Abacus Services
Malta Schemes
Of the Malta fund types available we have outlined below details of those schemes targeted towards retail, institutional and professional investors.
Professional Investor Funds (PIFS)
PIFs are regulated by the MFSA and in comparison to retail funds, benefit from a lighter form of regulation enabling the PIF to be used for hedge funds, property funds, private equity funds and other forms of alternative investment, provided that its only activity is operating as a PIF and that it does not itself carry out any investment services licensable activity.
The basic structure used for collective investment schemes is the SICAV with its variable capital nature and possibility to establish any number of segregated sub-funds within its structure.
A PIF may be set up as an incorporated open or closed-ended investment company – in the form of a SICAV or INVCO, or a limited partnership or a unit trust. The PIF regime consists of three categories:
- PIFs promoted to Qualifying Investors (or Qualifying Investor Funds);
- PIFs promoted to Experienced Investors (or Experienced Investor Funds); and
- PIFs promoted to Extraordinary Investors (or Extraordinary Investor Funds).
- PIFs are designed for professional and high net worth investors and can be established to target either qualifying investors or experienced investors or extraordinary investors, in accordance with their minimum investment thresholds as noted below.
As the PIF is not classified as a retail type fund it is not subject to any restrictions on its investments or borrowing powers making it an attractive product for alternative investment schemes, and is therefore differentiated from normal retail funds as it is regulated by specific rules relating to its establishment, management and marketing.
The MFSA would ordinarily expect an external Manager to be appointed, established in Malta and be in possession of a Category 2 Investment Services Licence issued in terms of the Investment Services Act and thus duly licensed and authorised by the MFSA to provide management services to CISs. The manager’s role – which may be undertaken by one or more parties ordinarily comprises:
- overall control of the operation of the fund (which may not be necessary in corporate funds with a board of directors);
- the role of the investment manager/adviser (day-to-day investment management/advice).
- In addition, the manager may also assume the role of the administrator (calculation of NAV etc.).
Administrative services in relation to the PIF may be carried out by a fund administrator. The administrator’s role ordinarily covers:
- liaison with shareholders;
- calculation of NAVs;
- reconciliations;
- pricing the investment portfolio;
- payment of bills;
- preparation of financial statements;
- fund accounting;
- performance reporting;
- compliance reporting;
- preparation of contract notes.
The role of the administrator may be carried out either by:
- a separate administrator appointed directly by the PIF (in which case the Manager’s role would be limited to the day-to-day management of the PIF’s portfolio); or
- the manager itself, after it has been delegated with such duties by the PIF; or
- a separate administrator appointed by the manager in the instance that the latter has been delegated with such duty by the PIF but has opted to outsource it to a third party.
These funds can be listed on the Malta Stock Exchange or a Recognised Investment Exchange (with certain regulatory requirements being met), allowing the fund to target specific categories of investors such as, institutional investors or pension funds which are restricted to acquiring units in listed schemes only.
Provided that all relevant documentation including the application form has been properly completed and is attached, the MFSA will respond to licence applications within 7 business days.
Experienced Investor Funds
“Experienced Investors’ are persons having the expertise, experience and knowledge to be in a position to make their own investment decisions and understand the risks involved. An investor must state the basis on which he/she satisfies this definition, either by confirming that he/she is:
- a person who has relevant work experience having at least worked in the financial sector for one year in a professional position or a person who has been active in these type of investments; or
- a person who has reasonable experience in the acquisition and/or disposal of funds of a similar nature or risk profile, or property of the same kind as the property, or
- a substantial part of the property, to which the PIF in question related; or
- a person who has carried out investment transactions in significant size at a certain frequency; or
- by giving any other appropriate justification.
Person who qualify as “Professional Clients” in terms of the MIFID, automatically qualify as “Experienced Investors”.
The minimum investment threshold is EUR 10,000 or USD 10,000 (or EUR equivalent in another currency). The total amount invested may not fall below this threshold unless this is the result of a fall in the net asset value of the Fund. The minimum investment threshold applies to each individual “Experienced Investor”. In the case of joint holders, the minimum investment limit remains EUR 15,000 or USD 15,000 (or EUR equivalent in another currency).
In the case of an umbrella fund comprising of sub-funds each of which is set up as a PIF, the EUR10,000 or USD 10,000 threshold may be applicable on a per scheme basis rather than on a per sub-fund basis. Thus effectively, an Experienced Investor may hold less than EUR10,000 or USD 10,000 in a sub-fund provided that the total holding in such scheme is at least EUR10,000 or USD 10,000 (or EUR equivalent in another currency).
