The Malta Financial Services Authority (MFSA) published its new Investment Services Rulebooks on 27 June 2013. The MFSA is now accepting applications for licences for managers which wish to be authorised as Alternative Investment Fund Managers (AIFMs) under the Alternative Investment Fund Managers Directive (AIFMD).

New Licences

On the basis of the new rules, the MFSA will issue licences to:

• Investment managers performing investment management services under the AIFMD, under its new Investment Services Rules for Investment Services Providers.
• Collective investment schemes targeting professional investors under the AIFMD, under its new Investment Services Rules for Professional Investor Funds.

In addition, the MFSA will continue to issue licences for the establishment of Maltese Professional Investor Funds (PIFs). These authorisations are targeted at, inter alia, funds managed by “sub-threshold” AIFMs which are not required to be licensed under the Directive, funds managed by AIFMs which are in full compliance with the Directive, and AIFMs based outside the EU, which are, for the time being, not required to be authorised under the AIFMD.

The MFSA is currently processing applications for existing licence holders to convert to an AIFM licence as soon as the Directive comes into force on 22 July 2013. Existing licence holders which submitted their application before 10 June 2013 will receive a revised licence which will be operative from 22 July 2013. The MFSA will make every effort to grant applications which are submitted after 10 June 2013 at the earliest possible date.

Transitional Arrangements

Managers and self-managed schemes which are already licensed under the MFSA’s current Investment Services Rules have a one year transitional period to satisfy the requirements of AIFMD. The MFSA advises licence holders to use the transitional period to adapt to the new rules and will require compliance on a “best efforts” basis in this period.

To obtain the AIFM licence, these managers and self-managed schemes will need to submit a self-assessment form to the MFSA by 31 March 2014.

Approach to Implementation

The MFSA has confirmed its approach to implementation of several key provisions of the Directive:

• Passporting. If requested by a manager, the MFSA has confirmed that it will include the additional investment services referred to in Article 6(4) of the Directive (including discretionary portfolio management on a client-by-client basis) in the passport notifications it will make to host EU member states.
• Delegation. The MFSA has indicated that it will allow certain portfolio and risk management tasks to be delegated (including partial delegation of both activities) in accordance with the Directive’s restrictions, and that it will determine the extent of the delegation permitted on a review of each proposed delegation structure.
• Remuneration. The MFSA has confirmed that it will only apply the remuneration rules under the Directive and ESMA’s Guidelines to the AIFM and not to any delegate of the AIFM.
• Depositary. Maltese AIFs and AIFMs may, for the time being, make use of a depositary which is based in another EU Member State (under the derogation permitted to member state regulators in the Directive). The MFSA has acknowledged that depositaries may wish to appoint delegates, such as prime brokers, to perform the custody function and at the same time enter into arrangements for contractual discharge of the depositary’s liability. It has helpfully stated that it will provide guidance on such structures in due course.

Co-operation Arrangements

The MFSA has signed co-operation arrangements with 34 non-EU securities regulators which are responsible for the supervision of alternative investment funds, including jurisdictions such as the USA, Canada, Brazil, India, Switzerland, Australia, Hong Kong and Singapore. ESMA negotiated the agreements on behalf of all 27 EU Member State securities regulators and is co-ordinating the finalisation of the process.