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Setting up a PIF in Malta

PIFs (Professional Investor Funds) are a type of collective investment scheme regulated under the Investment Services Act [CAP 370] aimed at professional or high-net worth individuals. This complements the UCITS and AIF fund regimes licensed by the MFSA.

Maltese PIFs are commonly used for hedge fund structures and their underlying assets can range from transferable securities, private equity, immovable property and infrastructure to more complicated asset classes including debt-financing and derivatives.

A PIF can be structured as an investment company with variable share capital (SICAV) or fixed share capital (INVCO), a contractual fund, unit trust or as a limited partnership. It may also be set up as an incorporated cell company or an incorporated cell of a recognised incorporated cell company.

Type of Eligible Investor Qualifying Investor that fulfils the following criteria:

(a) invests a minimum of €100,000 or its currency equivalent in the PIF, which investment may not be reduced below this minimum amount at any time by way of a partial redemption;

(b) declares in writing to the fund manager and the PIF that he/she is aware of and accepts the risks associated with the proposed investment; and

(c) satisfies at least one of the following:

(i) is a body corporate which has net assets in excess of €750,000 or which is part of a group which has net assets in excess of €750,000;

(ii) is an unincorporated body of persons or association which has net assets in excess of €750,000;

(iii) is a trust where the net value of the trust’s assets is in excess of €750,000;

(iv) is an individual whose net worth or joint net worth with that of the person’s spouse, exceeds €750,000; or

(v) is a senior employee or director of a service provider to the PIF.

Minimum Investment €100,000
Third Party Manager Required or Self-Managed (would recommend that you opt to be self-managed since if appointing a third-party manager, it would need to have an investment committee with a sufficient and proven track record of trading on an established Virtual Currency exchange
Fund Administrator Manager may delegate the fund administration to a third-party administrator
Custodian Optional, provided adequate safekeeping measures are in place
Auditor Required
MLRO Required
Compliance Officer Required (may also act as MLRO)
Application Fee €2,000
Application Fee per sub-fund €1,000
Annual Supervisory Fee €2,000
Annual Supervisory Fee per sub-fund €600

Benefits

  • PIFs are not targeted for retail investors and they are thus not burdened with investment restrictions affecting diversification and leverage as for retail funds
  • PIFs may be self-managed and there is thus no requirement to appoint a third-party manager
  • Maltese PIFs are compatible with Islamic funding structures and finance vehicles such as Ijarah and Murabaha funds
  • Provided all documents are submitted to the authority, the MFSA can issue an approval “in principle” within two to three months from submission, depending on the complexity of the fund
  • PIFs can be set up as a single fund or a multi-fund structure, combining different investment strategies or asset classes in different sub-funds

Licensing Stages

The MFSA is the authority responsible for issuing a UCITS licence in terms of the Investment Services Act.When considering a CIS application, the MFSA will consider:

  1. The track record of all the parties involved (including directors, founder shareholders and promoters of the scheme); and
  2. The on going adherence to the fit and proper test (integrity, competence and solvency).

 Phase One – Preparatory

Preliminary meetings are held with the MFSA to discuss the details of the structure with the promoters and present a copy of the draft application. This should take place in advance of the submission of the application. The draft application includes the Offering Document and Personal Questionnaires (PQs) on officials of the company, qualifying shareholders to ensure they are “fit and proper” persons to carry out their functions.

 Phase two – Pre-Licencing

The MFSA will issue its ‘in-principle’ approval. The licence is issued as soon as all pre-licensing issues are resolved.

 Phase three – Post Licencing

The Applicant may be required to satisfy a number of post-licensing conditions prior to formal commencement of business.

PIFs investing in Cryptocurrencies

Under the new licensing regime regulating cryptocurrencies, PIFs are the investment fund structure which can be licensed by the MFSA to invest in virtual currencies subject to the MFSA Investment Services Rules.

For more information or if you have any questions, please feel free to contact Dr Cherise Abela Grech on cabelagrech@gtgadvocates.com

Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.