Before an Experienced Investor Fund may accept any investment, it must obtain a completed “Experienced Investor Declaration Form” in which the investor confirms that he/she has read and understood the mandatory risk warnings and describes why he/she is an “Experienced Investor”. This Declaration Form is required for the prospective investor to demonstrate eligibility to be treated as an Experienced Investor and to exclude retail investors. The Manager/Sales Agent or any third party selling units of the Experienced Investor Fund is bound to take reasonable steps to ensure that the investor has sufficient knowledge and understanding of the risks involved in investing in a PIF.
Furthermore, the Manager/Sales Agent will be required to countersign the Experienced Investor Declaration Form signifying that he is satisfied that the investor has sufficient knowledge and understanding of the risks involved. If the Manager/Sales Agent is not satisfied that the investor has the necessary experience and knowledge in order to understand the risks involved, then the Manager/Sales Agent should state so in the Experienced Investor Declaration Form and confirm that the investor had been warned accordingly. The investor will also confirm that he had been warned in this regard.
PIFs promoted to Experienced Investors are subject to investment restrictions set out in Part B I of the Investment Services Rules for Professional Investor Funds. Whilst borrowing on a temporary basis for liquidity purposes is permitted and not restricted, borrowing for investment purposes or leverage via the use of derivatives is restricted to 100% of the NAV.
The Experienced Investor PIF must appoint a Custodian with a safekeeping and monitoring role; the leverage required is the same level as that of UCITS and the only specific investment restrictions adopted are those that are self-imposed by the Manager.
A PIF targeting Qualifying investors is required to draw up an Offering document which should be provided to prospective investors free of charge.
Qualifying Investor Fund
An investor may only be classified as a “Qualifying Investor” if the investor attests that they meet one or more of the following criteria:
- a body corporate which has net assets in excess of EUR750,000 or USD 750,000 (or EUR equivalent in another currency) or which is part of a group which has net assets in excess of EUR750,000 or USD 750,000 (or EUR equivalent in another currency);
- an unincorporated body of persons or association which has net assets in excess of EUR750,000 or USD 750,000 (or EUR equivalent in another currency);
- a trust where the net value of the trust’s assets is in excess of EUR750,000 or USD 750,000 (or EUR equivalent in another currency);
- a person who has reasonable experience in the acquisition and/or disposal of
- funds of a similar nature or risk profile;
- property of the same kind as the property, or a substantial part of the property, to which the PIF in question relates;
- an individual whose net worth or joint net worth with that person’s spouse, exceeds EUR750,000 or USD 750,000 (or EUR equivalent in another currency);
- senior employees or Directors of service providers to the PIF;
- relations or close friends of the promoters limited to a total of 10 persons per PIF;
- entities with (or which are part of a group with) EUR3.75 million or USD 3.75 million (or EUR equivalent in another currency) or more under discretionary management, investing on its own account;
- the investor qualifies as a PIF promoted to Qualifying or Extraordinary Investors;
- an entity wholly owned by persons or entities satisfying any of the criteria listed above which is used as an investment vehicle by such persons or entities.
In the case of joint holders, all holders should individually satisfy the definition of “Qualifying Investor.” The minimum initial investment amounts to EUR75,000 or USD 75,000 (or EUR equivalent in another currency). The total amount invested may not fall below this threshold (or equivalent) unless this is the result of a fall in the net asset value. Provided that the minimum threshold is satisfied, additional investments of any size may be made. The minimum investment threshold applies to each individual “Qualifying Investor”. In the case of joint holders, the minimum investment limit remains EUR75,000 or USD 75,000 (or EUR equivalent in another currency).
In the case of an umbrella fund comprising of sub-funds each of which is set up as a Professional Investor Fund, the EUR75,000 or USD 75,000 r (or EUR equivalent in another currency) threshold may be applicable on a per scheme basis rather than on a per sub-fund basis. Thus effectively a “Qualifying Investor” may hold less than EUR75,000 or USD 75,000 (or EUR equivalent in another currency) in a sub-fund provided that his total holding in the scheme amounts to at least EUR 75,000 or USD 75,000 ( or EUR equivalent in another currency).
Prior to accepting any investment, the PIF must be in receipt of a completed “Qualifying Investor Declaration Form” in which the investor confirms that he/she has read and understood the mandatory risk warnings and describes why he/she is a “Qualifying Investor”. In the case where the Qualifying Investor is a company or partnership, such declaration is required from the Directors/ Partners, whilst in the case of a Trust, from the Trustee.
