MFSA Circular regarding various amendments to the Investment Services Rulebooks

On 4th September 2023, the Malta Financial Services Authority (the “MFSA”) issued a Circular outlining various amendments made to the Investment Services Rulebooks, ensuring inter alia that they are aligned with European legislation.

A brief description of the primary amendments effected to the updated Investment Services Rulebooks, which updated rulebooks are attached to the aforementioned MFSA Circular, are found hereunder:

  • The introduction of new rules in the Investment Services Rules for Alternative Investment Funds, Part A: The Application Process, to comply with the marketing requirements outlined in the Cross-Border Distribution of Funds Directive (“CBDFD”). These new rules come in the form of two new sub-sections under Section 5, addressing pre-marketing procedures and de-notification arrangements, aligning with AIFMD Articles 30a and 32a as introduced by CBDFD. Moreover, slight revisions have been made to the rule for self-managed AIFs, specifying the need for Risk Managers to submit Personal Questionnaires and requiring, where applicable, Terms of Reference for Investment and Risk Committees.
  • The Investment Services Rules for Retail Collective Investment Schemes, Part A, has been revised to align with a decision made by the MFSA in 2016 which has streamlined and reduced the available fund frameworks governed by the Investment Services Act and associated Investment Services Rules. Following an assessment, the decision was made to phase out Retail Non-UCITS Schemes and Overseas Based Retail Non-UCITS Schemes, with existing holders however permitted to continue to operate under such regimes. This decision was never formally reflected in the Investment Services Rules, and thus the MFSA have sought to address this matter through the amendments being affected at present. Additionally, a new ‘Section 6’ has been introduced, detailing the procedures and requirements for European retail AIFs exercising passport rights to market their units in Malta under the AIFMD, aligning with UCITS Schemes and Retail AIFs. In response to the CBDFD requirements, several changes have been made through the introduction of new rules for European Retail AIFs and UCITS schemes as is required under Article 43a of AIFMD, Article 93 and 93a of the UCITS Directive. CBDFD UCITS requirements, such as marketing definitions, ongoing requirements, cross-border marketing rights, information for Maltese investors, and de-notification arrangements, have also been extended to Retail AIFs to ensure fairness and investor protection.
  • The implementation of new rules to adhere to PRIIPs Regulation. The PRIIPs Regulation came into effect on January 1st, 2018, introducing key information documents for packaged retail and insurance-based investment products (hereinafter referred to as “PRIIPs KIDs”) available to retail investors in the EEA. Various rulebooks have been amended to introduce rules requiring PRIIPs manufacturers, advisors, and sellers to create PRIIPs KIDs in accordance with the PRIIPs Regulation. It’s important to note that AIFMs, UCITS ManCos, self-managed AIFs, self-managed UCITS, and PIFs all fall under the scope of the PRIIPs Regulation within the local regulatory framework.
  • The introduction of new rules pursuant to Regulation (EU) 2023/606 of the European Parliament and of the Council of 15 March 2023 amending Regulation (EU) 2015/760 as regards the requirements pertaining to the investment policies and operating conditions of European long-term investment funds and the scope of eligible investment assets, the portfolio composition and diversification requirements and the borrowing of cash and other fund rules (“ELTIF II”). Rule 3.04 of Investment Services Rules for Alternative Investment Funds, Part A and the preamble to Part B have been amended to make reference to the ELTIF II and any subsequent iterations of such Regulation.
  • Additional amendments including the deletion of Schedule D of Investment Services Rules for Retail CIS: National Rules for Marketing of European UCITS Schemes in Malta, the application of current formatting templates to the Part A Rulebooks, and minor editorial, structural and referential corrections.

Concluding Remarks

The amendments to the abovementioned Rulebooks have entered into force on the 5th of September and have provided greater legal certainty to ensure that Maltese rules and procedures are kept up to date with European Regulations and Directives. It is crucial that investment firms, fund managers and collective investment schemes familiarise themselves with these changes and proactively ensure that they are complied with.

Nicholas Micallef would like to thank Emma Attard Bondi, a student intern at Ganado Advocates, for her assistance during the drafting of this article.