MFSA AIF/ PIF Licence Application

# MFSA AIF/ PIF Licence Application  ###### Regulated by the Malta Financial Services Authority ## What is the MFSA AIF/PIF Licence? The Malta Financial Services Authority (MFSA) is the single regulator for financial services activities in Malta. It regulates and supervises credit and financial institutions, investment, trust and insurance business. The Investment Services Act, Chapter 370 of the laws of Malta (“ISA”), establishes the principal regulatory framework governing investment services and Collective Investment Schemes (“CISs”) and any CIS operating in or from Malta is required to procure a CIS licence from the MFSA. ##### The current MFSA Investment Services Rules provide a regulatory framework for the following types of investment funds: - retail CISs (including Maltese UCITS schemes and retail AIFs); - non-retail CISs including Alternative Investor Funds (AIFs) and Professional Investor Funds (PIFs). ##### When properly structured, Malta-registered CIS schemes would benefit from: - No income or company tax is imposed on hedge funds having more than 85% of their underlying assets situated outside Malta; - No tax on the Net Asset Value of the scheme; - No withholding tax on dividends paid to non-residents; - No taxation on capital gains on the sale of units by non-residents; - No stamp duty on issues or transfers of units. #### Malta-registered Collective Investment Schemes are generally not subject to Malta tax. ###### A lighter and more flexible regulatory regime ## Collective Investment Schemes A CIS may be licensed in accordance with the provisions of the Investment Services Act, 1994 and the applicable regulations and rules issued by the MFSA as an Alternative Investor Fund or a Professional Investor Fund. Both these funds provide a “lighter” regulatory regime and more flexibility than UCITS and other retail funds which are also licensed by the MFSA. AIFs and PIFs must satisfy the requirements set for a Collective Investment Scheme (“CIS”) as defined by Maltese law. In the first place, this means that the AIF/PIF must be established as a scheme or arrangement which has as its object the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange and which, additionally, also possesses any one of the following characteristics: - the scheme or arrangement operates according to the principle of risk spreading; and either: - the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or - at the request of the holders, units are repurchased or redeemed out of the assets of the scheme or arrangement, continuously or in blocks at short intervals; or - units are, or have been, or will be issued continuously or in blocks at short intervals. However, the MFSA may grant a CIS licence to any scheme or arrangement which does not operate on the principle of risk spreading, where the units in such scheme or arrangement are to be offered for subscription, sale or exchange to: - holders of investment services licences; or - persons whose ordinary business involves the acquisition and disposal of instruments or property of the same kind as those in which the scheme or arrangement invests; or - persons who are exempt by regulation from the requirement of an investment services licence provided that the scheme or arrangement invests in instruments or property in respect of which such persons are exempt. Notwithstanding the above, the risk spreading requirement has ceased to be applicable to collective investment schemes licensed as PIFs targeting Qualifying Investors (as defined below) and is not applicable to AIFs. Nonetheless, risk spreading continues to be mandatory for UCITS Retail Schemes. ### Looking to setup a Fund in Malta? [Contact Us](https://hbmgroup.com/contact/) #### Alternative Investor Funds (AIF) Any CIS which is to be targeted to professional investors and which is managed by an AIFM or which, in the case of a self-managed fund, surpasses the _de minimis_ threshold or opts-in to benefit from the passporting procedure would be required to apply for an AIF licence rather than its PIF counterpart. The units or shares of CISs duly licensed as AIFs may be marketed to professional investors in another Member State or EEA State by means of the passporting procedure provided in the applicable rules as transposed from the AIFMD. #### Professional Investor Funds (PIF) PIFs are subject to minimal regulation compared to regular investment schemes provided that their only activity is operating as a PIF and, accordingly, does not itself carry out any investment services licensable activity.  References to “PIFs”, “funds” and “schemes” below should be read and construed as interchangeable terms. The information set out hereunder is intended as generic guidance, supplementary to the MFSA’s “A Guide to the Establishment of Professional Investor Funds”, and should not be construed as customised advice. We would be happy to advise once we have been provided with the relevant facts pertaining to the proposed structure. ###### A lighter regulatory touch #### The PIF Regime - Investor Profiles The PIF regime provides a lighter regulatory touch on the basis of the participating investors’ wealth and experience. Accordingly, PIFs may only be promoted to **Qualifying Investors** with a minimum investment threshold of EUR 100,000 or equivalent in any other currency. The total amount invested by each investor may not fall below this threshold at any time during the operation of the fund unless this is the result of a fall in the net asset value. The minimum investment threshold applies to each individual investor. In the case of an umbrella fund comprising a number of sub-funds the threshold is applied on a “per scheme” basis rather than on a “per sub-fund basis”, thereby enabling the investor to spread the investment requirement across the various sub-funds. Where the fund’s base currency is not denominated in Euro, exchange rate fluctuations do not affect the minimum investment threshold provided that, at the time the investment is placed, the threshold was satisfied on the basis of the exchange rate prevalent on the date of such investment. Before any fund may accept any investment from any investor holding himself/ itself out as a ‘Qualifying Investor’, the fund is required to obtain a completed Declaration Form in which the investor confirms that he/she/it has read and understood the mandatory risk warnings and describes why he/she/it satisfied the applicable requirements, thereby excluding retail investors. The fund may rely on the declaration provided by the investor, unless it has any information to the contrary. PIFs are not subject to investment or borrowing (leverage) restrictions, unlike retail funds. ###### Structure ## The Legal Forms AIF can take on Under Maltese Law Whilst the forms indicated in (01) and (02) below represent the **corporate forms**, those in (03) and (04) represent the **non-corporate forms**. 1. ##### Investment Company An investment company constituted by Memorandum and Articles of Association (i.e. SICAVs and INVCOs). 2. ##### Commercial Partnership A commercial partnership constituted by means of a partnership deed. 1. ##### Unit Trust A unit trust constituted by a trust deed between a management company and a licensed trustee (regulated by the Trusts and Trustees Act). 2. ##### Mutual Fund A mutual fund established by way of contract (otherwise referred to in civil law jurisdictions as “fond commun de placement”). Of the vehicles outlined above, the most common legal form for a Scheme in Malta is the **SICAV (multi class or single class open ended investment company)**, due particularly to the structural