Regulatory approach of PIFs and AIFs: MFSA issues Consultation Document

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The Alternative Investment Fund Managers Directive (hereinafter referred to as the “AIFMD” or the “Directive”) was transposed into Maltese law in July 2013. During the transposition, the MFSA decided to retain the Professional Investor Funds (PIFs) Regime. This was possible because the AIFMD is not a product-oriented directive, meaning that the obligations deriving from the Directive are on the Alternative Investment Fund Managers (AIFMs) and not on the funds. The AIFMD lays down rules for the authorisation, ongoing operation and transparency of the AIFMs.

Under the present system PIFs may be managed by Non-EU AIFMs, Below-Threshold AIFMs, and Above-Threshold AIFMs. To determine whether an AIFM is above or below the threshold, its Assets Under Management (AUM) need to be calculated. The AUM aggregates all assets being managed by the AIFM without deducting liabilities. The AIFM’s relation to the threshold determines the applicability of the AIFMD.

In the scenario where a PIF is managed by an above-threshold (full) AIFM the PIF would be required to be managed by the AIFM in full compliance with the AIFMD while also complying with the PIF Rulebook, thus being exposed to two bodies of regulation. In addition to this, the PIF would be managed as an AIF despite not being able to market its units across the EU by means of the passporting procedure.

On March 10th, 2015 the MFSA issued a consultation document on the regulatory approach applicable to licensed PIFs and AIFs. Until March 30th, the MFSA was gathering feedback which it will now use to finalise its policy decision and establish a way forward.

As it is, the MFSA is faced with two options. The first option is to retain the current position and continue to allow AIFMs to manage both PIFs and AIFs. The second option is to amend the current situation and have Full AIFMs (Above-Threshold) only manage AIFs. The following table illustrates the consequences of both options.

PIF Table


The first option will allow the PIF Brand to be retained even for AIFMs that exceed the threshold. This allows two different frameworks to serve as platforms for AIFMs irrespective of their size. The MFSA has stated that it favors the second option since amending the current system will contribute towards maintaining a clear distinction between the PIF and AIF regimes. This will provide for greater clarity and reduces possible misunderstandings regarding the applicable requirements.