Malta has established itself as one of the EU’s top domiciles for asset management and investment funds. Long known as the jurisdiction of choice for hedge funds and alternative funds within the EU, Malta permits managers to run the spectrum of funds from the national Professional Investor Fund (PIF) regime that falls outside EU directives, Alternative Investment Funds (AIF) under the AIFMD, as well as the EU hallmark and globally recognised UCITS schemes. Notified AIF (NAIF) are permitted since 2016.
The Scale of the Challenge
According to internal research and market statistics, UK managers currently manage over £1 trillion for non-UK European clients.
By reason of the uncertainty surrounding Brexit, UK-licensed asset managers and UK funds that are passported into the EU may no longer be able to keep on operating in the way they do today. In equal measure, EU-licensed fund managers that have passported funds into the UK will be in a similar position.
The time has long passed for UK fund directors to maintain a passive, wait-and-see approach, and post-Brexit strategies need to be identified without further delay.
Malta Asset Management & Financial Services
During the past 20 years, Malta has strived to become the jurisdiction of choice for financial services businesses seeking to establish themselves in a secure and well-regulated EU domicile. Regulated by the Malta Financial Services Authority (MFSA), the sole regulator for Financial Services in Malta, Malta’s financial services industry has grown thanks to the regulator’s open-door policy. Local practitioners may present interested businesses to conduct informal meetings to determine whether Malta would be the ideal jurisdiction to set up operations.
Malta’s body of financial services regulations transposes all EU directives and has attracted businesses in areas as diverse as investment funds and fund administration, custodian services, listing on capital markets and a Prospects MTF, payment services and electronic money issuers, as well as credit and financial institutions.
Malta – Investment Services
Malta’s Investment Services Act and subsidiary legislation permit four categories of license that have proved extremely popular amongst market participants.
Category 1 licence authorises holders to receive and transmit orders in relation to one or more instruments and/or provide investment advice and/or place instruments without a firm commitment basis but not to hold or control clients’ money or customers’ assets. The minimum capital for this category of license is €20,000 or €50,000 depending on the client base and whether professional indemnity Insurance (PII) is held.
Category 2 authorises one to provide any investment service and to hold or control clients’ money or customers’ assets, but not to operate a multilateral trading facility or deal for their own account or underwrite or place instruments on a firm commitment basis. Minimum capital is €125,000 and this is usually the license required by fund managers.
A category 3 licence permits the provision of any investment service and to hold and control clients’ money or customers’ assets and the minimum capital required increases to €730,000.
A category 4 licence authorises the holder to act as trustees or custodians of collective investment schemes, also with a minimum capital requirement of €730,000. For AIFs restricted under certain conditions the share capital required drops to €125,000.
In terms of the EU Markets in Financial Instruments Directive II (MiFID II), Investment Service Providers licensed in Malta can benefit from passporting their activities to other EU Member States.
A Wealth of Opportunities within Malta Asset Management
Malta has witnessed record inflows of licence applications to the MFSA for UK businesses seeking a post-Brexit strategy. These have been attracted by the wide range of flexible options possible through Malta, including fully self-staffed operations, or starting off with a lighter footprint through outsourcing certain functions to professionals.
Given the short time frame left until the big day, it is clear that no new licence applications submitted now will be issued in any EU jurisdiction. Short- and medium-term options however remain possible for UK fund managers who have not yet formalised a Brexit strategy. This also permits them to experience at first hand what Malta has to offer before committing to a more established presence on the island.
The British Connection
Malta enjoyed British rule as a Crown colony for almost 200 years until 1964 when Malta achieved independence. It then became a Commonwealth member, however much British influence is still prevalent till today in business, laws and education. Malta is a bi-lingual country with Maltese and English both official languages.
Further legacy of British rule is found in Malta Company’s Act that is largely modelled on the UK equivalent, and IFRS accounting is the norm.
Webinar on Malta Asset Management 7 Funds
Malta has positioned itself as a top jurisdiction for investment funds and asset management. Chetcuti Cauchi Advocates has arranged webinars dedicated to asset management and post-Brexit solutions. To view the recording visit: Malta for the future of the Banking and Asset Management Industries
Chetcuti Cauchi Advocates Fintech Practice
The scope behind our Financial Services & Fintech Practice is to assist and advise our international clients on a plethora of issues, including investment funds and fund administration, custodian services, listing on the capital markets and Prospects, PSPs and EMIs, credit and financial institutions law, as well as various Fintech related services. While continuing to offer the highest level of service in more traditional fields of financial services law, our Practice has branched into Fintech in past years and was one of the pioneers in Malta who sought to assist clients and entrepreneurs seeking to set up shop in Malta. Malta now vaunts the world’s first fully-comprehensive legal framework for blockchain technology and cryptocurrency which has made the island one of the top locations in the world for Fintech businesses to relocate.
