The term 'recognized jurisdictions' features quite broadly in the Maltese funds regulatory regime. The term may sound innocuous enough, but it has a number of important implications which need to be taken into account when structuring funds in Malta. We've just uploaded a detailed publication on our website analyzing the term in extensive detail. You can find the publication here. As usual, get in touch if you have questions about hedge funds in Malta, Maltese investment services set-ups, or any other aspect of Malta's financial services sector.
Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates
Showing posts with label malta. Show all posts
Showing posts with label malta. Show all posts
Monday, 16 April 2012
Saturday, 3 March 2012
Malta to bring Sun and Sea to Harrods, London
Malta will be showcased prominently at the prestigious Harrods store in London throughout March this year. Malta's presence at Harrods is expected to attract attention from the City as more and more investors seek more favourable investment destinations like the European Island of Malta.
Chetcuti Cauchi will be hosting a seminar on Malta's role as a gateway to doing business in Europe and North Africa.
Wednesday, 29 February 2012
Getting a Maltese Investment Services license: a Case Study
As part of my work I continually speak with people who are interested in doing business in Malta or through Malta. One of the recurring themes of these discussions is that people know about Malta and know that there are some interesting opportunities here, however few know what this means in real, tangible terms. Therefore today I want to present a case study which details, in a practical manner, the process by means of which a business can obtain an investment services license in Malta and offer its services throughout Europe. At every stage, I highlight the input that we would typically provide. Note that the specifics of the project are fictitious (in the interests of confidentiality), but I hope this will serve as a clear and useful example.
The Project
Mr Smith and Mr Jones are long time friends. Mr Smith is a mathematician with several years experience working as a currency trader at a Swiss bank; he is also fluent in IT. Mr Jones is a former athlete with many connections in the hedge funds industry. Smith has developed, in his spare time, an algorithmic trading system that consistently beats the market. Jones encourages Smith to take this further, and promises to invest in the project. The two plan to market the product as a solution to hedge fund clients looking to allocate a portfolio of their assets to currency trading. They consider the software itself to be their secret sauce however, and will not license it directly to clients. Instead their plan is for clients to deposit moneys in account that they (Smith and Jones) hold: the algorithm will then perform the trades. They plan to charge an annual management fee as well as a performance fee.
Determining the relevant license
The first step will be that of determining the applicable license. Foreign exchange acquired for speculative purposes is an instrument under the Investment Services Act, therefore an Investment Services License will be required. Their business will involve their 'holding or controlling' the moneys of their clients, therefore they will need a Category 2 Investment Services License.
Knowing which license they need tells Smith and Jones a lot of important information about the costs that the project will entail, such as their regulatory fees (application fee, license fee, supervisory fee and contribution to investor compensation scheme). They can now plan and budget accordingly.
How we help: guidance in relation to the selection of the appropriate license, advice on likely license conditions associated with the license, mapping out of project plan and timeline
Operational set-up
Next, they need to determine the exact nature of their operational set-up in Malta. Jones lives in London and cannot move to Malta because of family commitments; plus in London he can be close to the fund managers. Smith, on the other hand, will take up residence in Malta. They will locate servers in Malta as well. Neither of them has any experience in a compliance role, so they will hire a local lawyer as a compliance officer. Initially they plan to start small, but plan to hire one or two local professionals within six months from commencement.
How we help: input on likely levels of local presence required, advice on rules regarding operational set-up and internal organization, assistance with hiring processes, introductions to reputable local service providers and professionals
Meeting the regulator
Jones and Smith now organize a meeting with their future regulator, the MFSA. More specifically they meet the authorisations unit, the team within the regulator which is dedicated purely to handling new applications. During the meeting they get the opportunity to discuss their business model and to address any preliminary queries in an open and informal manner.
How we help: organization of meetings, negotiation with and representation before the regulator, drafting of formal communications
Preparing the application
Now comes the exciting part where all the form filling, drafting and number crunching happens. The application consists in the filing of a number of documents including: a business plan, financial projections, due diligence documents, detailed financial projections. These need to be drafted to a high standard and must provide the MFSA with a coherent picture of the business.
