While the MFSA has issued a notice in relation to the proposed framework applicable to the Notified AIFs1 setting out the key highlights of the new regime, the final MFSA rules in relation to the new framework are yet to be published.

Key Highlights

Full AIFMD compliance – The Notified AIF regime is fully compliant with Alternative Investment Fund Manager Directive (the “AIFMD”). This new regime relies on the AIFM’s regulatory status and good standing and thus, the onus of ensuring AIFMD compliance has shifted on the AIFM, in line with the provisions of the AIFMD.

Notification process – AIFMs will be able to manage AIFs following a notification process to the MFSA. The Notified AIF will be listed on a “List of Notified AIFs” on the MFSA website. The inclusion of an AIF in the List of Notified AIFs does not imply that the AIF is regulated, licensed or in any way approved by the MFSA. While the Notified AIF will not be subject to ongoing supervision by the MFSA, the MFSA will ensure compliance with AIFMD by regulating and supervising the AIFM.

Cost efficient – Having regulated AIFs and regulated AIFMs creates overlaps and/or inconsistent regulatory requirements affecting the AIF and / or the AIFM, leading to increased fees for the AIF and the AIFM. A certification to be given to the MFSA by the AIFM that the prospectus includes the minimum requirements set out in the MFSA rules will reduce costs arising out of the licensing process.

Time to Market – The MFSA has committed itself to list the AIF on the Notified AIF List within 10 business days from the submission of a complete notification pack. This means that AIFMs will have a product which is quicker to set up, enabling them to meet investment targets and securing investment in the short term.

Target Investors – The Notified AIF regime is available for marketing exclusively to professional investors (as defined under Annex II of MiFID) and/or qualifying investors which satisfy the conditions as set out in the MFSA rules.

Licensed AIFs – The MFSA will retain the licensed AIF regime thereby ensuring that investors wishing to invest through a regulated vehicle will have the option to do so. The MFSA is also revamping the fund regime in Malta in line with market preferences.

Increased responsibilities of the AIFM – In addition to the responsibility to ensure AIFMD compliance, the AIFM will also be required to undertake a due diligence process on the service providers and the governing body of the AIF. The AIFM will also be required to hold all founder shares (and consequently all voting powers) in the AIF.

Scope of application – the Notified AIF regime is only available to full-scope AIFMs which are authorized and regulated under the AIFMD. The full scope AIFM must be licensed by the MFSA as an AIFM or be in possession of a management passport under Article 33 of the AIFMD. The notification request should be in respect of an AIF which is not already licensed and which is to be promoted to professional investors and/or qualifying investors.

Who cannot make use of the Notified AIF regime – It is being proposed that the Notified AIF regime is not available to the following collective investment schemes:

  • AIFs which are already authorized;
  • Funds which are not AIFs;
  • Self-managed AIFs;
  • AIFs which are not marketed and sold exclusively to professional and/or qualifying investors;
  • Loan funds; or
  • AIFs that invest in non-financial instruments2.

The above criteria are still under review by the MFSA and it is expected that the final list of exclusions will be set out in the final MFSA rules, which are yet to be published.

Form of the Notified AIF – The Notified AIF may be established in one of the following forms:

  • An investment company with variable share capital (SICAV);
  • An investment company with fixed share capital (INVCO);
  • An incorporated cell companies;
  • An incorporated cells of a Recognised Incorporated Cell Company;
  • A limited partnership;
  • A unit trust;
  • A contractual fund.

Due Diligence – The AIFM will need to undertake a due diligence process on the service providers and the governing body of the AIF in order to ensure that they are fit and proper to undertake the functions to be assigned to them. The due diligence will need to be updated on an annual basis. The MFSA will rely on the checks undertaken by the AIFM and may carry out spot checks on the AIFM in order to ensure that the proper due diligence is being undertaken on an ongoing basis.

Way Forward

The adoption of the Notified AIF regime necessitates changes in the current laws. Amendments to such laws are expected to be submitted to the Ministry for its approval in early April. Once these are approved, the MFSA will issue rules on this new framework. Together with the MFSA rules, the MFSA will also publish all pro-forma documentation which is to be submitted to the MFSA with the notification request by the AIFM. It is expected that requests for Notified AIFs will be accepted during Q2 of 2016.


1 http://www.mfsa.com.mt/pages/announcement.aspx?id=7446

2 The final rules to be issued by the MFSA will provide clarity as to the types of instruments in which the Notified AIF can invest.