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On 20 October 2025, the MFSA published a consultation document setting out its proposed approach to transposing and implementing the Directive (EU) 2024/927 amending the Alternative Investment Fund Managers Directive (AIFMD) and the Undertaking for Collective Investment in Transferable Securities Directive (UCITSD) relating to delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds (AIFMD II ") which was published in the Official Journal of the European Union on 26 March 2024 and entered into force on 15 April 2024. Member States are required to transpose the Directive by 16 April 2026, except for certain reporting-related provisions that have a later application date of 16 April 2027.
The purpose of this Consultation Document is to provide an overview of the changes brought about by the Directive, explain how and where the MFSA proposes to transpose these provisions in national law, outline the planned implementation approach, and present the MFSA's proposed positions on the options and discretions available under the Directive.
Indeed, the transposition of AIFMD II and UCITS VI will require a series of amendments to Malta's financial services legislation and MFSA Rulebooks, including updates to the Investment Services Act and related subsidiary regulations. The MFSA is also proposing corresponding revisions to its rulebooks for fund managers and funds to align with the new EU governance, delegation, liquidity, and reporting standards introduced under the reforms.
Key changes and local implementation
The consultation sets out the detail on how the MFSA proposes to transpose the Directive into Maltese law. The key changes include:
Loan-origination regime
AIFMD II introduces a dedicated regime for "loan-originating AIFs". Under the said regime, Loan-originating AIFs will be required to adhere to inter alia specific leverage limits, concentration rules (e.g., 20 % limit for a loan to a single borrower if the borrower is a financial undertaking, AIF or UCITS) and liquidity management provisions, and must obtain MFSA approval to be structured as open-ended funds. The new regime also grants the MFSA the discretion to permit such funds to market to retail investors. The MFSA proposes to phase out its current Loan Funds regime for new AIFs as from 16 April 2029. Therefore, existing AIFs which have a redemption date which falls after this date will need to align to the new regime in a timely and orderly manner, ensuring full compliance with the updated regulatory framework from 17 April 2029 onwards.
Depositary derogation
Currently, AIFs licensed in Malta are required to appoint a locally licensed depositary. AIFMD II introduces the possibility for individual Member States to allow depositary services to be provided to alternative investment funds ("AIFs") on a cross-border basis, thereby enabling a depositary established in one Member State to act for AIFs located in another Member State. In view of the limited availability of local depositaries, the MFSA proposes to exercise this option. The MFSA intends to permit such cross-border arrangements where all regulatory requirements are met and a reasoned request is submitted demonstrating the lack of suitable local depositary services for the AIF's investment strategy. This option will apply only where the aggregate amount of assets in the national depositary market does not exceed EUR 50 billion and following a case-by-case assessment by the MFSA.
Next steps and consultation questions
The MFSA is inviting industry stakeholders to submit their feedback by 24 November 2025 on the proposed approach to the transposition of AIFMD II, including views on whether certain options, such as the origination of loans to consumers or the marketing of loan-originating AIFs to retail investors, should be exercised or restricted. .
Conclusion
With significant implications for fund managers, initiators, funds, and service providers, this development marks an important milestone in Malta's continued evolution as a forward-looking EU fund domicile. By aligning with the next generation of investment fund rules under AIFMD II and UCITS VI, Malta reaffirms its commitment to maintaining a robust, innovative, and internationally competitive regulatory framework that supports the efficient structuring and cross-border distribution of investment funds.
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