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Regulation

Isle of Man

Fund Administration in the Isle of Man

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The Isle of Man, amongst many other things, is an ideal centre for the administration of niche fund and investment products. The legislation in place offers a wide variety of fund structures around which the most appropriate investment vehicle may be constructed.

Moreover, the Island has developed over many years, a robust political and financial infrastructure with an emphasis on pragmatic regulation. The purpose of this paper is to give a brief background to the Isle of Man fund environment and to focus on one particular type of popular structure available in the Isle of Man, the Closed-Ended Investment Company or “CEIC”. CEIC’s have been successfully used by many fund promoters in recent years as the vehicle of choice when establishing an investment company, be it a private unlisted company or a stock market listed company. It should be remembered that the information contained within this paper is for guidance only and interested parties should consult the relevant original legislation when structuring an Isle of Man product.

The Constitutional position of the Isle of Man

The Isle of Man is a self-governing dependency of the British Crown and is not part of the United Kingdom. Through long-established constitutional convention, the Isle of Man has autonomy in relation to its domestic affairs, including taxation and business law. As the Island is not a member state of the European Union (as provided under Protocol 3 to the Act of Accession), EU rules only apply to the Isle of Man in relation to a limited range of matters. Tynwald, the Island’s parliament, has been in existence for over 1,000 years and is the world’s oldest continuously functioning parliament. As a common law jurisdiction, the Island’s legal traditions draw heavily on those of England providing a level of familiarity when dealing with the Island.

Regulatory environment

The Isle of Man has developed a reputation as a jurisdiction of quality through its enactment of pragmatic legislation enabling industry to operate in a business friendly environment whilst at the same time adhering to international standards of financial supervision. Fund managers, administrators, and providers of corporate and fiduciary services, are regulated by the Isle of Man Financial Services Authority (“FSA”) and to complement the licensing framework for the regulation of such entities, the Island has adopted extensive measures to prevent money laundering and the financing of terrorism.

Closed-ended Investment Companies

Legislation in the Isle of Man makes a fundamental distinction between an “open-ended investment company” and a “closed-ended investment company”. Open-ended investment companies are corporate vehicles which provide investors with a right of exit by allowing them to redeem their shares and are considered to be collective investment schemes for the purposes of Isle of Man law.

A collective investment scheme or fund is subject to regulation in the Isle of Man under the Collective Investment Schemes (“CIS”) legislation whilst a CEIC, which provides no such right of exit, is not currently subject to the same CIS regulations. To that end, a CEIC is treated in the same way as any other operating company for regulatory purposes and, as a result of this approach, there are a number of important advantages to operating such a company from the Isle of Man including:

• no regulatory pre-approval requirements for launch in the Isle of Man
• no requirement for a licensed fund manager or administrator to be appointed
• no prescriptive requirements as regards board composition
• no requirement for a separate custodian
• no restrictions on asset classes, investment strategy or leverage
• no prescriptive rules about permitted investors or minimum subscription requirements

Companies – both traditional and modern

Company legislation introduced in 2006 has given promoters wishing to use an Isle of Man investment company the choice between using a vehicle incorporated under the Companies Act 2006 or alternatively a more traditional vehicle established under the Companies Act 1931.

Key features of a 2006 Act company are:

• minimal administrative requirements
• flexible capital structure
• limited disclosure requirements
• suitably regulated registered agent must be appointed

1931 Act companies draw heavily on English corporate legislation and therefore have more prescriptive administrative and statutory filing requirements.

Solution Freedom

Listing an Isle of Man CEIC

Isle of Man CEIC’s are suitable for listing on many recognised investment exchanges and over the years have proved to be a popular choice of vehicle for listing on the AIM Market in particular. A CEIC is not required to appoint a licensed fund administrator, however an Isle of Man corporate services provider may be required to deliver statutory and on-going compliance services.

Taxation

The Isle of Man offers a tax neutral environment in many cases with no capital taxes and a zero rate of corporate tax for CEIC’s. Value added tax may, however be payable on fees levied by certain functionaries to an investment company, dependent on the jurisdiction in which they are based.

 

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Insurance Brokers in Malta

1024 547 Jatco Insurance

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The Malta Financial Services Authority (“MFSA”) handles the registration and enrolment of insurance intermediaries including insurance brokers. The carrying out of insurance intermediaries activities is regulated under the Insurance Intermediaries Act, 2006 (the “Act”). Once the MFSA has issued its licence, the insurance brokerage companies would be enrolled in the MFSA “Brokers List”.

The MFSA also maintains registers of persons carrying on the insurance intermediaries activities of insurance brokers in the ”Brokers Register”. The qualifications required for a person to be entitled to be registered in the Brokers Register are as follows:

1. the applicant shall be an individual;
2. the applicant shall be a fit and proper person to be so registered and to ensure the company’s sound and prudent management;
3. the applicant shall possess the qualifications and fulfils or complies with the requirements as determined by the Act.

Furthermore, such registered broker must be a director or an employee of an enrolled company to be able to carry out insurance intermediaries activities.

As per the Act, Insurance Brokerage can be defined as professional activities of persons, acting with complete freedom as to their choice of lawful insurers, who bring together, with a view to the insurance or reinsurance of risks or commitments, persons seeking insurance or reinsurance and insurers or reinsurers. Insurance brokers carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim. Insurance brokers shall do everything which is reasonably possible to satisfy the insurance requirements of their clients and shall place the interests of those clients first.

Insurance Brokers in Malta operate under a very strict regulatory regime which requires insurance broking companies to have a minimum share capital of €58,234; to have in place a professional indemnity insurance cover of at least €1 million; to operate a “Business of Insurance Broking” bank account and to hold a fidelity bond of at least €11,467 where applicable.

An insurance broker company in Malta may also be converted to a Protected Cell Company (PCC) in terms of the Companies Act (Cell Companies Carrying on Business of Insurance) Regulations, 2010. Jatco Insurance Brokers PCC Ltd was converted to a PCC in September 2013, and was the first insurance brokerage company worldwide to obtain the licence for an insurance brokerage cell. The Company now has three insurance brokerage cells operating under its structure.

Foreign investors who would like to establish an insurance brokerage company or cell in Malta, will take advantage of a favourable regime which incorporates all EU financial services legislation. Consequently, operators will benefit from the single market passporting rights under freedom of services and freedom of establishment.

The benefits of having an insurance brokerage company or cell in Malta

1. Ability to intermediate policies directly into the EU and European Economic Area – Full EU membership enables Maltese brokers to dispense with the need for fronting companies into the EU/European Economic Area (EEA).

2. Effective and responsive regulation – Regulation is to EU standards while being flexible and responsive for which the most successful established insurance domiciles are favoured.

3. Established financial centre – Insurance, legal and accounting expertise is all available within Malta’s highly trained professional workforce.

4. Tax efficiency – Tax refund system that could be beneficial to foreign investors.

5. Malta has double taxation treaties with over 60 countries.

6. Migration from other jurisdictions – Regulations enable the easy relocation from other jurisdictions which have similar legislation.