How we help: drafting of all relevant documentation - typically we will source 'building blocks' from our clients which we then help to expand and build up to the high standards expected by the regulator
Post-submission
The documents are ready and a draft submission takes place. The MFSA now commences its review. This is a thorough process - the business model will be analyzed for feasibility and adherence with local legislation, the adequacy of internal organizational arrangements will be scrutinized, and due diligence will be conducted on Jones and Smith.
During this stage a dialogue will take place with the regulator, with some back and forth communication being commonplace. The MFSA will not, except in exceptional circumstances, refuse an application outright - if there are issues, these will be flagged (e.g. some area of the business is unclear) and an opportunity given to address them.
How we help: continuous follow-up with authorities, addressing regulatory queries
In Principle Approval
The regulatory review is complete and 'in principle approval' is issued. This is a document stating that the MFSA will issue the license provided that certain stated conditions are adhered to. In this case (and in most cases) these are simple requirements; form the companies, file signed original versions of the application forms, pay the licensing fee, etc. Smith and Jones have done their homework well, and the remaining conditions are easy to satisfy at this stage.
How we help: assistance with the fulfilment of all 'in principle approval' conditions.
Issuing of the License
The conditions stated in the In Principle approval are adhered to and a note to this effect is sent to the MFSA. Shortly thereafter the license itself is issued. Once the license is issued, an application for 'passporting' is filed with the MFSA, indicated the jurisdictions in which the company will offer its services. This is processed within a month (there is a statutory time limit) and the company can now start to collect client moneys and invest them.
How we help: filing of passporting applications, post-licensing compliance consultancy services, company administration and maintenance services
Our Investment Services Practice
My firm’s expertise and familiarity with local regulatory processes and comprehensive licensing and compliance service has positioned Chetcuti Cauchi Advocates as the Malta law firm of choice for discerning operators seeking a one-stop shop financial services solution provider in Malta. I hope the above gives readers a clear idea of what this kind of process looks like in real terms. Get in touch if you want to discuss further. You can find more information by following links to our website here:
Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates
The Project
Mr Smith and Mr Jones are long time friends. Mr Smith is a mathematician with several years experience working as a currency trader at a Swiss bank; he is also fluent in IT. Mr Jones is a former athlete with many connections in the hedge funds industry. Smith has developed, in his spare time, an algorithmic trading system that consistently beats the market. Jones encourages Smith to take this further, and promises to invest in the project. The two plan to market the product as a solution to hedge fund clients looking to allocate a portfolio of their assets to currency trading. They consider the software itself to be their secret sauce however, and will not license it directly to clients. Instead their plan is for clients to deposit moneys in account that they (Smith and Jones) hold: the algorithm will then perform the trades. They plan to charge an annual management fee as well as a performance fee.
Determining the relevant license
The first step will be that of determining the applicable license. Foreign exchange acquired for speculative purposes is an instrument under the Investment Services Act, therefore an Investment Services License will be required. Their business will involve their 'holding or controlling' the moneys of their clients, therefore they will need a Category 2 Investment Services License.
Knowing which license they need tells Smith and Jones a lot of important information about the costs that the project will entail, such as their regulatory fees (application fee, license fee, supervisory fee and contribution to investor compensation scheme). They can now plan and budget accordingly.
How we help: guidance in relation to the selection of the appropriate license, advice on likely license conditions associated with the license, mapping out of project plan and timeline
Operational set-up
Next, they need to determine the exact nature of their operational set-up in Malta. Jones lives in London and cannot move to Malta because of family commitments; plus in London he can be close to the fund managers. Smith, on the other hand, will take up residence in Malta. They will locate servers in Malta as well. Neither of them has any experience in a compliance role, so they will hire a local lawyer as a compliance officer. Initially they plan to start small, but plan to hire one or two local professionals within six months from commencement.
