The Malta Financial Services Authority ("MFSA") has published a brochure "A Guide to the Establishment of Custody Operations (Depositaries) in Malta", explaining the licensing requirements for custodians (depositaries) established in Malta.

Custodians of collective investment schemes require a Category 4 Investment Services Licence issued by the MFSA under the Investment Services Act (Chapter 370 of the Laws of Malta): Category 4a for custodians servicing any type of collective investment scheme, and Category 4b where the custodian only acts as depositary of Alternative Investment Funds ("AIF") under the conditions set out in Article 21(3) last paragraph of the AIFMD (Directive 2011/61/EU) or which are subject to the "depositary lite" regime under Article 36 of the AIFMD.

A Category 4a Licence Holder may be established in Malta as follows:

  1. a credit institution, constituted and licensed under the Laws of Malta;
  2. a branch, established in Malta, of a credit institution authorised in an EEA State;
  3. a branch, established in Malta, of a third country credit institution which is subject to prudential supervision requirements at least equivalent to the requirements applicable to Maltese credit institutions;
  4. a company, incorporated in Malta, which is wholly owned by a credit institution, provided that the liabilities of the Licence Holder are guaranteed by a credit institution and the credit institution is either a Maltese credit institution or is a foreign credit institution which is subject to prudential supervision requirements at least equivalent to the requirements applicable to Maltese credit institutions;
  5. a company incorporated in Malta which is wholly owned by a Maltese or foreign institution or company which is deemed by the MFSA to be an institution or company which provides unit-holders with protection equivalent to that provided by a Licence Holder fulfilling the requirements of (a), (b), (c) or (d) above and provided the liabilities of the company acting as custodian are guaranteed by the institution or company and the institution or company has a minimum paid-up share capital of EUR 5 million or its equivalent in foreign currency; or
  6. an investment firm in Malta or a branch of an investment firm established in another EEA State subject to capital adequacy requirements in accordance with Directive 2013/36/EU and Regulation (EU) No 575/2013 including capital requirements for operational risks, and authorised in accordance with Directive 2004/39/EC and which also provides the ancillary service of safe-keeping and administration of financial instruments for the account of clients in accordance with point (1) of Section B of Annex I to Directive 2004/39/EC; such investment firms shall in any case have own funds not less than the amount of initial capital referred to in Article 28 (2) of Directive 2013/36/EU.

A Category 4b Investment Services Licence Holder may be either one of the entities listed above or alternatively, a Category 2 Licence Holder (excluding fund managers) or recognised Fund Administrator established in Malta.

The MFSA's brochure gives an indication of the operational models which the MFSA is willing to consider in relation to the safekeeping of assets by the custodian where the fund appoints a third party prime broker, and contains a list of Frequently Asked Questions, addressing, for example, issues related to local presence requirements, delegation of safekeeping functions and reporting requirements for custodians set up as a branch.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.