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Asset management essentials
The building blocks
The Maltese financial services industry is going through exciting times. The international community is alert to the fact that Malta has become a fully- fledged asset management domicile, boasting a statutory and regulatory regime fully compliant with international standards within a country which is a full member of the European Union. Our size makes us nimble and proactive, enabling us to come up with new solutions, which differentiates our product from that of more established jurisdictions. The principle of proportionality is firmly entrenched in the jurisdiction’s way of doing business. There are significant fiscal incentives for appropriately setup structures, with Malta benefitting from over 65 double taxation agreements with other countries.
The international financial services community is cognisant of the potential and opportunities of doing business in Malta. There were approximately 100 registered fund schemes in Malta in 2006. This has risen to a current figure exceeding 600 fund schemes domiciled in Malta. Simultaneously the number of managers regulated to provide investment management services has now exceeded 120.
Malta was one of the first European Union jurisdictions to fully transpose the Alternative Investment Fund Managers Directive (AIFMD) directive into its regulatory framework. The AIFMD is intended to create a harmonised framework for the management and marketing of alternative funds within the context of a high level of investor protection. It prescribes rules for the authorisation, operating conditions, and transparency obligations to be applied to Alternative Investment Fund Managers (AIFMs) and for the marketing of Alternative Investment Funds (AIFs) to professional investors throughout the EU.
Undertakings for Collective Investment In Transferable Securities, or UCITS, are essentially Collective Investment Schemes (CISs) which, having satisfied those additional legal and regulatory requirements set out in the UCITS directives, in both form and substance, may avail themselves of a larger market for the sale of their units by “passporting” into any EEA or EU member state without the requirement of licensing in each new member state.
Professional Investor Funds
The Maltese jurisdiction has a very strong product in its Professional Investor Fund (PIF), a Collective Investment Scheme (CIS) for experienced investors.
A PIF is a fully regulated non-retail fund which is subject to a lighter touch regime than that of UCITS funds and funds managed by AIFMs. Given the characteristics of a PIF, the objective of this regime is to create a “fast track” for regulatory approval for this type of investment vehicle and a reduced level of ongoing regulation and supervision. These features of the PIF, together with an attractive fiscal environment, have made Malta an increasingly popular hedge fund domicile.
The investment management function is fully regulated in Malta. There are 3 separate regulatory regimes governing the investment management function for each of the 3 sections described above. The establishment or appointment of a regulated investment management entity separate from the fund is possible but not obligatory, as a fund incorporated in Malta can opt to be self-managed. In a self-managed scenario the fund takes responsibility for the investment management structure internally through the establishment of the appropriate internal mechanisms. The provision of investment services in, or from, Malta, is regulated by the Investment Services Act, CAP 370 of the Laws of Malta, and the Investment Services Rules, which implement various European Union directives.
In accordance with applicable regulations Maltese funds can appoint an investment manager established in a jurisdiction other than Malta. Likewise Maltese Investment Managers can be appointed by funds domiciled in other jurisdictions.