How we help: input on likely levels of local presence required, advice on rules regarding operational set-up and internal organization, assistance with hiring processes, introductions to reputable local service providers and professionals
Meeting the regulator
Jones and Smith now organize a meeting with their future regulator, the MFSA. More specifically they meet the authorisations unit, the team within the regulator which is dedicated purely to handling new applications. During the meeting they get the opportunity to discuss their business model and to address any preliminary queries in an open and informal manner.
How we help: organization of meetings, negotiation with and representation before the regulator, drafting of formal communications
Preparing the application
Now comes the exciting part where all the form filling, drafting and number crunching happens. The application consists in the filing of a number of documents including: a business plan, financial projections, due diligence documents, detailed financial projections. These need to be drafted to a high standard and must provide the MFSA with a coherent picture of the business.
How we help: drafting of all relevant documentation - typically we will source 'building blocks' from our clients which we then help to expand and build up to the high standards expected by the regulator
Post-submission
The documents are ready and a draft submission takes place. The MFSA now commences its review. This is a thorough process - the business model will be analyzed for feasibility and adherence with local legislation, the adequacy of internal organizational arrangements will be scrutinized, and due diligence will be conducted on Jones and Smith.
During this stage a dialogue will take place with the regulator, with some back and forth communication being commonplace. The MFSA will not, except in exceptional circumstances, refuse an application outright - if there are issues, these will be flagged (e.g. some area of the business is unclear) and an opportunity given to address them.
How we help: continuous follow-up with authorities, addressing regulatory queries
In Principle Approval
The regulatory review is complete and 'in principle approval' is issued. This is a document stating that the MFSA will issue the license provided that certain stated conditions are adhered to. In this case (and in most cases) these are simple requirements; form the companies, file signed original versions of the application forms, pay the licensing fee, etc. Smith and Jones have done their homework well, and the remaining conditions are easy to satisfy at this stage.
How we help: assistance with the fulfilment of all 'in principle approval' conditions.
Issuing of the License
The conditions stated in the In Principle approval are adhered to and a note to this effect is sent to the MFSA. Shortly thereafter the license itself is issued. Once the license is issued, an application for 'passporting' is filed with the MFSA, indicated the jurisdictions in which the company will offer its services. This is processed within a month (there is a statutory time limit) and the company can now start to collect client moneys and invest them.
How we help: filing of passporting applications, post-licensing compliance consultancy services, company administration and maintenance services
Our Investment Services Practice
My firm’s expertise and familiarity with local regulatory processes and comprehensive licensing and compliance service has positioned Chetcuti Cauchi Advocates as the Malta law firm of choice for discerning operators seeking a one-stop shop financial services solution provider in Malta. I hope the above gives readers a clear idea of what this kind of process looks like in real terms. Get in touch if you want to discuss further. You can find more information by following links to our website here:
Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates
Wednesday, 18 January 2012
Malta gets the nod from Financial Times
There's more good press for Malta, with the Financial Times joining Bloomberg and Business Insider in highlighting Malta's efforts at building a financial centre of good repute. Titled 'Mediterranean Revival', the article highlights some of the various initiatives that are going on in Malta, such as the new High Net Worth Individuals Scheme and the Highly Qualified Persons Rules, which Jean-Philippe discussed in an earlier post. The article focuses on the various attractions of the Malta property market. While it does criticize certain aspects of the property market, the overall tone is positive.
Read the full article here.
Read the full article here.
Saturday, 7 January 2012
The Malta FOREX boom
An increasing number of businesses providing services focusing on the foreign exchange asset class are choosing Malta as their domicile. At Chetcuti Cauchi we have experienced this growth first hand, having been engaged by a healthy number of FOREX businesses to handle their licensing and compliance requirements.
What is driving this growth? First of all, Malta has been working for a couple of decades now to create a business friendly environment. FOREX businesses are therefore choosing Malta for much the same reason that hedge funds, gaming operators, investment boutiques, financial institutions and other financial businesses choose the country; approachable regulators, competitive costs, low taxes, quality professionals and Mediterranean lifestyle.
