MFSA launches AIFMD application process
Following the coming into force of the Alternative Investment Funds Manager Directive (AIFMD), the MFSA launched the new Investment Services Rulebooks on 27 June 2013. The Authority has been accepting applications for licences in terms of the AIFMD and the related Commission Delegated Regulation. This publication is aimed at providing guidance to:
- new applicants for Alternative Investment Fund Manager (AIFM) Licences
- new applicants for Alternative Investment Fund (AIF) Licences
- existing holders of Professional Investor Fund (PIF) Licences
- existing holders of investment management and self-managed PIF licences applying for revised AIFMD compliant licences
- existing holders of Non-UCITS Collective Investment Scheme Licences
New applications
As from 22 July 2013 new licences will be issued for:
- Investment management services provided to Collective Investment Schemes which are not UCITS
- Collective Investment Schemes targeting professional investors
- Professional investor funds (PIFs) in the following cases:
(i) applicants opting to apply to be licensed as a ‘de minimis’ self-managed AIF;
(ii) applicants opting to apply for a PIF Licence provided the PIF is managed by a de minimis AIFM;
(iii) applicants opting to apply for a PIF Licence provided the PIF is managed by a AIFM in full compliance with the AIFMD;
(iv) applicants opting to apply for a PIF Licence provided the PIF is managed by a non-EU AIFM in terms of the relevant conditions of the AIFMD under which other EU-Member States may allow them to market to professional investors in their territory;
- Non-UCITS retail schemes
- Private Collective Investment Schemes will continue to be issued with a recognition certificate as these falls outside of scope of the AIFMD.
Revision of existing licences
Managers and self-managed schemes that are already licensed under the current Investment Services Rules have a one year transitional period with effect from 22 July 2013 in order to satisfy the requirements of the AIFMD and convert to an AIFM or Self-Managed AIF Licence as applicable. This process may be carried out by submitting a duly filled in Self-Assessment Form for Fund Managers (or Self-Assessment Form for Self-Managed Collective Investment Schemes Applying for an AIFM Licence, as the case may be). After review by the MFSA, applicants who are deemed to be AIFMD compliant will be issued with a revised AIFM Licence which will be operative from 22 July 2013.
In order to be in line with the European Commission’s interpretation that all managers should fully comply with the Directive by 22 July 2014, licence holders should ensure that their Self-Assessment Form is submitted to the MFSA by 31 March 2014 at the latest. Licence holders are also advised to use the transitional period to adapt to the new AIFMD framework. Managers and self-managed funds who choose to be classified as a ‘de minimis’ AIFM/AIFs should also submit the relevant Self-Assessment Form by not later than 31 March 2014.
Passporting
Pursuant to the provisions of the Directive as transposed in the Investment Services Act) Regulations 2013, EU AIFMs may passport their services and manage EU AIFs either directly or by establishing a branch; additionally, these AIFMs may also be authorised to manage UCITS in accordance with Directive 2009/65/EC. EU AIFMs may as well market the units or shares of an EU AIF in accordance with the provisions of the Directive as transposed in the Investment Services Act (Marketing of Alternative Investment Funds) Regulations 2013.
According to article 6(4) of the AIFMD, AIFMs may also be authorised to provide discretionary portfolio services on a client-by-client services regulated in accordance with certain provisions of Directive 2004/39/EC (MiFID). These services will be included in the MFSA’s passport notification to the host EEA Member States.
Delegation of management functions
Under the AIFMD, managers that intend to delegate any functions to third parties shall notify the MFSA accordingly and must be able to justify the entire delegation structure on objective reasons (as contained in Section 4 of Part BIII of the Investment Services Rules for Investment Services Providers). Notwithstanding this, the AIFM shall at all times retain the power to perform senior management functions in particular in relation to the implementation of investment policy and investment strategies. It shall also have the expertise and resources to supervise the delegated tasks effectively and manage the risks associated with the delegation.
Subject to the above-mentioned provisions the MFSA may allow certain portfolio and risk management tasks to be delegated in line with the Directive (including partial delegation of both activities) and shall determine the extent of delegation that may be allowed following a review of the proposed delegation structure.
Depositary arrangements
The MFSA has negotiated a derogation with the EU Commission which has been incorporated in the Directive and which will allow Malta-based AIFs and AIFMs to make use of the services of an AIFMD-compliant depositary based in another EU or EEA Member State until 22 July 2017. Thereafter a Maltese AIFM or self – managed AIF must employ the services of a depository located in Malta.
In terms of Article 21(3)(c) of the AIFMD, funds which have no redemption rights exercisable during the five year period from the date of initial investment and which generally do not invest in assets that must be held in custody may appoint as Custodian an entity which carries out a depositary (safe-keeping and oversight) function as approved by the MFSA.
A depository “lite” regime will also apply to EU AIFMs managing non-EU AIFs marketed in the EU (at least until July 2015).
Co-operation within non-EU jurisdictions
The MFSA has signed co-operation arrangements with 34 non-EU securities regulators, with responsibility for the supervision of alternative investment funds (AIFs), including jurisdictions such as the USA, Canada, Brazil, India, Switzerland, Australia, Hong Kong and Singapore. ESMA negotiated the agreements on behalf of all 27 EU Member State securities regulators. These arrangements will facilitate the exchange of information, cross-border on-site visits and mutual assistance in the enforcement of the respective supervisory laws.
The co-operation agreements are a key element in ensuring compliance with the AIFMD and are a pre-condition to allowing non-EU AIFMs access to EU markets or to perform fund management activities on behalf of EU managers. The arrangements also cover co-operation in the cross-border supervision of depositaries and AIFMs’ delegates.
