Since the launch of the Professional Investor Regime in 2000, Malta has been increasingly attracting fund promoters to the jurisdiction, evidenced by the yearly growth in in the number of hedge funds licensed in Malta and the number assets under administration. This rise in popularity results from the approachability of the MFSA, which adopts a flexible approach to new business proposals, the relatively low regulatory costs and the fact that investment restrictions are kept to a minimum.
Malta has established itself as an innovative and reliable financial services centre, hosting a variety of financial services businesses and structures including AIFs, UCITS, fund managers, fund administrators, forex brokers, payment services providers, investment advisors and insurance principals. Malta also boasts of a variety of Investment funds, being the first EU Member to introduce UCITS III in November 2007, has fully implemented MIFID and also offers PIFs which are Shariah Compliant.
Maltese hedge funds often take form of PIFS, which are most commonly set up as an investment company with variable or fixed share capital with a multi-fund or umbrella fund structure. PIFs are aimed at more experienced investors with a very high net-worth, and thus, with the exception of PIFs investing in immovable property, are not subject to restrictions on their investment and borrowing powers.
The Malta Financial Services Authority redefined the concept of a Professional Investor Fund, removing the previously existing categories of PIFS and allowing only PIFS promoted to ‘Qualifying Investors’.
In order to classify as a Qualifying Investor, the following criteria must be satisfied:
- Invest a minimum of €100,000 or its currency equivalent in the PIF, which investment may not be reduced below this minimum amount at any time by way of a partial redemption;
- Declare in writing to the fund manager and the PIF that he/she is aware of and accepts the risks associated with the proposed investment; and
- Satisfy at least one of the following:
- is a body corporate which has net assets in excess of €750,000 or which is part of a group which has net assets in excess of €750,000;
- is an unincorporated body of persons or association which has net assets in excess of €750,000;
- is a trust where the net value of the trust’s assets is in excess of €750,000;
- is an individual whose net worth or joint net worth with that of the person’s spouse, exceeds €750,000; or
- is a senior employee or director of a service provider to the PIF.
Under the PIF regime, the fund can opt to be self-managed and self-administered, usually through an ad hoc Investment Committee of the Board of Directors of the company or appoint a professional Manager. Thereby reducing the costs and eliminating the need to appoint third-party administrators. However, it is still possible to have an externally managed structure.
When applying for a PIF licence, the applicant should provide the MFSA with a duly filled application form together with a Memorandum and Articles, Offering Memorandum (and Offering Supplement/s in the cases of sub-Fund/s), the applicable fee, PQs of Directors, Compliance Officer, MLRO and, where applicable, Investment Committee members. The MFSA must also be provided with Competency Forms of the acting Compliance officer, Money Laundering Reporting Officer and, where applicable, the portfolio manager.
The Legal Advisory Services Team at BDO Malta have an investment fund practice thereby offering assistance with the structuring and setting up of funds and on-going advice after post- licensing stage. We help our clients with the drafting of regulatory documentation, including offering memoranda and ancillary agreements, manage relations with regulatory authorities, providing ongoing regulatory advice, passporting in or out of Malta under the relevant directives (MiFID, UCITS and AIFMD); and providing transactional work including drafting and negotiation of documentation.
Get in touch with BDO's Legal Team: