Malta: Notified AIFs – Latest Developments


The transposition in Malta of the Alternative Investment Fund Managers Directive1 ('AIFMD') strengthened the Maltese regulatory framework applicable to Alternative Investment Fund Managers ('AIFMs') and further reinforced the integrity of the financial system. Even though the AIFMD focussed on establishing a European framework aimed at regulating and supervising AIFMs, the Malta Financial Services Authority ('MFSA') went beyond the AIFMD and made provision for a structured framework for the regulation and supervision of Alternative Investment Funds ('AIFs'). Since July 2013, the authorisation and regulation of AIFs runs parallel with the authorisation and regulation of PIFs which were retained for de minimis AIFMs and third country managers. Furthermore, this specific product regulation enabled the MFSA to implement the Regulations (EU) No 345/2013 and 346/2013 on European venture capital funds and European social entrepreneurship funds respectively to the PIF and AIF regimes depending on whether the funds are managed by a full-scope AIFM or a de minimis AIFM.

On 1 April 2016, the Authority launched of the Notified AIF ('NAIF') regime. This regime marks a clear departure from the MFSA's concept of AIFs as regulated and supervised products and aims at providing AIFMs with a solution to market AIFs within the European Union in the shortest timeframe possible. This article proposes to provide an overview of the salient features of the NAIF regime.

Key facts for the establishment of a NAIF

A NAIF can be established in Malta in terms of the Investment Services Act (List of Notified AIFs) Regulations, 2016 and the Investment Services Rules for Investment Services Providers (the 'Rules').

The fund manager establishing and managing the NAIF may either be a full-scope AIFM authorised in terms of the Investment Services Act to provide manage AIFs or alternatively an EU AIFM which is in possession of a management passport under Article 33 of the AIFMD.

On the other hand, the NAIF can be either open-ended or closed-ended and established in any form which is available under Maltese Law namely investment companies i.e. SICAV2 or INVCO3, unit trusts, contractual funds or incorporated cells within an incorporated cell company. However, the NAIF regime will not be available to all collective investment schemes. Self-managed AIFs, property funds, loan funds and funds which invest in non-financial assets as further specified by the Authority cannot be established as NAIFs. Furthermore, collective investment schemes which are already licenced in terms of the Investment Services Act cannot convert to the NAIF Regime.

The investor base for NAIFs is restricted to professional investors4 and/or qualifying investors5. The AIFM is required to adhere to the promotional rules applicable in the jurisdiction(s) where the NAIF is being marketed.

The notification process

The AIFM must submit to the MFSA a notification pack which includes a notification form with the required accompanying documentation within 30 calendar days from the date of resolution of the governing body of the AIF approving the prospectus. The same process is applicable in the case of notification of sub-funds of NAIFs. The accompanying documentation consists of the following:

  1. a prospectus containing the minimum contents required and drafted in accordance with the templates provided; prescribed in the Rules and duly compiled having regard to the appropriate pro-forma template provided;
  2. a resolution by the governing body of the AIF certifying that the prospectus has the minimum contents required and that it has been drafted in accordance pro-forma template;
  3. a self-certification by the AIFM that, having regard to any delegate manager(s) or advisers it has in place, it has the necessary competence and experience to manage the AIF and monitor effectively any delegate;
  4. a joint declaration by the AIFM and the governing body of the AIF by which each undertakes responsibility for the AIF, including, inter alia, the obligations arising under the AIFMD;
  5. a declaration by the AIFM confirming that it has carried out the necessary due diligence with regard to the service providers of the AIF and the governing body of the AIF. This declaration must include a statement that the AIFM is satisfied with the outcome of this due diligence exercise and there are no untoward features which need to be brought to the attention of the MFSA.

The MFSA will be including the AIF in the List of Notified AIFs within 10 working days from the date of filing of a duly completed notification pack and at this stage, the prospectus of the NAIF can be dated.

Obligations of the AIFM

Due Diligence

Before submitting a notification to the MFSA for inclusion of an AIF in the List of Notified AIFs, the AIFM is required in terms of the Regulations and the Rules to carry out the necessary due diligence exercise to ensure that the service providers and the governing body of the AIF are 'fit and proper'. In particular, the AIFM shall not permit a person to hold the office of director of the AIF unless it is satisfied on reasonable grounds that the person complies, and will comply on an ongoing basis, with high standards of fitness and probity.

The AIFM must carry out the necessary due diligence and keep records of correspondence in this regard. The documentation related to the due diligence exercise shall be made available upon request for inspection by the MFSA. The AIFM shall also update the relevant due diligence records and documents on an annual basis and shall document the updates carried out.