PIFs promoted to Qualifying Investors are not subject to any restrictions on their investment or borrowing powers (including leverage) other than those which may be specified in their Offering Document.
Although the MFSA recommends and would ordinarily expect the appointment of a custodian or prime broker, there is no obligation to have either.
A PIF targeting Qualifying investors is required to draw up an Offering document which should be provided to prospective investors free of charge.
Extraordinary Investor Fund
An "Extraordinary Investor" is required to meet one or more of the following criteria:
- a body corporate which has net assets in excess of EUR7.5 million or USD 7.5 million (or EUR equivalent in another currency) or which is part of a group which has net assets in excess of EUR7.5 million or USD 7.5 million (or EUR equivalent in another currency);
- an unincorporated body of persons or association which has net assets in excess of EUR7.5 million or USD 7.5 million (or EUR equivalent in another currency);
- a trust where the net value of the trust's assets is in excess of EUR7.5 million or USD 7.5 million (or EUR equivalent in another currency);
- an individual whose net worth or joint net worth with that person's spouse, exceeds EUR7.5 million or USD 7.5 million (or EUR equivalent in another currency);
- a senior employee or Director of service providers to the PIF;
- the investor qualifies as a PIF promoted to Extraordinary Investors;
- an entity wholly owned by persons or entities satisfying any of the criteria listed above which is used as an investment vehicle by such persons or entities.
In the case of joint holders, all holders should individually satisfy the definition of “Extraordinary Investor”. The minimum initial investment is EUR750,000 or USD 750,000 ( or EUR equivalent in another currency). The total amount invested may not fall below this threshold (or equivalent) unless this is the result of a fall in the net asset value of the Fund. Provided that the minimum threshold is satisfied, additional investments of any size may be made. The minimum investment threshold applies to each individual “Extraordinary Investor”. In the case of joint holders, the minimum investment limit remains EUR750,000 or USD 750,000 (or EUR equivalent in another currency).
In the case of an umbrella fund comprising of sub-funds each of which is set up as a PIF, the EUR750,000 or USD 750,000 (or EUR equivalent in another currency) threshold may be applicable on a per scheme basis rather than on a per sub-fund basis. Thus effectively, an “Extraordinary Investor” may hold less than EUR 750,000 or USD 750,000 (or EUR equivalent in another currency) in a sub-fund provided that his total holding in the scheme is at lease EUR750,000 or USD 750,000 (or EUR equivalent in another currency).
Prior to accepting any investment, the PIF should be in receipt of a completed “Extraordinary Investor Declaration Form” in which the investor confirms that he/she has read and understood the mandatory risk warnings and describes why he/she is an "Extraordinary Investor". In the case where the Extraordinary Investor is a company, such declaration is required from the Director(s)/General Partner(s), whilst in the case of a trust, from the trustee. The Extraordinary Investor Declaration form demonstrates the eligibility of the investor to be treated as an Extraordinary Qualifying Investor.
PIFs promoted to Extraordinary Investors are not subject to any restrictions on their investment or borrowing powers other than those which may be specified in their Offering Document/Marketing Document.
Although the MFSA recommends and would ordinarily expect the appointment of a custodian or prime broker, there is no obligation to have either.
An Offering document or Prospectus is not necessary as a marketing document is deemed sufficient for the purposes of marketing to extraordinary investors by the MFSA
Retail Investment Schemes (UCITS)
UCITS is the acronym for “Undertaking for Collective Investment in Transferable Securities” and refers to European Directive 85/611/
Retail Funds are the most strictly regulated of all funds as they are offered to the general public. The Investment Services Act includes specific rules relating to retail funds regarding the appointment of the Manager, Administrator, Investment Adviser and Custodian together with investment restrictions regarding permissible investment instruments.
UCITS are essentially collective investment schemes which have satisfied the legal and regulatory requirements set out in the UCITS Directive, allowing such schemes access to a larger market as they can be passported into any EEA or EU member state without the requirement of additional licenses being obtained.
In order to apply for a licence from the MFSA to operate a UCITS fund, a scheme must satisfy the following requirements:
- its sole investment objective must be based on investments in transferable securities (e.g. shares in companies, securities equivalent to shares in companies, bonds and other debt securities etc.) and/ or in other liquid financial assets, and be operated on the principle of risk-spreading;
- the units in the fund must be capable of repurchase or redemption at the request of the shareholder directly out of those undertakings’ assets (effectively disqualifies closed-ended schemes);
- it must be constituted as a mutual fund or other equivalent contractual scheme, managed by a management company, an investment company/ limited partnership with variable share capital, or a unit trust;
- it must not have any restrictions under the trust deed or the investment company’s articles restricting the promotion or sale of units within the EU;
- must conform with the UCITS Directive 85/611/EC.
