Source: China Offshore
With the signing of the Memorandum of Understanding between the Malta Financial Services Authority (“MFSA”) and the Chinese Securities Regulatory Commission (“CSRC”) in 2010¸ Chinese Qualified Domestic International Investors (“QDII”) are able to invest on behalf of Chinese investors into Maltese domiciled funds which are licensed as either Retail UCITS Schemes or Professional Investor Funds. A UCITS fund is the European golden standard and a worldwide recognised brand of excellence for investment funds. TheUCITS regime was established in 1985. UCITS IV¸ is the most recent update of the EU Directive governing UCITS and which is to be transposed by EU Member States by not later than 30 June 2011.
A UCITS fund is primarily intended for retail investors and therefore a number of investor protection safeguards are entrenched in the regime. The success of the UCITS regime is notlimited to Europe. In fact¸ investors in South America¸ the MiddleEast and Asia have sought to actively invest in UCITS funds.
The MFSA’s regulatory framework for retail collective investment schemes provides for both Maltese UCITS funds being established and licensed in Malta as well as European UCITS funds being passported to Malta. Indeed¸ a UCITS fund may be passported and therefore its units may be offered on a crossborder basis within the EU through the notification procedure¸ without the need to be licensed. The Maltese regime permits UCITS Funds to invest in transferable securities¸ money market instruments¸ units of other UCITS¸ deposits with credit institutions and financial derivative instruments.
The second category of Maltese licensed funds in which a QDII may invest in are Professional Investor Funds (PIFs). The Maltese PIF regime provides for funds targeting (a) Experienced Investors (minimum investment of €10¸000 or equivalent in another currency); (b) Qualifying Investors (minimum investment of€75¸000 or equivalent in another currency); and (c) Extraordinary Investors (minimum investment of €750¸000 or equivalent in another currency). Given that PIFs are primarily intended for sophisticated investors they are less tightly regulated than UCITS Funds. The Maltese PIF regime however seeks to create an ideal balance between the flexibility characterising these types of funds and the regulatory safeguards which ensure an adequate level of protection to their investors.
Under Maltese law¸ it is also possible to covert a PIF into a UCITS Fund. This conversion may be carried out by satisfying anumber of criteria which include (a) the approval of the necessary corporate and shareholder actions; (b) the alignment of the offering document¸ investment restrictions and performance fee structure to UCITS requirements and (c) the appointment of service providers in accordance with UCITS rules.
During the past years¸ the number of investment funds licenced in Malta has grown at a rapid and consistent pace. Malta’s success is primarily attributable the approachable and responsive financial services regulator – the MFSA¸ the competitive licensing and supervisory fees together with the flexible and transparent regulatory environment. The favourable yet EU compliant fiscal regime applicable to investment f