A jurisdiction needs to factor in many elements to attract promoters and entice them to set up their funds and fund services companies in its domicile. Whilst Malta might not have been the obvious choice in the past it has become a popular jurisdiction among such promoters since it has succeeded in striking the right balance between effective regulation and not overburdening promoters.
The Maltese regime relating to the setting up of investment funds and fund services companies is robust and at the same time relatively flexible. The Malta Financial Services Authority (MFSA) is readily available to meet promoters so as to better understand their needs, plans and timelines. It is efficient and thorough in its assessments whilst not creating unnecessary obstacles which could deter promoters from setting up their operation or investment fund on the Island.
One of Malta’s unique features, when compared to some other more established EU fund domiciles, is that Malta-based collective investment schemes set up as Professional Investment Funds are not obliged to appoint local service providers. Therefore, such collective investment schemes have the option to appoint any fund administrator that is licensed or regulated in a reputable jurisdiction. Over the last few years this has proved to be beneficial to promoters, especially to the more established collective investment schemes relocating to Malta, who prefer to retain their fund administrator due to the long term relationship they may have built.
A large number of the current Malta based fund administrators have obtained a recognised status from the MFSA over the last few months and we are currently witnessing a remarkable increase in the number of prospective administrators in the process of submitting applications to obtain a recognition certificate. This increment can be attributed not only to the practitioners involved in the industry who promote Malta as a financial services hub, but more importantly to the authorities in Malta who had the foresight to offer adequate training and courses in fund administration and accounting, as well as investing heavily in providing training in information technology over the last few years. It has been predicted that since Malta’s popularity as a fund jurisdiction was increasing continuously this would inevitably attract an influx of fund administrators in the medium to long term. Thus well prepared, as this industry starts to flourish, Malta can now provide a skilled labour force at competitive operating cost.
The Investment Services Act (Chapter 370 of the Laws of Malta) provides that a prospective fund administrator requires a recognition certificate issued by the MFSA to carry out fund administration services. The MFSA Investment Services Rules for Recognised Persons regulates recognised fund administrators: it establishes the activities that can be provided by recognised fund administrators, imposes conduct of business requirements, sets out the responsibilities they have towards the MFSA as recognised persons and the applicable financial reporting and audit requirements. No minimum capital requirements are imposed on recognised fund administrators that set up in Malta, yet the MFSA does expect the recognised fund administrator to organise and control its affairs in a responsible manner and to follow adequate operational, administrative and financial procedures and controls in respect of its own business. A recognised fund administrator may outsource the performance of its operational function to a third party, yet the responsibility to control operational risk remains on the recognised fund administrator who is expected to exercise due skill, care and diligence.
Most importantly, Malta’s tax regime is designed to promote international investment and it therefore does not only accommodate the investment fund itself but also caters for the fund’s service provider when domiciled in Malta.
Malta indeed offers the right formula to all parties involved in the funds sector and the industry now identifies Malta as an inviting jurisdiction in this regard. We have also noted a substantial increase in collective investment schemes relocating to on-shore jurisdictions and we are confident, therefore, that so long as the number of investment funds continues to increase, the popularity of Malta as a fund administration centre will consequently also continue to rise over the coming years. We believe that it is only a matter of time before other fund administrators discover the opportunities and benefits Malta has to offer and the reasons that make it an attractive domicile of choice for funds and fund services.
Dr Antonia Zammit, Ganado & Associates, Valletta, Malta