Investment Services Regulatory Background

The Investment Services Act 1994 (ISA) is the principal regulatory framework governing investment services license holders and Collective Investment Schemes (CISs). The Act provides for the authorization and on-going supervision of investment services license holders and collective investment schemes (CISs) operating in and from Malta.

The ISA stipulates that a license is required whenever an investment services business is to be undertaken in or from Malta and lays down the broad criteria to be applied by the MFSA when considering applications.

The ISA enforces any Investment Services Rules (ISRs) issued by the MFSA from time to time. These rules are issued and amended in order to reflect the transposition of EU directives as well as best practices of the industry.

Collective Investment Schemes in Malta

The ISA states that a CIS is any scheme which has as its object, or one of its objects, the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange and which has the following characteristics:

The CIS 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 repurchased or redeemed out of the asset of the CIS, continuously or in blocks at short intervals; or

 Units are or have been or will be issued continuously or in blocks at short intervals.

In terms of Maltese law, a CIS domiciled in Malta is not permitted to issue any units or carry on an activity in or from Malta unless it has a valid CIS license.

CISs can be established as follows: