For many, Malta is either a holiday destination steeped in architectural and military history or an inevitable stop for any linguaphile. Yet, beyond the architectural majesty lies a thriving financial market that has become a key player for many in the asset management industry. As a member of the European Union, Malta has implemented all the rules and regulations we find throughout the Eurozone, with one of particular interest for asset managers, the Alternative Investment Fund Managers Directive (AIFMD) of 20s13. Not only has Malta implemented the directive but it has taken significant steps to further strengthen its regulatory framework, thus making it an attractive jurisdiction for asset managers looking for a secure and compliant environment.
AIFMD Level 2 Enhances Malta's Regulatory Framework
In 2021, the implementation of AIFMD Level 2 further enhanced Malta's regulatory framework especially for alternative investment funds (AIFs), including private equity, real estate, venture capital and hedge funds. The directive has introduced several new requirements and obligations for asset managers, such as the need for investment managers to appoint a local depositary for each AIF.
The depository is of paramount importance for funds and investors alike, as it is responsible for the safekeeping of a fund’s assets and ensures that the fund’s operations comply with the objectives set out in the offering documents and the overall regulatory requirements. AIFMD level 2 thus expanded the role of depositaries to include oversight and monitoring of cash and assets, risk management, and regulatory reporting. Malta has embraced these rules and pushed local depositories to implement stringent risk monitoring measures.
Malta's custody market has been and continues to be well-equipped to meet the requirements of AIFMD and the country's regulatory regime is often considered by investment professionals as one of the more robust in Europe. The Malta Financial Services Authority (MFSA), which oversees the market, has been particularly proactive of late in implementing strict regulatory guidelines and enforcing the new requirements around licensing, minimum capital, risk monitoring and controls, to cite just a few.