On 26 May 2016 the Malta Financial Services Authority ('MFSA') published a circular, thus putting flesh on the bones of its intention to consolidate and reduce the number of fund frameworks available to fund promoters pursuant to the Investment Services Act (Chapter 370 Laws of Malta) and the applicable Rules thereof.

As at the date of publication of the aforementioned circular, the available fund frameworks available to promoters were as follows:

  1. Retail Schemes

These included UCITS, Non-UCITS Retail Schemes, Overseas Based Non-UCITS Retail Schemes and Retail AIFs.

  1. Professional Investor Funds ('PIFs')

These comprised the below three sub-categories:

  1. PIFs promoted to Experienced Investors with a minimum investment requirement of EUR 10,000;
  2. PIFs promoted to Qualifying Investors with a minimum investment requirement of EUR 75,000; and
  3. PIFs promoted to Extraordinary Investors with a minimum investment requirement of EUR 750,000.
  1. Alternative Investment Funds ('AIFs')

These were subdivided into the following sub-categories (save from the retail AIFs which have been included under the Retail Schemes above):

  1. AIFs promoted to Experienced Investors with a minimum investment requirement of EUR 10,000;
  2. AIFs promoted to Qualifying Investors with a minimum investment requirement of EUR 75,000;
  3. AIFs promoted to Extraordinary Investors with a minimum investment requirement of EUR 750,000;
  4. AIFs promoted to Professional Investors, as defined in Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments ('MiFID'), with no minimum investment requirement; and
  5. Notified AIFs ('NAIFs'), which have been available since June 2016.

Further to an assessment of the aforementioned available fund frameworks, the MFSA decided to proceed with their consolidation thereof, thus adopting an even more promoter-friendly approach. Thus, with effect from 3 June 2016, the new fund regulatory status quo has been moulded as follows:

  1. Retail Schemes

These include UCITS and Retail AIFs. Non-UCITS retail schemes have been phased out (whilst no new licences are being issued, the existing licence holders are allowed to continue operating under the previous regime) whereas the Overseas-Based Non-UCITS retail schemes are now required to comply with the Maltese National Private Placement Regime.

  1. PIFs

These now include only PIFs promoted to Qualifying Investors (revised definition to be found below) with a minimum investment requirement of EUR 100,000. As with Non-UCITS retail schemes above, PIFs licenced under the previous regulatory framework are allowed to continue operating under their respective regulatory regime.

  1. AIFs

These are now subdivided into the following sub-categories (save from the retail AIFs above):

  1. AIFs promoted to Qualifying Investors (revised definition to be found below) with a minimum investment requirement of EUR 100,000;
  2. AIFs promoted to Professional Investors, as defined in MiFID, with no minimum investment requirement; and
  3. NAIFs

The term 'Qualifying Investor' has been revised not only vis-à-vis the investment requirement but also the eligibility criteria. It is worth mentioning here that the revised definition shall not be applicable before the publication of the revised rulebooks, until when the previous definition shall continue to be used. The table below includes both definitions (previous and revised) for comparison purposes:

Previous Definition Revised Definition
A 'Qualifying Investor', is required to meet one or more of the following criteria:

  1. A body corporate which has net assets in excess of EUR750,000 or USD750,000 or which is part of a group which has net assets in excess of EUR750,000 or USD750,000;
  2. An unincorporated body of persons or association which has net assets in excess of EUR750,000 or USD750,000;
  3. A trust where the net value of the trust's assets is in excess of EUR750,000 or USD750,000;
  4. An individual, or in the case of a body corporate, the majority of its Board of Directors or in the case of a partnership its General Partner who has reasonable experience in the acquisition and/or disposal of :-
  1. Funds of a similar nature or risk profile;
  2. Property of the same kind as the property, or a substantial part of the property, to which the PIF in question relates;
  1. an individual whose net worth or joint net worth with that person's spouse or civil partner, exceeds EUR750,000 or USD750,000;
  2. A senior employee or Director of Service Providers to the PIF;
  3. A relation or close friend of the promoters limited to a total of 10 persons per PIF;
  4. An entity with (or which are part of a group with) EUR3.75 million or USD3.75 million or more under discretionary management, investing on its own account;
  5. The investor qualifies as a PIF promoted to Qualifying or Extraordinary Investors;
  6. An entity whether body corporate or partnership wholly owned by persons or entities satisfying any of the criteria listed above which is used as an investment vehicle by such persons or entities.
 A 'Qualifying Investor', is an investor which fulfils the following criteria:

  1. Invests a minimum of EUR 100,000 or its currency equivalent in the PIF/AIF/NAIFs which investment may not be reduced below this minimum amount at any time by way of a partial redemption; and
  2. Declares in writing to the fund manager and the PIF/AIF/NAIF that it is aware of and accepts the risks associated with the proposed investment; and
  3. Satisfies at least one of the following:
    1. A body corporate which has net assets in excess of EUR 750,000 or which is part of a group which has net assets in excess of EUR 750,000 or, in each case, the currency equivalent thereof;
    2. An unincorporated body of persons or association which has net assets in excess of EUR 750,000 or the currency equivalent;
    3. A trust where the net value of the trust's assets is in excess of EUR 750,000 or the currency equivalent;
    4. An individual whose net worth or joint net worth with that of the person's spouse, exceeds EUR 750,000 or the currency equivalent; or
    5. A senior employee or director of a service provider to the PIF/AIF/NAIF.

The aforementioned consolidation proves yet again the MFSA's pro-investor mentality through the unambiguous and quite welcome simplification and clarity introduced. Such mentality has been prominent in every measure adopted by the regulator, working in tandem with the industry, thus ensuring that Malta remains a nonpareil international financial services hub as well as a global investment jurisdiction of choice.

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.