Recognised Financial Entities

Recognised financial entities are financial entities which require recognition from the regulator, rather than a licence, in order to start operating within a jurisdiction. In Malta, the local regulator which governs all financial services is the Malta Financial Services Authority (MFSA). In Malta, one finds two main recognised financial entities: Fund Administrators and Recognised Incorporated Cell Companies.

Fund Administrators

Fund Administrators are recognised financial entities which are responsible for carrying out various activities in support of the actual process of running a collective investment scheme.  As per the Investment Services Act (Cap. 370), a fund administrator is defined as any person who in Malta or from Malta provides administrative services to licence holders in Malta, or equivalent authorised persons and schemes overseas, but which does not itself constitute a licensable activity. These are required to apply for recognition by the MFSA. There are several different fund administration services which can be carried out.

Generally, the main services offered regularly by Fund Administrators are:

• Preparation of Net Asset Value;
• Reconciliations;
• Pricing the Investment Portfolio;
• Fund Accounting;
• Preparation of Contract Notes;
• Transfer Agency;

Other services include:

• Payment of Bills;
• Preparation of Financial Statements;
• Performance Reporting;
• Compliance Reporting;
• Registrar

Entities which provide any one of the aforementioned services or a limited number of other ancillary services will not necessarily require a recognition as per the requirement stipulated in the Investment Services Act, however this issue is to be determined by the MFSA only.

Our publication ‘Fund Administrators in Malta’ offers a good insight on the roles of fund administrators, the exemption from the registration requirement, the recognition requirements and continuing requirements, outsourcing of functions and compliance.

Recognised Incorporated Cell Companies

Recognised Incorporated Cell Companies (IICs) are a relatively new form of recognised financial entities and corporate vehicles which serve as original and flexible legal structures in the sphere of insurance business. They have played a significant role in Malta’s status as an attractive domicile for insurance businesses.

These recognised financial entities are regulated as per the Companies Act (Recognised Incorporated Cell Companies) Regulations (2010) which provide for flexible regulations which allow the incorporation of distinct cells which may be licensed independently of the main company. This confers on them the ability to create cells for the purpose of segregation of the cellular assets and liabilities. Each incorporated cell of an ICC has its own separate legal personality which is distinct from that of a Limited Liability Company, thus it is able to transact and enter into contracts with third parties in its own name. Moreover, a Malta IIC may establish incorporated cells for the purpose of carrying out business of affiliated (captive) insurance which provides vast opportunities.

Malta has also legislated in respect of Protected Cell Companies (PCCs), which makes it the sole EU member state to establish a legal regime for both cell companies.

Our Recognised Financial Entities Practice

Our professionals at Chetcuti Cauchi can offer legal advisory services regarding the set up of recognised financial entities. Our lawyers assist with the setting up Malta ICCs which may be set up by way of incorporation, continuation through redomiciliation, conversion or division as well as the utilisation of ICCs in the field of captive insurance and the exercise of EU passporting rights, amongst others. Our professionals will also communicate with the local regulator on behalf of the client at pre-licensing stage and will guide clients through the legal requirements of the regulatory process up till the attainment of the licence. Our team can also provide legal counsel at post-licensing stage, thus ensuring that all compliance matters are catered for.