The Alternative Investment Fund Management Directive within the EU law regulates EU fund managers managing investment funds (primarily hedge funds and private equity funds) as well as fund managers based outside the EU that manage and market units or shares of EU-established AIFs. This Directive is aimed towards addressing the regulatory gap and providing a more standardised framework.
Following the AIFM Directive issued by the EU, which was transposed by Malta, Professor Joe Bannister, Chairman of the Malta Financial Services Authority (MFSA), gives his insight in an interview that was first published on Malta's new Country Profiler website about Malta's position with regards to financial regulation, shedding light on the country's different economic sectors and industries.
With regards to Malta's operating advantages in relation to regulation, Professor Bannister pointed out that Malta developed a strong regulatory regime backed by an approachable regulatory authority. The close relationship between regulator, policymakers and industry stakeholders enabled Malta to grow and maintain consistent growth within this sector.
Malta was one of the first EU members to transpose the EU AIFM Directive. Following this step, Malta launched a new AIF regime alongside the Maltese Professional Investor Fund (PIF). When asked about Malta's regulatory environment and its implications within the funds sector, Professor Bannister referred to this year's focus areas. Malta is focusing on converting existing licenses to be in line with the new framework, calling for close collaboration between regulator and operator, particularly investment managers.
Due to the AIFM Directive, interesting changes are occurring on the funds scenario as managers based both within and outside the EU are actively reviewing their position in view of the new regulations. Through being one of the first member states to transpose the Directive, Malta successfully managed to build for itself a solid reputation as a European Funds Jurisdiction, leading to increased chances of Malta developing its potential to become an investment services hub within the single market.
Bannister highlighted the fact that new regulation is intended to ensure greater financial stability while generating demand for new investment products on the market. Therefore, market structures need to be re-engineered to accommodate these new products and regulatory frameworks must encourage investors to re-enter the market. The recent financial crises brought about a considerable disruption in capital supply lines and capital supply flows, causing severe market inefficiencies that need to be turned round to push investment and growth opportunities.
In addition to this landscape, three pan-European supervisory authorities for banking, insurance & pensions and securities & markets influenced Malta's International Finance Centre, affecting Malta's competitiveness. As Bannister rightly pointed out, these authorities are part of a wider framework in charge of ensuring financial stability, reduce the possibility of transmission of financial shocks within the system and see that a more standardised regulatory platform is in place for cross-border business within the EU.
Nonetheless, operators are still able to design innovative products for both investors and investees, however, more than ever, operators and authorities need to collaborate for efficiency's and effectiveness' sake.
In the present, Malta is carrying out various efforts in order to maintain and strengthen its position however, as stated by Professor Bannister, it must not lose sight of its track record as well as its starting point.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
