Throughout the past years Malta has become a highly attractive jurisdiction in the field of financial services. The Investment Services Act, 1994 (the “ISA”) presented several types of collective investment schemes or funds that may be registered with the Malta Financial Services Authority (MFSA), and may be directed at both domestic and international markets.

The development of Malta as the jurisdiction of choice for several types of collective investment schemes has been extraordinarily assisted by the local financial services authority, the MFSA.

The Investment Services Act (ISA)

Collective Investment Schemes (CISs) are defined as arrangements having as their object (or as one of their objects) the collective investment of capital obtained by means of an offer of units for subscription, sale or exchange, and have the following features:

• They function in accordance with the principle of risk spreading, and
• The contributions by the participants, and the income payments made to them, are grouped; or units are re-purchased or redeemed continuously or at short intervals, out of the assets of the Scheme at the request of the unit holders; or units are issued continuously or at short intervals.

A Scheme which does not spread its risk may still be allowed to function if its units are offered only to license holders and/ or persons who deal in similar investment instruments or property as part of their ordinary business, or who are themselves exempt from an investment services license.

Legal Structures of CISs

The law provides that a scheme may be established as either:

• A Maltese CIS can be formed using diverse legal structures, specifically:
• SICAV: a collective investment company with variable share capital
• INVCO: a collective investment company with fixed share capital
• Unit trust 
• Mutual fund: set up by means of contractual agreement
• Limited partnership

Types of Schemes

Professional Investor Funds (PIFs)

PIFs target investors who are either qualified or experienced, in accordance with their minimum investment threshold. These types of funds are classified as non-retail type funds and are therefore not subject to any restrictions on their investment or borrowing powers.

Such funds may be sold only to investors who satisfy the minimum investment threshold: ‘experienced investors’ are subject to a minimum threshold of US$ 20,000; ‘qualifying investors’ are subject to a minimum investment threshold of US$ 100,000; whilst ‘extraordinary investors’ are subject to a minimum investment threshold of EUR 1,000,000.

Private Schemes

Private Collective Investment Scheme is the scheme which limits the total number of participants to 15 persons. Hence, the Regulator has to ensure that the participants are close friends or relatives of the promoters, that the scheme is private in nature and purpose, and that it does not qualify as a PIF.

These private Schemes do not require a license under the Investment Services Act, however one finds the requirement that the promoters apply to the MFSA for recognition. One would also need to pay special recognition and annual fees. The special income tax regulations applicable to other types of Schemes do not apply, as such Schemes are not considered as being licensed.

Specialist Schemes

Such Schemes target special sectors as venture capital or development funds; money market funds; property funds; and futures and options funds.

Retail Funds

These Schemes collect funds from the public and therefore, these are the most highly regulated funds from all those listed above.