Before marketing within the territory of another EU or EEA member state, a UCITS is required to inform the relevant foreign authorities of its intention to market and furnish the relevant authority with its constitutional documents, offering document or simplified prospectus and latest available financial statements with details regarding the marketing strategy in the member state. Following a period of 2 months, providing no objections are raised by the member state in which it is intended to market the scheme, the UCITS scheme may commence marketing.
A Maltese UCITS Scheme is an open ended Scheme formed in accordance with or existing under the laws of Malta and is subject to the requirements applicable to Maltese UCITS and the Undertakings for the Collective Investment in Transferable Securities and Management Companies Regulations, 2004 (“UCITS Regulations”) which transpose the EU UCITS Directive (Directive 85/611/
A Maltese UCITS Scheme may be set up as:
- an investment company with variable share capital in terms of the Companies Act;
- a limited partnership whose share capital is divided into shares in terms of the Companies Act;
- a unit trust in terms of the Trust and Trustees Act; or
- a common contractual fund in terms of the Civil Code.
A Maltese UCITS Scheme is required to appoint a Maltese UCITS Management Company as its designated Investment Manager unless it is set up as a self managed Maltese UCITS Scheme. In the latter case the Maltese UCITS Scheme should be constituted in the form of an investment company with variable share capital.
The Custodian or depositary of a Maltese UCITS Scheme should also be based in
The Administrator of a Maltese UCITS Scheme should be based in
A Maltese UCITS Scheme is required to draw up a full Prospectus and a Simplified Prospectus and may market its units to the general public in
It is also possible for a PIF licensed in
A Maltese UCITS Scheme that has been granted or has applied for a Collective Investment Scheme Licence may apply for admissibility to listing with the Listing Authority (the MFSA is the Listing Authority in terms of the Financial Market Act, 1990).
A European UCITS Scheme marketing into
- the appointment of at least one of the following entities to carry out the above-mentioned services:
1. an Investment Services Licence Holder; or
2. a local branch of a European Investment Firm passporting into
3. a local branch of a UCITS Management Company passporting into
- other arrangements entered into by the European UCITS Scheme subject to the approval of the MFSA following submission of relevant details to the MFSA.
Retail Investment Schemes (Non UCITS)
A Maltese Non UCITS Scheme is an open ended or closed ended retail Scheme formed in accordance with or existing under the laws of
A Maltese Non UCITS Scheme may be set up in various legal forms including:
- an investment company with variable share capital (SICAV) in terms of the Companies Act;
- an investment company with fixed share capital (INVCO) in terms of the Companies Act;
- a limited partnership divided into shares in terms of the Companies Act;
- a unit trust in terms of the Trust and Trustees Act; and
- a common contractual fund in terms of the Civil Code.
A Maltese Non UCITS Scheme is required to appoint an Investment Manager unless it is set up as a self managed Maltese Non UCITS Scheme.
The Custodian or depositary of a Maltese Non UCITS Scheme should be based in
The Administrator of a Maltese UCITS Scheme should be based in
A Maltese Non UCITS Scheme may market its units to the general public in
A Maltese UCITS Scheme is required to draw up a full Prospectus and to comply with the requirements outlined in the Investment Services Act (Prospectus of Collective Investment Schemes) Regulations, 2005.
A Maltese Non UCITS Scheme that has been granted or has applied for a Collective Investment Scheme Licence may apply for admissibility to listing with the Listing Authority (the MFSA is the Listing Authority in terms of the Financial Market Act, 1990).
Private Schemes
There may be circumstances where a privately controlled investment ‘company’ can be an attractive product for small groups of connected parties.
A ‘Friends & Family’ vehicle can facilitate a commercially effective pooling of investor capital and a convenient reporting mechanism.
A Private Scheme is a collective investment scheme which limits the total number of participants to fifteen persons and where the competent authority is satisfied that -
- the participants are close friends or relatives of the promoters;
- that the scheme is essentially private in nature and purpose; and
- the scheme does not qualify as a professional investor fund in terms of guidelines issued for this purpose by the competent authority,
A Private scheme does not require licensing under the Investment Services Act although the promoters must apply to the MFSA for recognition.
The special income tax regulations applicable to other types of Schemes do not apply, as such Schemes are not considered as being licensed.
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