Professional Investor Fund (PIFs) Formation for Crypto Funds in Malta

 

Just like collective investment schemes (CIS), Professional Investor Funds (PIF) in Malta require an appropriate fund licence from the Malta Financial Services Authority (MFSA).  Crypto funds domiciled in Malta are regarded under the same regulations as traditional established Maltese funds; therefore crypto fund managers looking to domicile their funds in Malta should be aware of the fund licencing options at their disposal, including how each licencing structure relates to security token offering regulation.

In our article ‘Security token regulation in Malta’, we introduced fund licencing structures and requirements for crypto fund managers. Professional Investor Funds are a type of CIS which fall under the Investment Services Act, 1994. Of the three most commonly available fund licence options, namely Professional Investor Fund, Alternative Investor Schemes and Open ended collective investment schemes; the most popular licence structure by a significant margin is the Professional Investor Scheme, of which there are 450 domiciled in Malta. Likewise, Professional Investor Funds have recently proved popular with crypto fund managers domiciled in Malta as digital assets and security token offerings grow in popularity. The preference for Professional Investor Funds is due in part to their flexible and light regulation, in comparison to retail funds.

 

Key features of Professional Investor Funds

 

  • Flexible Management – Professional Investor Funds are generally for those investors who are classed as professional, or high net worth investors/individuals; with a minimum capital requirement for qualifying investors of €100,000. As they are not promoted to retail investors, they are subsequently free of many of the restrictions usually enforced on retail funds.
  • Fund Structures – Crypto fund managers may choose to structure their Professional Investor Funds as either a SICAV (the most popular structure), INVCO, a contractual fund, unit trust, an incorporated cell company, or a limited partnership. SICAVs offer the greatest flexibility for crypto fund managers.
  • A Range of Management Options – Unlike some CIS, crypto fund managers may choose to establish a self-managed or externally managed fund. An external management body may be resident within or outside of Malta, and in each case must be deemed fit and proper by the MFSA (outside of Malta) or duly licensed and authorised by the MFSA (within Malta). A self-managed fund, on the other hand, is managed by the crypto funds board of directors, subject to satisfactory establishment of competence by the MFSA. As a self-managed fund, the minimum share capital is raised to €125,000.
  • Investment Risk Hedging – Professional Investor Funds, unlike other CIS, are exempt from risk spreading and diversification requirements, should the crypto fund manager wish to focus on a smaller range of assets. However, the fund manager is responsible for deciding if the risk profile of individual investments falls within the Professional Investor Scheme’s risk management profile and likewise, liquidity management systems must be implemented.
  • Time Efficient Licensing – Review of a Professional Investor Scheme licence can be done in as little as 3 – 4 months by the MFSA, and the necessary documents prepared in less than 1 month. Likewise, the pre-licensing stage is in the order of 4 – 6 weeks, making the entire process possible in as little as 6 months from inception.

 

Please note, Professional Investor Funds are not suitable for crypto fund managers wishing to passport their funds within the EU; other fund licences such as AIFs or UCITS should be sought out if this is a fund requirement.

 

Professional Investor Funds Licencing Process

Once you have decided that a Professional Investor Scheme is a best-fit licence for your crypto fund, you can begin the licencing process. The CIS licencing process in Malta is robust and well established, to ensure funds are set up in a responsible manner. Licencing a PIF includes four main stages:

 

  • The crypto fund manager and/or fund representatives attend a preliminary meeting with the MFSA to discuss the fund’s priorities, structure and scope.
  • The applicant completes and submits the MFSA CIS licence application form, provides all supporting documents, and pays the application fee to the MFSA.
  • Next, the MFSA will conduct due diligence checks to ensure that your proposed crypto fund, managers and board of directors are ‘fit and proper’ to oversee the fund. If successful, your crypto fund will receive ‘in principle approval’ by the MFSA.
  • Once the applications soft copy has been approved, the crypto fund manager may resubmit the documentation, alongside any outstanding documents, pending final approval. Once in principle approval has been issued, there is a 4-6 week period until a full licence is issued.

 

ICO Launch Malta is on-hand to assist your crypto fund with each step of the Professional Investor Scheme  licencing process, in addition to establishing the correct fund licencing option for your fund.

We are experts in Maltese security token offering regulation, crypto fund consultation and establishment, and guiding our clients through the CIS licencing process. Contact us to discuss your individual crypto funds requirements.