What You Need To Know About Malta’s Notified Alternative Investment Funds
The Malta Financial Services Authority (‘MFSA’) has launched the Notified Alternative Investment Funds (‘NAIFs’) regime through the Investment Services Act (List of Notified AIFs) Regulations (the ‘Regulations’) thereby setting the scene for fund promoters to launch AIFs through Malta via a light touch notification procedure without the need of going through a full licensing process.
Who May Launch a NAIF?
In terms of the Regulations a NAIF may be launched by full-Scope AIFMs authorised by the MFSA in terms of the Investment Services Act to provide fund management services to AIFs, or alternatively, an EU AIFM having passported its fund management licence to Malta in terms of Article 33 of the AIFMD. Third country AIFMs may also submit requests for a notification of an AIF if passporting rights have been granted to the country where the AIFM has been established.
What Type Of AIFs May Be Launched Under The Regulations?
The Regulations apply to AIFs which are to be managed by an external AIFM and launched with the intention to be marketed to professional investors and/or qualifying investors.
The Regulations do not apply to AIFs in possession of a collective investment scheme licence, or to:
(a) AIFs which are not externally managed by an AIFM;
(b) AIFs which are not marketed and sold exclusively to professional and/or qualifying investors;
(c) AIFs established to invest through loans;
(d) AIFs which invest in non-financial assets as specified by the MFSA.
AIFs which are in possession of a collective investment scheme license cannot be converted into a NAIF.
What Form Can The NAIF Take?
The Regulations apply to AIFs set up under any of the following legal structures (whether open- or closed-ended):
(a) SICAV (an investment company with variable share capital);
(b) INVCO (an investment company with fixed share capital);
(c) SICAV ICC (an incorporated cell of a SICAV set up in terms of the Companies Act (SICAV Incorporated Cell Company) Regulations;
(d) RICCs (an incorporated cell of company set up as Recognised Incorporated Cell Company);
(e) Limited partnership;
(f) Unit trust;
(g) Contractual Fund.
The Regulations provide that the notification process may only be availed of by AIFs promoted to professional or qualifying investors, and to AIFs which are not in possession of a collective investment scheme licence.
The Notification Process
The NAIF regime aims at providing Alternative Investment Fund Managers (“AIFMs”) with a solution to market AIFs within the EU as early as ten (10) working days from the date of filing a duly completed notification pack with the MFSA.
Due Diligence – The AIFM shall carry out the due diligence process on each service provider and member of the governing body of the AIF to ensure that they satisfy the high standards of fitness and properness expected by MFSA.
Notification Request – AIFM shall submit a request for inclusion by MFSA of an AIF or for one or more sub-funds of a NAIF in the List of Notified AIFs.
The AIFM must submit the following documentation together with the aforementioned notification request:
(a) A prospectus containing the minimum criteria prescribed in the relevant investment services rules and duly compiled having regard to the template made available by MFSA;
(b) A resolution approved by the governing body of AIF certifying that the prospectus of the AIF satisfies the minimum criteria prescribed by the MFSA in the applicable investment services rules;
(c) A self-certification by the AIFM that, having regard to any delegate manager(s) or advisers it has in place, it has the necessary competence and experience to manage the AIF and monitor effectively any delegate;
(d) A joint declaration by the AIFM and the governing body of the AIF by which each undertakes responsibility for the AIF, including, inter alia, the obligations arising under the AIFMD;
(e) A declaration by the AIFM confirming that it has carried out the necessary due diligence with regard to the service providers of the AIF and the governing body of the AIF. This declaration must include a statement that the AIFM is satisfied with the outcome of this due diligence exercise and there are no untoward features which need to be brought to the attention of the MFSA.
The MFSA shall include the AIF in the List of NAIFs within ten (10) working days from the date of filing of the duly completed notification request together with the accompanying documents. Thereafter the prospectus may be dated.
Given that the NAIF is an EU product, the AIFMD marketing passport will be available in relation to it, so a NAIF can be marketed cross-border to professional investors within the EEA without further regulatory obstacles being imposed.
AIFs set up and launched in line with the NAIF regime shall be fiscally treated in the same manner as licensed AIFs and therefore non-prescribed NAIFs will benefit from a complete tax exemption.
The lighter touch nature of the Regulations renders the setting up and launching of EU AIFs via Malta easier, quicker and surely cheaper. It can safely be stated that with the introducing of this product Malta has once again placed itself at the forefront of regulatory innovation in Europe making it a preferred destination and base for the fund industry.