Salient Features of the Investment Services Act

Characteristics of Collective Investment Schemes (CISs) and Professional Investor Funds (PIFs)

 Collective Investment Schemes

 The definition of a ‘collective investment scheme’ in the ISA is a very broad one which embraces corporate schemes such as open-ended and closed-ended investment companies, investment partnerships and other non-corporate investment vehicles. The MFSA will grant a licence for a collective investment scheme where it is satisfied that the scheme will comply with the relevant regulations and that its directors and officers, or in the case of a unit trust its trustees, are ‘fit and proper persons’ to carry out the functions required of them. The MFSA will in particular examine and consider the nature and features of the proposed scheme and the type of investors to whom it will be marketed. It will also review the experience and track record of all parties who are to be involved with the scheme. For further information on Collective Investment Schemes set up locally, please access the attached link

Professional Investor Funds

Professional Investor Funds (PIF’s) are collective investment schemes designed for professional and high net worth investors aggregated under the term “authorized investors” – a term which requires a minimum investment level of $100,000 or that investors have a minimum net worth of $1m. Careful consideration is given to the needs of fund managers and investors and the MFSA offers a streamlined and rapid processing procedure for licence applications. A PIF is distinguished from a normal retail fund by special rules relating to its establishment, management and marketing in a manner which reflects its distinction from normal retail funds. The object is to reduce to an acceptable minimum the information and documentation needed to establish a PIF. In most cases a corporate PIF would take the form of an incorporated open-ended or closed-ended investment company or partnership – in the form of a SICAV or a unit trust.

Interpretation and Significance of “Investment Advice”

 Article 3. (1) of the Investment Services Act  states that  “no person shall provide, or hold himself out as providing, an investment service in or from within Malta unless he is in possession of a valid investment services licence.”

 Item 6 of Schedule I of the Act specifically defines the term “investment service” as giving, offering or agreeing to give, to persons in their capacity as investors or potential investors or as agent for an investor or potential investor, a personal recommendation in respect of one or more transactions relating to one or more instruments.”

Interpretation of investment brokerage

Schedule I of the Investment Services Act provides a list of services which are licensable under the Act. The receipt from a person of an order to buy, sell or subscribe for instruments and the transmission of that order to a third party for execution, in return for brokerage is a licensable activity. Moreover acting to conclude agreements to buy, sell or subscribe for one or more instruments on behalf of other persons also requires a licence under the act.

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