Setting up a Fund in in Malta A Step by Step Guide Attractions of - PowerPoint PPT Presentation

Setting up a Fund in in Malta A Step by Step Guide Attractions of f th the Regimes T ECH CHNICAL E XCE LLENCE . . P RACTICAL S OLU CELL OLUTIONS

A Steep Increase in the Total Number of Funds Domiciled in Malta PIF Licences were up by 6.5% from 2012 to the end of 640 2013 620 600 580 560 540 520 2011 2012 2013 T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

The Key Reasons Underpinning Growth. What Makes Malta An Attractive Fund Domicile?  A Broad Array of Structuring Solutions: Fund Structures Range from utilising stand alone funds, umbrella funds and fund platforms. Also, Malta offers the use of Professional Investor Funds, Alternative Investment Funds, UCITS and Private Funds.  A Responsive Regulator: The MFSA’s high degree of accessibility and responsiveness boosts Malta’s allure as an attractive fund domicile.  A High Degree of Regulatory Protection: Malta’s investor protection laws and regulatory framework has attracted a number of international fund managers onshore as it enables them to use Malta’s badge of quality as a key selling point.  Low Set-Up Costs and Professional Fees. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Overview of Types of Funds in Malta AIFs PIFs Retail Schemes De Minimis Full Scope UCITS AIFs AIFs Targeting Targeting Targeting experienced qualifying extraordinary investors investors investors T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

The Structures Available Collective Investment Schemes (whether PIFs or AIFs) may be set up as closed-end funds, open-ended funds, or a combination of both, and may assume a variety of legal forms:  Investment Company with Variable Share Capital (SICAV)  Investment Company with Fixed Share Capital (INVCO)  Limited Partnership  Unit Trust  Contractual Fund  Incorporated Cell Company (ICC) Due to their liquid nature, UCITS funds must be structured as open- ended funds. With the exception of INVCO’s, UCITS funds can assume any of the legal forms above listed. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Professional Investor Funds (“ P IFs”) in Focus Following the implementation of the AIFMD, the MFSA has retained its highly successful PIF regime. The PIF brand which boasts a lighter, more flexible regulatory regime than that applicable to UCITS and AIFs may continue to be availed of by sub-threshold-AIFMs and Third Country Managers. PIFs fall into one of three categories, depending on the wealth and experience of fund investors: • PIFs targeting Experienced Investors; • PIFs targeting Qualifying Investors; and • PIFs targeting Extraordinary Investors. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Main Advantages of PIFs PIFs may be structured to invest in a variety of assets, ranging from plain vanilla equity and debt securities to more complex assets classes such as private equity, infrastructure and bespoke derivatives. PIFs boast a number of advantages over AIFMD-compliant AIFs. PIFs targeting Qualifying and Extraordinary Investors are not subject to any investment restrictions and limitations on the use of leverage. Moreover, no custodian needs to be appointed for PIFs targeting Qualifying and Extraordinary investors. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Characteristics of Experienced, Qualifying and Extraordinary PIFs Experienced PIF Qualifying PIF Extraordinary PIF Minimum 10,000 75,000 750,000 Investment ( € ) Direct borrowing for investment purposes and leverage through the use None, unless the fund Investment of derivatives is restricted invests in immovable None Restriction to 100% of NAV. Other property investment restrictions apply. Optional, self-managed Optional, self- Optional, self- Fund Manager PIFs allowed managed PIFs allowed managed PIFs allowed

