Brexit & Malta's Fund Industry

Brexit

The Investment Fund Industry (‘IFI’) - one of our principal practice groups - is comprehensively regulated within the EU in order to ensure greater investor protection. As a result of the UK’s referendum and until negotiations between the EU and UK commence (hopefully by not later than March 2017 as recently indicated by Theresa May) and are concluded, a degree of uncertainty may arise on how UK asset managers will position themselves and their funds.

The two regulatory regimes for IFIs, are the:

  1. Undertakings for Collective Investment in Transferable Securities Directive (UCITS); and
  2. Alternative Investment Fund Managers Directive (AIFMD).

In respect of both UCITS and Alternative Investor Funds (‘Funds’) a UK asset manager is currently able to market and distribute its Funds across the EU. The reality may change (subject to conclusion of negotiations between the EU and UK) whereby Funds may be classified as ‘third country’ Funds and may no longer benefit from the possibility of passporting such Funds within the EU.

Various considerations may need to be made for UCITS such as either having authorised distributors in the various Member States in which it would like to market and distribute its funds, or have an EU based management company which will then be authorised to passport and market freely as per current practice.

AIFs are themselves not able to have a passport but their managers may benefit from the management passport and the marketing passport. Should the UK AIFM become a non-EU AIFM it would be subject to similar treatment given to other non-EU AIFMs and thus not be able to either market its own AIFs in the EU or manage EU AIFs established in another EU jurisdiction. If the UK will be able to benefit from the extension of funds passport to non-EU countries is a matter yet to be analysed and understood.

In the event that asset managers are looking to hedge their bets, they may consider establishing their Funds in another EU jurisdiction as well as consider re-domiciling their operations both in terms of funds and asset management. Malta is well positioned to assist and it offers the possibility of not only re-domiciling the Funds but also the asset management company. Its favourable tax regime (with over 70 double tax treaties), close ties to the UK both historically and in present day matters, the fluent use of the English language, portfolio of fund options and a strong and successful financial services industry position Malta in an ideal situation to provide a seamless transition from an operational aspect whilst continuing to have access to the EU market.

UK asset managers, need to consider what action they need to take as a result of the new political and economic direction which the UK is about to embark on. Warren Buffet is quoted as saying ‘Predicting rain doesn’t count. Building arks does.’  

 



Contact Us
Related Practice Groups