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Licensing & The Application Process
Collective investment schemes are licensed by the Malta Financial Services Authority (MFSA). The appropriate CIS licence must be obtained before the scheme may begin issuing or creating any units or carrying on any activity, whether in or from within Malta or any other territory outside Malta, although initial steps may be taken towards establishing the fund.
Each fund and, in the case of umbrella companies, each sub-fund and incorporated cell requires separate licensing.
Obtaining a licence requires the completion of the relevant application form which essentially serves the purpose of identifying the objects of the scheme, the identity and competence of each of its directors and officers, the kind of investors to whom the CIS is expected to be marketed, and other information relating to the structuring and operation of the scheme.
In considering applications for CIS licences, the MFSA is principally required to give due regard to the following in considering a licence application:
- the degree of protection afforded to the investors;
- the degree of protection to the reputation of Malta taking into account Malta’s international commitments;
- the promotion of competition and choice; and
- the reputation and suitability of the applicant and all other parties connected with the scheme.
The MFSA will only grant a Collective Investment Scheme Licence if it is satisfied that the fund will comply in all respects with the relevant regulations and that its directors or and officers, or in the case of a unit trust or limited partnership, its trustees or General Partner respectively, are fit and proper persons to carry out the functions required of them in connection with the PIF- the “Fit and Proper Test”.
This is a fundamental regulatory concept which requires that qualifying shareholders (i.e. founding shareholders holding 10% or more in the fund), directors, officers, Trustees and/or General Partners (as the case may be) and senior staff of the fund must demonstrate solvency, competence and integrity in all their dealings, both at licensing stage and on an on-going basis. In the course of its considerations the MFSA will consider the experience, standing, competence and track record of all parties who will be involved in the fund and will require substantial disclosure in the form of detailed Personal Questionnaires which must be duly completed by each relevant person.
Each application is assessed on its own merits and on the basis of relevant circumstances and considerations. In the case of schemes available to the public, the standard license conditions would usually apply, whilst in the case of schemes which are only made available to restricted classes of knowledgeable investors, such as Professional Investor Funds, such conditions would apply only insofar as they are not derogated or altered by the MFSA.
The application process can be broken down into three distinct phases as follows
Phase One – Preparatory
- Submission of preliminary outline of proposal by promoters to the MFSA;
- Submission of a draft Application Form, together with supporting documentation and payment of the non-refundable application fee/s. The draft Application form and the supporting documentation will be reviewed by the MFSA and comments provided to the Applicant within 3 weeks from submission of the application documents
- “Fit and proper” checks begin at this stage. This entails following up all the information which has been provided in the Application documents submitted. This includes contacting overseas regulators (where applicable) and referees.
- The applicability of the relevant Standard Licensing Conditions is determined by the MFSA depending on the nature of the proposed scheme. These licence conditions are very important since they represent the ongoing requirements to which the Applicant will be subject, once licensed.
Phase Two – Pre-Licensing
- Authority issues its “in principle” approval for the issue of a licence;
- Submission of signed copies of the revised application form together with supporting documentation in their final format;
- Finalisation of any outstanding matters, and resolution of any other issues raised during the application process.
A licence will be issued as soon as all pre-licensing issues are resolved.
Phase Three – Post Licensing/ Pre-Commencement of Business
The Applicant may be required to satisfy a number of specific post-licensing matters prior to formal commencement of business.