Secondly, and perhaps more importantly, Malta also has certain characteristics which may appear to be of minor importance but can be of great benefit to FOREX businesses. Let's focus first on the question of legal clarity; in some jurisdictions, FOREX businesses exist in a sort of no man's land. Malta FOREX businesses on the other hand are regulated under the Investment Services Act, 1994. This is the same legislation that implements MiFID (the EU Directive on investment services) into Maltese legislation. This can gives rise to various advantages, including passporting opportunities, high regulatory standards as well as the all important peace of mind of knowing which set of rules one is required to adhere to.
In addition, Malta also has flexible rules with respect to leverage ratios. This allows Malta FOREX businesses to cater for a broader array of investor risk appetites.
Feel free to get in touch with us if you are interested in setting up a Malta FOREX business, or would like to know more about what Malta can offer you and your company.
Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates
Bloomberg highlights Malta hedge funds industry
Bloomberg has just spoken in glowing terms about Malta as a hedge funds domicile in an article titled 'Malta lures hedge funds with 300 days of sun aided by EU rules'. The article observes that a number of factors are leading hedge fund managers to choose Malta as a domicile for their hedge funds, such as a renewed focus on transparency. The article also suggests that widespread worries that the EU is soon to become hostile towards hedge funds not domiciled in an EU jurisdiction may also be leading some hedge funds towards Maltese shores. The much maligned AIFMD appears may be turning out to be a blessing in disguise for the jurisdiction; the changes that it introduces are likely to trigger discussions about choice of domicile in many boardrooms, and Malta, with its various charms and attractions, will certainly top many shortlists.
The article further cements Malta's standing as a hedge funds domicile, allowing hedge fund managers that have chosen Malta to reap a rich reputational dividend. No one expects 2012 to be an easy year, but this article serves as a reminder that Malta's hedge funds industry is strong and set for another year of growth.
Dr Charles Cassar
Financial Services Lawyer
Chetcuti Cauchi Advocates
Low taxes for Malta Financial Services Executives
A welcome initiative of the Maltese government is the recent introduction of a lower tax rate of 15% chareable on income of Malta financial services executives in excess of Euro75,000 and exempting from Malta tax any income over the five million Euro threshhold.
Evidently, Malta is showing concrete signs of its commitment to its success story with the financial services industry. Topping the already favourable regulatory framework and corporate tax regime enjoyed by the gaming industry in Malta, these recent initiatives seek to attract highly qualified financial services expatriates to relocate to Malta under employment with gaming companies licenced by the Malta Financial Services Authority.
The Highly Qualified Persons Rules 2011 apply as of fiscal year starting 1st January, 2010 and will benefit financial services specialists with technical, management and industry specific know-how that will be crucial to ensure Malta survival as a top financial services domicile. My partners and I have had the exciting experience of witnessing the exponential growth and the privilege of assisting top regulated hedge fund managers, investment services firms, captive insurance operators, forex companies and banking institutions start up their operations in Malta in the last decade and I for one welcome this initiative with open arms given the ever increasing demand for candidates to fill top jobs opening regularly in the local financial services market market.
Amongst the high end financial services executive positions covered by these new personal tax rules are the CEO, CFO, COO, Chief Risk Office, Senior Analyst, Structuring Professional, Senior Trader/Trader., CTO, Head of Marketing, Head of Distribution Channels, Head of R&D. These “eligible offices” must be held with companies authorised or recognised by the Malta Financial Services Authority (MFSA).
My team is currently handling of a number of applications for top management officials of leading gaming groups under these rules. I have prepared an overview of the Malta tax guidelines for financial services executives under the Highly Qualified Persons Rules - Malta Top Financial Services Management on my law firm's website. These should answer your first questions as to whether you qualify. If still in doubt, please contact me and my team of Malta tax advisors at your convenience.
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