Are funds that are offered to the public required to be registered under the securities laws of your jurisdiction? If so, what are the factors and criteria that determine whether a fund is required to be registered?
The laws and regulations regulating public investment funds, or in the Maltese context, retail funds, are the following:
- UCITS V Directive and the implementing regulations and administrative provisions relating to UCITS funds.
- AIFM Directive and the implementing regulations and administrative provisions for retail alternative investment funds (AIFs).
- Rules for Retail Collective Investment Schemes issued by the MFSA.
- Rules for Alternative Investment Funds issued by the MFSA. This provides the regulatory framework for retail AIFs.
- Companies Act (Chapter 386 of the Laws of Malta) and all subsidiary legislation made under this chapter applicable to retail funds.
- Investment Services Act (Chapter 370 of the Laws of Malta) and all subsidiary legislation made under this chapter applicable to retail funds. This provides the statutory basis for the licensing and regulation of funds (see section 3).
- The Listing Rules – Admissibility Requirements for Collective Investment Schemes.The above laws and regulations apply across the board to retail collective investment schemes, with the exception that closed-ended funds do not fall within the remit of the rules governing UCITS schemes, owing to the nature of this fund type which cannot be established on a closed-ended basis.Under the Maltese fund framework, funds that are offered to the public must hold a licence issued by the MFSA, and the authorisation process is to be understood as being the applicable registration framework for such funds. Unless a Scheme satisfies the explicit categories set out in the Investment Services Act (Exemption) Regulations, then it must obtain an authorisation licence from the MFSA that confirms it is controlled by persons who have been deemed “fit and proper” by the Maltese Regulator, and that the Scheme shall be organised and controlled in a responsible manner and shall have adequate operational, administrative and financial procedures and controls to ensure compliance with all regulatory requirements. The exemptions from MFSA authorisation are limited, and include the following:
- where a Scheme involves participants, each of which carries on a business other than that which constitutes an investment service under the ISA, and enters into the scheme arrangement for commercial purposes related to that business;
- where the Scheme operates according to the principle of risk spreading or in respect of which the contributions of the participants and the profits or income out of which payments are to be made to them are pooled, but only if the general purpose of the Scheme is commercial and not for investment purposes; or
where a Scheme is operated by a company for its own employees, former employees, their dependants, or for companies in the same group, in instruments issued by the company or other companies in the same group, or other instruments as may be approved by the authority.
Nevertheless, such exemptions are strictly interpreted, and are not automatically operative but their applicability must be determined in writing by the MFSA.