NAIFs update - Malta

Published 17 Jun 2016

Malta’s Notification framework for alternative investment funds

In February 2016, the Malta Financial Services Authority (‘MFSA’) announced the launch of a new framework applicable to the Notification of Alternative Investment Funds. The process of notification of funds shall apply to Alternative Investment Funds (‘AIFs’) which are promoted to Professional Investors or Qualifying Investors. AIFs falling within the scope of the notification process shall be managed by a full-scope Alternative Investment Fund Manager (’AIFM’) who will undertake responsibility for that AIF and for the fulfilment of its obligations, its investors and its regulator under the AIFMD and the relevant rules and regulations.

The process of notification of AIFs shall be available in respect of collective investment schemes which are not in possession of a license issued by the Malta Financial Services Authority (‘’MFSA’’) in terms of the Investment Services Act. 

 

Collective Investment Schemes which cannot make use of the notification process

The following collective investment schemes are not eligible for the notification process:

  • AIFs which are self-managed;
  • AIFs which are not marketed and sold exclusively to Professional and/or Qualifying Investors;
  • Loan funds whether self-managed or third-party managed;
  • AIFs that invest in non-financial assets such as antiques, works of art, classic cars, real estate, physical commodities and other tangible assets.

The above list of collective investment schemes is currently under review by the MFSA and the final list of AIFs which are not eligible will be set out in the MFSA’s final rules.

 

Constitution of a Notified AIF

A Notified AIF may be established as:

  • SICAV (an investment company with variable share capital)
  • INVCO (an investment company with fixed share capital)
  • SICAV Incorporated Cell Company
  • RICC (an incorporated cell of a recognised incorporated cell company)
  • Limited Partnership
  • Unit Trust
  • Contractual Fund

 

Target Investors

Notified AIFs may be marketed to the following types of investors:

  • Professional Investors which are investors deemed to be professional clients as defined under Annex II of MIFID (or may on request, be treated as professional clients)
  • Qualifying Investors, being investors that fulfil the following criteria:

a) Invest a minimum of EUR 100,000 (or currency equivalent) in the AIF;

b) Declare in writing to the AIFM and the AIF that they are aware of and accept the risks associated with the proposed the following; and

c) Meet at least one of the following:

       i) 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 currency equivalent)

       ii) An unincorporated body of persons or association which has net assets in excess of EUR 750,000 (or currency equivalent);

       iii) A trust where the net value of the trust’s assets is in excess of EUR 750,000 (or currency equivalent);

       iv) An individual whose net worth or joint net worth with that of his spouse exceeds EUR 750,000 (or currency equivalent); or

       v) A senior employee or Director of Service Providers of the Notified AIF.

In addition to the above, the AIFM shall also observe the rules applicable in the jurisdiction(s) where the AIF is being marketed.

 

Procedure to be followed by the AIFM during the notification process for AIFs

a) The EU/EEA AIFM may submit a notification request to the MFSA for an AIF to be included in the list of Notified AIFs. The full scope AIFM is to be either licensed by the MFSA or in possession of a management passport under Article 33 of the AIFMD.

b) The notification requests is to be accompanied by the following documents:

  • A Prospectus, a pro-forma template being provided by the MFSA;
  • A resolution by the governing body of the AIF certifying that the Prospectus has been drafted in accordance with the pro-forma template;
  • A self-certification by the AIFM that it has the necessary competence and experience to manage the AIF and/or monitor effectively any delegate;
  • A joint declaration by the AIFM and the governing body of the AIF wherein each undertakes responsibility for the AIF, including the obligations arising under the AIFMD;
  • A declaration by the AIFM confirming that it has carried out the necessary due diligence with respect to the governing body and the service providers of the AIF.

The MFSA shall make available specimens of the above mentioned documents.

Within 10 business days from the date of filing a complete notification pack, the MFSA shall include the AIF in the List of Notified AIFs. Notified AIFs will not be subject to ongoing supervision.

 

Due Diligence

The AIFM is to carry out the necessary due diligence exercise to ensure that the service providers and the governing body of the AIF are ‘’fit and proper’’. The AIFM is to update the relevant due diligence records on an annual basis and shall document the updates carried out. The MFSA will not carry out any due diligence but will be relying on the checks and controls carried out by the AIFM.

The MFSA will maintain an updated List of Notified AIFs in good standing on its website. The first requests for Notified AIFs will be accepted during the second quarter of 2016.

 

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