The Malta Financial Services Authority (MFSA) has issued a consultation proposing the creation of a new fund structure, that of Notified Professional Investor Funds (NPIFs). This introduction is intended to complement Malta’s existent funds framework, while also introducing the possibility of lower setup and other operational and regulatory costs when compared to a fully-licensed fund.

The MFSA is thus proposing an amendment to the Investment Services Rules as follows:

  • NPIFs will be subject to a notification process and will thus not be licensed by the MFSA.
  • Marketing and offering documentation will not be reviewed/approved by the MFSA, therefore placing sole responsibility on the NPIF.
  • NPIFs can only be non-retail schemes available to Qualifying Investors, due to their risk level and minimum supervision. They shall also be allowed to engage in any investment strategy except for ‘lending’.
  • NPIFs can only be set up as third-party managed funds, managed by either:
    • locally licensed de minimis AIFMs, or
    • EU de minimis AIFMs which have been authorised in an EU or EEA State and which the MFSA deems to be subject to regulation in an equal or comparable level to that it would have been subject to in Malta, or
    • third country AIFMs which are authorised in a jurisdiction with whom the MFSA has signed a cooperation agreement / memorandum of understanding on securities, and which the MFSA deems to be subject to regulation in an equal or comparable level to Malta.
  • A third-party service provider is to be entrusted with conducting due diligence with respect to the NPIF, both at notification stage and on an ongoing basis. The MFSA is proposing that this function can only be undertaken by persons who are competent and have the necessary resources and who are either:
    • recognised fund administrators duly authorised by the MFSA, or
    • authorised (full) AIFMs, or
    • Corporate Company Service Providers (CSPs), not being under-threshold CSPs.
  • NPIFs must have an MLRO at all times. This function may be delegated to:
    • the administrator of the NPIF provided that such administrator is a Recognised Fund Administrator or is authorised in an EU Member State, or in a reputable jurisdiction, or
    • an officer of the NPIF who has sufficient seniority and command.
  • A minimum of one member of the governing body must be resident in Malta. Such individual shall be responsible for leading matters relating to the compliance of the NPIF and is to be in charge of any reporting in relation thereto.
  • The NPIF’s governing body must submit an annual Compliance Certificate
  • The NPIF must ensure that its assets are subject to adequate safekeeping arrangements, with such details being outlined in the notification process and the offering memorandum.
  • Fund administration services must be carried out by a Maltese established fund administrator that is in possession of a Fund Administration Recognition Certificate.

This consultation is considered to be part of a number of key regulatory and policy initiatives being undertaken by the MFSA in relation to asset management.

The feedback period for this consultation document is open till Tuesday, 31st January 2023.

For further information and assistance kindly contact Dr Ian Gauci and Dr Cherise Abela Grech.

Disclaimer This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.
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