Malta:The Notified AIF

Malta has launched a new fund structure – the Notified AIF.

The Malta Financial Services Authority (MFSA) announced on 11 February 2016 a new fund structure for Alternative Investment Funds (AIFs): the Notified AIF. This new framework is aimed at qualifying investors and professional investors under MiFID.

The new regime will only be applicable to AIFs, whether open-ended or closed-ended, which are not already licensed by the MFSA. The regime is not available for:

• loan funds;
• AIFs which are not marketed and sold exclusively to professional and/or qualifying investors; or
• funds which invest in non-financial assets (e.g. real estate).

The Notified AIF may take any form, provided that any such structure is allowed under Maltese law and is managed by a full scope alternative investment fund manager (AIFM). A Notified AIF will not be authorised or in any way approved by the MFSA, nor will they be subject to ongoing supervision. The AIFM will assume full responsibility for the Notified AIF and for the fulfilment of the obligations of the Notified AIF. AIFMs based in the European Union or the European Economic Area may submit a notification to the MFSA for an AIF to be included on its list of Notified AIFs, which must be maintained by the MFSA. Third country AIFMs will be able to submit a request for notification of an AIF if the country in which the relevant third country AIFM is established has passporting rights pursuant to the Alternative Investment Fund Managers Directive (AIFMD).

What you need to know

• Malta has launched a new notification framework for AIFs.
• The Notified AIF offers fund managers a straightforward and quick process for establishing AIFs in an alternative jurisdiction.
• The new regime will only be applicable to AIFs which are not already licensed by the MFSA.

The basis for the new regime is a set of new regulations under the Maltese Investment Services Act together with the Investment Services Rules produced by the MFSA. Once the rules are approved, the MFSA will publish a list of required documents and a pro-forma prospectus template, which must be submitted as part of the AIF’s notification application. The new rules are expected to be approved in April 2016. Notification requirements

The notification process is expected to consist of the following steps:

• the approval of the prospectus by the AIF’s governing body (e.g. if it is a partnership, the general partner);
• the submission by the AIFM of a completed notification to the MFSA within 30 days of such approval;
• the inclusion of the AIF on the Notified AIF list within ten business days of the notification; and
• the finalisation and dating of the prospectus.

Documents

The request for the notification of an AIF needs to be accompanied by a number of documents, including:

• a prospectus meeting certain basic requirements (this will be a straightforward process, as the MFSA will be publishing a pro-forma template);
• a certificate of the AIFM stating that it has the necessary competence and experience to manage the AIF and to monitor any delegate which may be appointed;
• a joint declaration by the AIFM and the governing body of the AIF, whereby each party undertakes responsibility for the AIF and for the obligations arising under the AIFMD; and
• a declaration by the AIFM confirming that it has carried out the due diligence on the service providers and the governing body of the AIF.
• The MFSA will then process the application and the supporting documents, and include the AIF in its list of Notified AIFs within a period of ten business days. The MFSA will maintain a list of Notified AIFs in good standing on its website, but will have the discretion to strike off an AIF from the list at any time.

Benefits

Benefits include a quick process, which means fund managers can bring AIFs to market more swiftly. There is also no regulation of the AIF by the MFSA – as the name suggests, this framework only requires a notification. One important distinction to draw between the Notified AIF and the new QIAIF and RAIF structures in Ireland and Luxembourg, respectively, is that there is no requirement for domestic service providers to be appointed by the fund.

Conclusion

It is expected that the MFSA will start receiving requests for inclusion in the list of Notified AIFs from Q2 2016. Given the expected ease of the process, we expect this new regime is likely to enhance Malta’s reputation as a potential fund jurisdiction among fund managers.

_{This article is part of our latest edition of Credit Funds INSIGHT. To download a PDF of the full publication, please click here.}