In the last decade,
Malta has distinguished itself as a serious and extremely adaptable jurisdiction in the
field of financial services. The
Investment Services Act, 1994 (as further
revised) presented various types of
collective investment schemes or funds
(Schemes) which may be registered with the Malta Financial Services Authority
(MFSA), and may be targeted at both domestic and international markets.
It is interesting to note that, the
approach of the MFSA approach in the regulation and compliance requirements for
such schemes is both prudent and flexible at the same time.
The Investment Services Act (ISA)
Collective Investment Schemes (CISs) have been defined by
this legislation as arrangements having as their object (or as one of their
objects) the collective investment of capital acquired by means of an offer of
units for subscription, sale or exchange, and which has the following
characteristics:
-
it operates according to the principle
of risk spreading, and
-
the contributions by the participants,
and the income payments made to them, are pooled; or
units are re-purchased or redeemed continuously or at short
intervals, out of the assets of the Scheme at the request of
the unit holders; or units are issued continuously or at
short intervals.
A Scheme which does not actively spread its risk may still
be allowed to operate if its units are offered only to licence holders and/or
persons who deal in similar investment instruments or property as part of their
ordinary business, or who are themselves exempt from an investment services
licence.
Legal Structures of CISs
The law provides that a scheme may be set up as either:
Types of Schemes
Professional Investor Funds (PIFs)
Such funds target either extraordinary investors or
qualifying investors or experienced investors, in
accordance with their minimum investment threshold. These types of funds are
classified as non-retail
type funds and are therefore not subject to any restrictions on their investment or
borrowing powers.
PIFs may be sold solely to investors who satisfy the
minimum investment threshold: ‘experienced investors’ are subject to a
minimum threshold of US$ 20,000; ‘qualifying investors’ are subject to a
minimum investment threshold of US$ 100,000; whilst 'extraordinary investors’ are subject to a
minimum investment threshold of EUR 1,000,000 (or equivalent in any
convertible currency) (click here for more info).
Private Schemes
The law defines a ‘private
collective investment scheme’, as that scheme which limits the total
number of participants to 15 persons. In such cases, the Regulator has to be satisfied that
the participants are close friends or relatives of the promoters, that the
scheme is essentially private in nature and purpose, and that it does not
qualify as a professional investor fund. It is interesting to note that such private Schemes do not require
a licence under the Investment Services Act, however one finds the
requirement that the promoters apply to the MFSA for recognition. One would
also need to pay special recognition and
annual fees. Since such Schemes are not considered as being licensed, the
special income tax rules applicable to other types of Schemes do not apply.
Specialist Schemes
These schemes would target special sectors such as venture capital or development funds; money
market funds; property funds; and futures and options funds.
Retail Funds
As implied from the title itself, these Schemes collect funds from the general public
and therefore, it goes without saying, that these are the most highly
regulated funds from all those listed above.
(click here for more info)
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