The Malta Financial Services Authority (the “MFSA”) has recently issued eight main areas in Malta’s asset management and servicing industry that may be impacted by Brexit and highlighted its position should a no-deal Brexit occur. According to the MFSA, the financial industry, whether in the European Union or in the United Kingdom, is one of the main industries set to be affected by Brexit.
UK Brokerage Firms Assisting Maltese Individuals
Brokerage activities are regulated by the Alternative Investment Fund Managers Directive (“AIFMD”), the Markets in Financial Instruments Directive II (“MiFID II”) and the European Market Infrastructure Regulation (“EMIR”). If a no-deal Brexit were to occur, UK entities would eventually lose their passporting rights. However, this depends on whether the UK will be considered as an EU/EEA jurisdiction.
On the other hand, if brokerage services are instead launched by a Maltese fund i.e. reverse solicitation, then the provisions of brokerage services by UK entities would not be affected.
UK UCITS and AIFs
In the event of a no-deal Brexit, Undertakings for the Collective Investment in Transferable Securities (“UCITS”) and Alternative Investment Funds (“AIFs”) operating within the UK, would also lose their passporting rights under the AIFMD and UCITS Directives.
However, UCITS and AIFs would still be able to offer funds within Malta under the National Private Placement (NPRR) scheme, as regulated by the Investment Services Act (Alternative Investment Fund Manager) (Third Country) Regulations (Malta AIFM Third Country Regulations), and in terms of the notification procedure stipulated in Article 42 of the AIFMD.
New Local UCITS
Any Maltese UCITS passporting within the UK has to follow the Financial Conduct Authority (FCA) notification procedure by the deadline of the 30th October 2019. New local UCITs choosing to provide their units to UK investors should request guidance from the FCA.
Three-choices for UK controlled Maltese AIFs
By reason of the fact that Article 37 of the AIFMD is not in force, Maltese AIFs controlled by UK AIFMs are presented with three choices in case of a no-deal Brexit:
1. Convert to a Maltese Professional Investment Fund (PIF); or
2. Appoint an EU AIFM; or
3. Convert into a self-managed AIF.
UK Depositories
UK depositories would also be impacted by a hard Brexit, as they would be restricted from directly carrying out safekeeping and/or other depository service with respect to EU AIFs and UCITS.
UCITS asset eligibility requirements
UCITS asset eligibility requirements would also be impacted in several ways, in the event of a no-deal Brexit. For instance, in a hard Brexit scenario, investment in UK UCITS cannot surpass the limit pertinent to investment in non-EU jurisdictions. Instead, they would be subjected to a 30% cap.
UK-Managed Maltese PIFs
On the other hand, Maltese PIFs controlled by UK firms will not be affected by Brexit. This is because the PIF is a local regime, and therefore as long as the person satisfies the requirements laid down by the MFSA, that person is exempted from attaining a licence.
Impact on Malta’s asset management and servicing sector
As witnessed above, Malta’s asset management and servicing sector will most probably undergo some issues in case of a no-deal Brexit. Chetcuti Cauchi Advocates can offer and provide advice to firms operating within such a sector, in order to ensure that such entities are able to keep operating without any interruption. Furthermore, our firm can also assist entities in obtaining a European Union licence in order to operate within the jurisdiction of Malta.
Webinars on Asset Management
Amidst the uncertainty surrounding Brexit, Chetcuti Cauchi Advocates have published webinars dedicated to Asset Management. As part of the solutions, our speakers provided an insight as to what the implications of a hard Brexit are, and why Malta is the ideal jurisdiction for entities operating within the UK-based industries. To view the Webinars please click here!
The Malta Financial Services Authority (the “MFSA”) has recently issued eight main areas in Malta’s asset management and servicing industry that may be impacted by Brexit and highlighted its position should a no-deal Brexit occur. According to the MFSA, the financial industry, whether in the European Union or in the United Kingdom, is one of the main industries set to be affected by Brexit.
UK Brokerage Firms Assisting Maltese Individuals
Brokerage activities are regulated by the Alternative Investment Fund Managers Directive (“AIFMD”), the Markets in Financial Instruments Directive II (“MiFID II”) and the European Market Infrastructure Regulation (“EMIR”). If a no-deal Brexit were to occur, UK entities would eventually lose their passporting rights. However, this depends on whether the UK will be considered as an EU/EEA jurisdiction.
On the other hand, if brokerage services are instead launched by a Maltese fund i.e. reverse solicitation, then the provisions of brokerage services by UK entities would not be affected.
UK UCITS and AIFs
In the event of a no-deal Brexit, Undertakings for the Collective Investment in Transferable Securities (“UCITS”) and Alternative Investment Funds (“AIFs”) operating within the UK, would also lose their passporting rights under the AIFMD and UCITS Directives.
However, UCITS and AIFs would still be able to offer funds within Malta under the National Private Placement (NPRR) scheme, as regulated by the Investment Services Act (Alternative Investment Fund Manager) (Third Country) Regulations (Malta AIFM Third Country Regulations), and in terms of the notification procedure stipulated in Article 42 of the AIFMD.
New Local UCITS
Any Maltese UCITS passporting within the UK has to follow the Financial Conduct Authority (FCA) notification procedure by the deadline of the 30th October 2019. New local UCITs choosing to provide their units to UK investors should request guidance from the FCA.
Three-choices for UK controlled Maltese AIFs
By reason of the fact that Article 37 of the AIFMD is not in force, Maltese AIFs controlled by UK AIFMs are presented with three choices in case of a no-deal Brexit:
1. Convert to a Maltese Professional Investment Fund (PIF); or
2. Appoint an EU AIFM; or
3. Convert into a self-managed AIF.
UK Depositories
UK depositories would also be impacted by a hard Brexit, as they would be restricted from directly carrying out safekeeping and/or other depository service with respect to EU AIFs and UCITS.
UCITS asset eligibility requirements
UCITS asset eligibility requirements would also be impacted in several ways, in the event of a no-deal Brexit. For instance, in a hard Brexit scenario, investment in UK UCITS cannot surpass the limit pertinent to investment in non-EU jurisdictions. Instead, they would be subjected to a 30% cap.
UK-Managed Maltese PIFs
On the other hand, Maltese PIFs controlled by UK firms will not be affected by Brexit. This is because the PIF is a local regime, and therefore as long as the person satisfies the requirements laid down by the MFSA, that person is exempted from attaining a licence.
Impact on Malta’s asset management and servicing sector
As witnessed above, Malta’s asset management and servicing sector will most probably undergo some issues in case of a no-deal Brexit. Chetcuti Cauchi Advocates can offer and provide advice to firms operating within such a sector, in order to ensure that such entities are able to keep operating without any interruption. Furthermore, our firm can also assist entities in obtaining a European Union licence in order to operate within the jurisdiction of Malta.
Webinars on Asset Management
Amidst the uncertainty surrounding Brexit, Chetcuti Cauchi Advocates have published webinars dedicated to Asset Management. As part of the solutions, our speakers provided an insight as to what the implications of a hard Brexit are, and why Malta is the ideal jurisdiction for entities operating within the UK-based industries. To view the Webinars please click here!