Characteristics of Experienced, Qualifying and Extraordinary PIFs Experienced PIF Qualifying PIF Extraordinary PIF Administrator Optional Optional Optional Optional, provided Optional, provided Custodian/Prime that there are that there are Required Broker adequate safekeeping adequate safekeeping arrangements arrangements Money Laundering Required Required Reporting Officer & Required Compliance Officer Auditor Required Required Required Must prepare an Offering/Marketing Must prepare an Must prepare an offering document or Documents offering document offering document a brief marketing document T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Two Drawbacks of the PIF Regime  The PIF regime is not available to AIFMs whose AuM exceed the AIFMD’s de minimis thresholds (Eur100M or Eur500M (for unleveraged funds with a lock-up period of 5 years) unless they opt to become AIFMD compliant leading to 2 regulatory regimes ; and  PIFs can only be distributed on a private placement basis. What Solutions are Available?  AIFMs wishing to reap the benefits of the Single Market may hence choose to ‘opt in’ to the full AIFMD regime in order to passport their funds on a pan-European basis.  Managers can structure their funds as AIFs. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Options for Swiss Fund Managers Scenario One : Swiss Fund Manager, Managing a Maltese AIF, Targeted Towards EU Investors Swiss Fund Malta EU Target Manager Domiciled AIF Market T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Options for Swiss Fund Managers Swiss Fund Manager, Managing a Maltese AIF, Targeted Towards EU Investors Timeframe 1: Concluding Mid-2015  During Timeframe 1, marketing will be regulated by the national private placement regimes (“NPPR”) of each National Member State. During this period, Swiss Managers may sell Private Placement EU AIFs on a private placement basis to investors in the EU. Rules  If the private placement route is chosen, Swiss managers will only have to comply with a limited number of provisions of Applicability of AIFMD the AIFMD, namely the provisions governing Transparency ‘Transparency’ (Articles 22-24) and those governing Rules ‘Controlling Interests’ (Articles 26-30).  Applicability Swiss managers availing of this option must be aware that of AIFMD the availability and scope of private placement rules vary Controlling Provisions widely across different Member States. This could make article 42 ‘private placements’ a thorny avenue to pursue. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Options for Swiss Fund Managers Swiss Fund Manager, Managing a Maltese AIF, Targeted Towards EU Investors Timeframe 2: Mid-2015 until 2018 Member  From mid-2015, Swiss AIFMs may opt for passporting rights State of Reference subject to fulfilling all the requirements of the Directive. In order to obtain a passport, Swiss Managers must be licensed by the regulatory authority of their Member State of Reference. Full Directive Applicabilit y  In order to be eligible for a license the Swiss AIFM must appoint a legal representative in Malta. Passport  It is notable that at the end of Timeframe 2, ESMA may decide to disallow private placements. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Options for Swiss Fund Managers Scenario Two : Swiss AIFM, Managing a Maltese AIF, Marketed in a Third Country Swiss AIFM Malta Third Country Domiciled AIF Target Market T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

Options for Swiss Fund Managers Swiss AIFM, Managing a Maltese AIF, Marketed in a Third Country Where a Swiss AIFM intends to manage one or more Malta AIFs Member and market the same in a third country, the Swiss AIFM must: State of Reference  Before mid-2015, marketing in the third country will be regulated by the national private placement regimes Third (“NPPR”) of such third country. Therefore, during this period, Country’s Swiss Managers may sell EU AIFs on a private placement National basis to investors outside the EU. Regime  As of mid-2015 (at the start of Timeframe 2) obtain a license from its Member State of Reference, which in the present Full example would be Malta. In order to be eligible for a license Directive the Swiss AIFM must appoint a legal representative in Malta Applicability which will act as a point of liaison with the MFSA; and  Comply with the relevant Third Country’s national marketing regime. At no stage will a passport become available for this type of activity. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS

The Licensing and Authorisation Process Collective Investment Schemes (“CISs”) established in Malta must obtain a collective investment scheme license under the Investment Services Act, Cap. 370 of the laws of Malta (the “ISA”) before commencing any activity in or from Malta. The parties involved in the CIS and the service providers must meet the MFSA’s “fit and proper” criteria, a process that assesses integrity, competence and solvency. The MFSA responds to license applications expeditiously, particularly if all service providers are based in recognised jurisdictions. T ECHNICAL E XCELLENCE . P RACTICAL S OLUTIONS