Based Non-UCITS retail schemes

  • Such schemes shall be required to comply with the Maltese National Private Placement Regime.
  • The Authority is aiming to completely phase out this regime by 31st December 2016.

 

Professional Investor Funds

There shall be one category of PIFs, namely those promoted to Qualifying Investors.

The main change shall consist in increasing the minimum initial investment from EUR 75,000 to EUR 100,000.

Existing PIFs for Experienced, Extraordinary and Qualifying Investors (with a minimum initial investment limit of EUR 75,000) will continue to operate under their respective regulatory regime.

The proposed revised definition of “Qualifying Investors” shall read as follows.

A “Qualifying Investor”, is an investor which fulfils the following criteria:

  1. invests a minimum of EUR 100,000 or its currency equivalent in the PIF/AIF/NAIFs which investment may not be reduced below this minimum amount at any time by way of a partial redemption; and
  2. declares in writing to the fund manager and the PIF/AIF/NAIF that it is aware of and accepts the risks associated with the proposed investment; and
  3. satisfies at least one of the following:

 

  • a body corporate which has net assets in excess of EUR 750,000 or which is part of a group which has net assets in excess of EUR 750,000 or, in each case, the currency equivalent thereof;
  • an unincorporated body of persons or association which has net assets in excess of EUR 750,000 or the currency equivalent;
  • a trust where the net value of the trust’s assets is in excess of EUR 750,000 or the currency equivalent;
    an individual whose net worth or joint net worth with that of the person’s spouse, exceeds EUR 750,000 or the currency equivalent; or
  • a senior employee or director of a service provider to the PIF/AIF/NAIF.

 

Alternative Investment Funds

AIFs shall be either Retail AIFs or Professional AIFs.

AIFs that are authorised in terms of the Investment Services Act can be marketed to Professional Investors and/or to Qualifying Investors, having a minimum investment requirement of EUR 100,000.