Introduction
On the 26th May 2016, the Malta Financial Services Authority (the “MFSA”) issued a circular to the financial services industry and announced that it will be consolidating and reducing the number of fund frameworks which are currently available to retail investors in terms of the Investment Services Act and relevant Investment Services Rules.
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Current Framework
Malta currently offers fund promoters twelve fund frameworks that are divided into three particular categories namely:
RETAIL SCHEMES – These include UCITS, Non-UCITS Retail Schemes, Overseas Non-UCITS Retail Schemes and Retail AIFs
PROFESSIONAL INVESTOR FUNDS (“PIFs”) – The PIF Regime is divided into the following categories, based on the investor’s wealth and experience namely;
PIFs promoted to Experienced Investors – minimum investment threshold of € 10,000;
PIFs promoted to Qualifying Investors – minimum investment threshold of € 75,000; and
PIFs promoted to Extraordinary Investors – minimum investment threshold of € 750,000
ALTERNATIVE INVESTMENT FUNDS (“AIFs”)
These can be divided into four sub-categories (other than Retail AIFs) that is to say;
AIFs promoted to Experienced Investors – minimum investment threshold of € 10,000;
AIFs promoted to Qualifying Investors – minimum investment threshold of € 75,000;
AIFs promoted to Extraordinary Investors – minimum investment threshold of € 750,000; and
AIFs promoted to Professional Investors – no minimum investment requirement.
By the beginning of June 2016, the fund frameworks will also include the Notified AIFs (“NAIFs”) which will be introduced through the Investment Services Act Regulations, 2016. NAIFs are alternative investment funds that satisfy the requirements stipulated in the Alternative Investment Fund Managers Directive (“MiFID”) which will be established by way of a notification by the AIFM to the MFSA.
Forthcoming changes
Following an assessment of the current frameworks by the MFSA, a number of fund frameworks will be eliminated and the following will remain:
RETAIL SCHEMES – This will include UCITS and Retail AIFs. Non-UCITS will be subject to the following:
Non-UCITS retail schemes will gradually be discontinued. Whilst existing license holders will be entitled to continue operating under the current regime, no new collective investment schemes will be issued under this category.
Overseas-Based Non-UCITS retail schemes will be required to adhere to the Maltese National Private Placement Regime. MFSA will communicate with license holders concerned to ensure smooth adjustment to the National Private Placement Regime.
PIFs – Only one category of PIFs shall remain, namely PIFs promoted to Qualifying Investors. An amendment shall be made to the definition and criteria for Qualifying Investors and to the minimum investment threshold which shall be increased from €75,000 to €100,000.
Existing PIFs for Experienced, Extraordinary and Qualifying Investors will continue to operate under their particular regulatory regime. New applications will not however be accepted.
AIFs – will consist of Retail AIFs or PRofessional AIFs. AIFs can be marketed to Professional Investors and/or Qualifying Investors having a minimum investment requirement of €100,000.
Way Forward
As of 3 June 2016, MFSA will not be accepting applications for the licensing of the following:
Non-UCITS Retail Schemes;
PIFs targeting Experienced and Extraordinary Investors;
AIFs targeting Experienced and Extraordinary Investors.
MFSA shall publish the revised Investment Services Rules applicable to Retail Schemes, PIFs and AIFs in order to reflect the consolidation of the Maltese Fund Regimes.
