In the last decade, Malta has distinguished itself as a serious and extremely adaptable jurisdiction in the field of financial services. One could easily state that Financial Services is one of the main pillars of the economy (together with high-tech manufacture and tourism). This is mainly attributed to the approachability and nimbleness of the single regulator, the Malta Financial Services Authority that oversees this sector; the fact that Malta was largely unaffected by financial crisis due to banks being conservative in reserves, mortgages and the fact that the government regularly and actively promotes the country as a financial centre.
Malta's success is mainly evident in these areas:
Hedge Funds
Investment services companies
iGaming
Malta companies
Captives
Various Country/Statistical Highlights
- Strength of Auditing and Reporting Standards – ranked 8th (up from 12th the previous year)
- Soundness of Banks - ranked10th (up from 13th)
- Regulation of Securities Exchanges – ranked 12th (up from 13th)
- Competitiveness - 50th in the overall ‘global rankings’
- Foreign direct investment [FDI]
- €11.9bn (end of June 2010),
- nearly double the previous year’s amount
- significant equity capital injections into foreign companies,
- 83% of that increase was in financial intermediation
- Gross Domestic Product - Financial Services accounts for 12% of Malta’s GDP
The Investment Services Act (ISA)
Collective Investment Schemes (CISs) have been defined by the ISA as arrangements having as their object (or as one of their objects) the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange, and which have the following characteristics:
- they operate according to the principle of risk spreading, and
- the contributions by the participants, and the income payments made to them are pooled; or
- units are re-purchased or redeemed continuously or at short intervals, out of the assets of the Scheme at the request of the unit holders; or
- units are issued continuously or at short intervals.
A Scheme which does not actively spread its risk may still be allowed to operate if its units are offered only to licence holders and/or persons who deal in similar investment instruments or property as part of their ordinary business, or who are themselves exempt from an investment services licence.
Legal Structures of CISs
A Maltese CIS can be formed using various legal structures, specifically:
1. SICAV: a collective investment company with variable share capital
2. INVCO: a collective investment company with fixed share capital
3. Unit trust
4. Mutual fund: established by means of a contractual agreement
5. Limited partnership
Types of Schemes
Professional Investor Funds (PIFs)
Such funds target either extraordinary, qualifying or experienced investors, in accordance with their minimum investment threshold. These types of funds are classified as non-retail type funds and are therefore not subject to any restrictions on their investment or borrowing powers.
PIFs may be sold solely to investors who satisfy the minimum investment threshold: experienced investors’ being EUR 10,000, qualifying investors being EUR 75,000; whilst extraordinary investors being EUR 750,000.
Private Schemes
The law defines a ‘private collective investment scheme’, as that scheme which limits the total number of participants to 15 persons. In such cases, the Regulator has to be satisfied that the participants are close friends or relatives of the promoters, that the scheme is essentially private in nature and purpose, and that it does not qualify as a professional investor fund. It is interesting to note that such private Schemes do not require a licence under the Investment Services Act, however one finds the requirement that the promoters apply to the MFSA for recognition. One would also need to pay special recognition and annual fees. Since such Schemes are not considered as being licensed, the special income tax rules applicable to other types of Schemes do not apply.
Specialist Schemes
These schemes would target special sectors such as venture capital or development funds; money market funds; property funds; and futures and options funds.
Retail Funds
As implied from the title itself, these Schemes collect funds from the general public and therefore, it goes without saying, that these are the most highly regulated funds from all those listed above. These schemes can be UCITS compliant or retail non-UCITS schemes.