Whilst on the one hand, the MFSA will not carry out any due diligence but will be relying on the checks and controls carried out by the AIFM in this regard, it may still carry out random checks post-notification, on the AIFM's compliance with the provisions of the Regulations and the Rules. Any adverse findings by the MFSA in relation to any appointment may lead, inter alia, to the removal of the NAIF from the List of Notified AIFs.

Appointment of Money Laundering Reporting Officer

The AIFM is required to appoint a money laundering reporting officer to carry out the money laundering reporting function in relation to the AIF. The duties of the money laundering reporting officer including the reporting obligations of the NAIF can be carried out by the administrator of the NAIF in accordance with the outsourcing agreement entered into between the AIFM, the AIF and the fund administrator. Nonetheless, the NAIF would still remain responsible for compliance with the requirements under the Prevention of Money Laundering and Funding of Terrorism Regulations6 and the Implementing Procedures and for the carrying out of the measures specifically assigned to the AIF.

Notification of changes to the prospectus to the MFSA

The AIFM must notify the MFSA of any amendments to the NAIF's prospectus within 30 calendar days from the date of the resolution of the governing body of the NAIF approving the changes to the prospectus. Apart from a copy of the revised prospectus, the notification to the MFSA shall also include:

  1. a resolution of the governing body of the NAIF certifying that the amendments to the prospectus comply with the standards prescribed in the Rules;
  2. where the changes concern the investment objectives, policies and restrictions, the governing body of the NAIF shall confirm that the NAIF currently operates in line with the investment objectives, policies and restrictions as set out in the prospectus; and
  3. a confirmation from the governing body of the NAIF confirming that the changes to the prospectus confirm with the provision of the constitutional documents.

The MFSA will acknowledge the receipt of the amendments to the prospectus within ten business days from the filing of the said notification.

Removal of the NAIF from the List of Notified AIFs

The inclusion of a NAIF in the List of Notified AIFs will not imply that the NAIF is authorised or licensed or in any way approved by the MFSA. Nonetheless, the MFSA retains the discretion to remove the NAIF from the List of Notified AIFs. The Regulations further specify the following instances when the AIFM may request the Authority to remove a NAIF or a sub-fund of a NAIF from the List of Notified AIFs:

  1. upon expiration of the duration of the NAIF or its winding up;
  2. in any case where the custodian has given notice of termination under the custody agreement or is in liquidation or subject to bankruptcy proceedings or has had its license to provide custody services in respect of NAIFs suspended or cancelled:
  3. in any case where the AIFM has given notice of termination or is in liquidation or subject to bankruptcy proceedings or has had its licence to act as an AIFM suspended or cancelled and an eligible replacement AIFM has not been appointed within thirty (30) days from notice of termination;
  4. in any case where any member of the governing body of the NAIF or any service provider appointed by the NAIF or by the AIFM on behalf of the NAIF fails to comply on an ongoing basis with the required high standards of fitness and properness and the AIFM has not within thirty (30) days arranged for a replacement member of the governing body or service provider to be appointed;
  5. in all other cases as may be specified in the agreement between the NAIF and the AIFM as grounds for requesting removal of the NAIF from the List of NAIFs; and
  6. in all other cases as may be specified in the custody agreement between the NAIF or the AIFM on behalf of the NAIF and the custodian as grounds for requesting removal of NAIF from the List of Notified AIFs.

Upon removal from the List of Notified AIFs, the AIF must cease trading other than for the purpose of winding down the operations of the AIF or sub-fund and the AIF or sub-fund must then be liquidated or otherwise terminated in accordance with the requirements of Maltese law.

What's next?

The Investment Services Act (List of Notified AIFs) Regulations were published in the Government Gazette. All legislative texts, pro-forma templates and guidance notes are available for download from the MFSA website -


1 Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers

2 Investment Company with Variable Share Capital

3 Investment Company with Fixed Share Capital

4 "Professional investors" are investors which are considered to be professional clients or which may, on request be treated as professional clients under Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments.

5 "Qualifying investors" are investors which invest a minimum of EUR 100,000 or its currency equivalent in the NAIF and declare in writing to the AIFM and the NAIF that they are aware of and accept the risks associated with the proposed investment. Furthermore, qualifying investors are required to satisfy at least one of the following eligibility criteria:

i. is a body corporate which has net assets in excess of EUR 750,000 or which is part of a group which has net assets in excess of EUR 750,000 or, in each case, the currency equivalent thereof;

ii. is an unincorporated body of persons or association which has net assets in excess of EUR 750,000 or the currency equivalent;

iii. is a trust where the net value of the trust's assets is in excess of EUR 750,000 or the currency equivalent;

iv. is an individual whose net worth or joint net worth with that of the person's spouse, exceeds EUR 750,000 or the currency equivalent; or

v. is a senior employee or director of a service provider to the NAIF.

6 S.L. 373.01

Notified AIFs – Latest Developments

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