Investment funds are regulated by the Investment Services Act and are known therein as Collective Investment Schemes (CIS) based on the principle of risk spreading for its investors.
Collective investment schemes are required to obtain a licence from the MFSA prior to commencement of operations. The regulator must be satisfied that the CIS would comply with the provisions of the law and relevant regulations, furthermore on considering an application the regulator would also apply the fit and proper test in order to ensure that the operator qualifies in terms of integrity, competence and solvency. Once granted a licence, the CIS must continue to qualify as fit proper throughout the duration of its operation.
Investment funds can take up different legal forms in terms of Maltese law which include:
- Companies with variable share capital (SICAV)
- Companies with fixed share capital (INVCO)
- A limited partnership
- A unit trust
- A contractual fund
- An incorporated cell company
Types of Investment Funds
Maltese law provides for different types of investment funds with varying levels of regulation depending on to whom the investment fund is going to be targeted. In this regard, Maltese law provides for retail funds and professional investor funds. The former is available to the general public and subject to more stringent regulation whereas the latter is aimed at investors that satisfy certain conditions prior to being accepted as an investor of the fund.
Maltese collective investment schemes may be classified as UCITS and Alternative Investment Funds. UCITS Schemes are open ended investment schemes licensed in terms of the provisions of the ISA together with the relevant provisions implementing the UCITS Directive to Maltese law. UCITS funds benefit from passporting rights within the EU and can therefore be marketed in other EU and EEA Member States.
Alternative Investment Funds include non-UCITS retail schemes and Professional Investor Funds. Non-UCITS retail schemes could be open ended or closed ended retail schemes. While professional investor funds are particularly suited for funds sold internationally on a private placement basis.
There are three categories of professional investor funds that may be marketed to different types of investors and are identified as such. Maltese professional investor funds may be established in any legal form available to collective investment schemes and may be promoted to:
- Experienced Investors
- Qualifying Investors
- Extraordinary Investors