Malta Collective Investment Schemes
Collective investment schemes (CIS) that issue or create units or carry on any activity “in or from within Malta” require a collective investment scheme licence issued by the Malta Financial Services Authority (“MFSA”). An exception is made with regard to private collective investment schemes and employee participation schemes.
CIS can take the form of Undertakings for Collective Investment in Transferable Securities (“UCITS”) or Professional Investor Funds (“PIFs“). Irrespective of the form, a CIS must satisfy the criteria set forth in Article 2 of the Investment Services Act (Chapter 370 of the Laws of Malta - “ISA”), and have as its objects the collective invesment of capital acquired by means of an offer of units for subscription, sale or exchange which has the following characteristics:-
- The scheme or arrangement operates according to the principle of risk spreading; and either
- The contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or
- At the request of the holders, units are or are to be repurchased or redeemed out of the assets of the scheme or arrangement, continuously or in blocks of short intervals; or
- units are, or have been, or will be issued continuously or in blocks at short intervals.
Diversification is a key element in all CIS. Stringent risk-spreading rules apply to UCITS, whereas laxer principles of risk-spreading are permissible with regard to PIFs (although this shall be susceptible to changes pursuant to the transposition of the Directive of Alternative Investment Fund Managers).
Pooling of Resources
Although there is no set minimum number, the very definition of CIS presupposes a plurality of investors. Consequently, one of the most popular corporate forms of CIS are public limited companies with variable share capital (“SICAVs”).
Redemption of Units
One of the hallmarks of a CIS is that investors can freely transfer or acquire Units in a CIS. However this power may be restricted by the Offering Supplement of the CIS, such as in close-ended schemes and through the inclusion of redemption gate provisions, particularly where the underlying investment of the CIS consists of illiquid assets e.g. real estate. Nevertheless, where the investment objectives of a PIF are proposed to be changed, the fund managers must seek the written consent of all investors of the CIS, and the investors shall have the discretion to redeem their units within the Scheme.
The Units mean any representation of the rights and interests of the participants in a CIS, and are recognised as a financial Instrument within the definition set forth in the Second Schedule of the ISA
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