By Joseph Saliba, MamoTCV Advocates – As an EU Member State, Malta has to confront the continuous challenge of remaining up to speed with all the legislative and regulatory changes being enacted by the EU, the latest of which being the AIFMD. In typically timely fashion, on the 27th June 2013 the MFSA published the complete Investment Services Rulebooks, modifying the previous framework whilst retaining flexibility through the exercise of available derogations in the Directive.
Local practitioners and other interested players, including the promoters and service providers of locally established alternative investment funds, have been impatiently awaiting the publication of these rules, with a view to analysing the impact of the transposition of the AIFMD.
Multiple concerns have haunted the local funds industry since the transposition of the AIFMD, namely whether Malta would retain its reputation as a financial services hub on a level playing field with other EU jurisdictions such as Luxembourg and Ireland. Meanwhile, the fate of the Professional Investor Fund (‘PIF’) regime has been also at the centre of such concerns. However, it has now been confirmed that the PIF regime will be retained almost unchanged and with all its flexibility for self-managed funds and for funds managed by managers who do not exceed the thresholds prescribed by the Directive (i.e. those falling under the ‘de minimis’ regime). At the same time, the regime has been amended and supplemented to achieve full compliance with the AIFMD for self-managed funds and managers exceeding the ‘de minimis’ thresholds and captured by the full provisions of the Directive.
The AIFMD now provides EU managers managing EU funds with the right to provide their management services (‘management passport’) and to market their EU funds (‘marketing passport’) throughout the EU through a pan-EU passport, without requiring another authorisation in the host State/s in addition to that obtained in their home Member State. In 2015, it should also enable EU managers managing non-EU funds and non-EU managers managing EU or non-EU funds to benefit from the 3rd country EU passport.
The EU passport will allow managers to choose more freely where to establish themselves and the funds they manage, enabling them to concentrate their fund management and marketing activities reaching across or involving various European jurisdictions within one EU State. This is expected to entice cross-border managers to establish their funds in one EU fund domicile.
At the same time, some non-EU managers who rely substantially on the EU investment market for distribution of their funds may ultimately decide either to relocate to or establish a management operation in an EU domicile.
In both cases, Malta will certainly figure as a front-line candidate and EU domicile of choice, given the beneficial tax regime it has to offer, the marked savings through lower costs and salary scales, the availability of a highly skilled labour force, as well as the acquired reputation of having robust, flexible regulation exercised by an approachable regulator.
This leaves another big hurdle for Malta attributed to the obligatory appointment of a depositary in the home Member State of the fund as prescribed by the Directive. Whilst the number of custodians operating in Malta is still quite limited, Malta has exercised the derogation allowing for credit institutions established in other Member States to be appointed as depositaries of Maltese funds until 2017. Nevertheless, Malta is working hard to attract more big depositaries to its shores, with some measure of success already registered.