Benefits of a Maltese Notified Professional Investor Fund

In a circular dated the 18^th December 2023, the MFSA introduced a framework for an additional fund structure within the jurisdiction of Malta, namely, the Notified Professional Investor Fund (“NPIF”).

The NPIF framework is designed to reap the benefits of an enhanced and expedited onboarding process, while concurrently complementing extant fund frameworks in Malta. The initiation of this framework by the MFSA is the outcome of a rigorous and thorough dual-phase process of soliciting public input and consultation earlier in 2023. The rules of the NPIF framework which were launched in December 2023 can be accessed here and the ongoing requirements can be accessed here.

Expanding on the market achievements of the Notified Alternative Investment Fund (“NAIF”) framework, the NPIF framework aims to combine the adaptability and less stringent regulatory requirements of the PIF framework with the swift time-to-market advantages of the NAIF framework. In other words, non-EU investment managers who were previously unable to establish a NAIF due to their absence of an EU licence can now do so through an NPIF.

Instead of undergoing a comprehensive licensing procedure with the MFSA, an NPIF will be added to a register maintained by the MFSA within ten working days following the submission of a complete notification request. To ensure that the expedited time-to-market benefits do not compromise investor protection, the NPIF regime has introduced the concept of a due diligence service provider. This entity is responsible for conducting due diligence on the NPIF, both during the notification phase and on an ongoing basis.

An NPIF must be a third-party managed fund, and it may be overseen by a de minimis AIFM holding a licence in Malta or authorised in the EU/EEA. Alternatively, it can be managed by a third-country AIFM authorised in a jurisdiction with which the MFSA has established a bilateral cooperation agreement (includes UK and Switzerland and numerous other jurisdictions). In cases where such an agreement is not in place, the MFSA may accept other forms of agreements or memoranda that it deems suitable.

NPIFs are governed by a set of proportionate and risk-based criteria. These criteria mandate that such funds must exclusively avail the services of explicitly designated, duly regulated service providers. In addition, they are required to conform to predefined asset thresholds and restrict their investor base solely to those individuals who meet the criteria of eligible investors.

As a non-retail collective investment scheme, NPIFs follow a simplified notification procedure and abide by a comprehensive regulatory framework that places corresponding responsibilities on their designated service providers. NPIFs are formally notified to the MFSA and are exclusively available to individuals classified as professional and qualifying investors, as defined by current laws and regulations. In light of the fact that NPIFs can only be established as non-retail schemes accessible solely to Qualifying and/or Professional Investors, they are obliged to provide thorough risk disclosures to potential investors in strict accordance with regulatory standards.

The introduction of this regulatory framework constitutes an integral component of a wider range of substantial regulatory and policy initiatives currently being pursued by the MFSA, specifically within the sphere of asset management.