Managers) Regulations, 2013

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,044, 8 ta’ Marzu, 2013

L.N. 115 of 2013

INVESTMENT SERVICES ACT

(CAP. 370)

Investment Services Act (Alternative Investment Fund

Managers) Regulations, 2013

IN exercise of the powers conferred by article 12 of the

Investment Services Act, the Minister for Finance, the Economy and

Investment, acting on the advice of the Malta Financial Services

Authority, has made the following regulations:-

(1) The title of these regulations is the Investment Citation,

Services Act (Alternative Investment Fund Managers) Regulations, commencement

and scope.

2013. (2) These regulations shall come into force on 22nd July 2013.

(3) The purpose of these regulations is to transpose and

implement Article 4(1)(a), (b), (h), (z), (aa) and (bb), Article 25(1),

(2), (3), (4), (6), (7) and (8), Article 46(4), Article 47(4), (5), (6), (7),

(8), (9) and (10) and Article 51(1) and (2) of the AIFM Directive.

(1)

In these regulations, unless the context otherwise Interpretation.

requires

"the Act" means the Investment Services Act;

"the AIFM Directive" means Directive 2011/61/EU of the

European Parliament and of the Council of 8 June 2011 on

Alternative Investment Fund Managers and amending Directives

2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009

and (EU) No 1095/2010 as amended from time to time, and includes

any implementing measures that may be issued thereunder;

"Alternative Investment Fund" or "AIF" means a collective

investment scheme, including subfunds thereof, which raises capital

from a number of investors, with a view to investing it in accordance

with a defined investment policy for the benefit of those investors,

and which does not qualify as a UCITS Scheme in terms of the

UCITS Directive;

"Alternative Investment Fund Manager" or "AIFM" means a

legal person whose regular business is managing one or more AIFs;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act, Cap. 330.

which body shall also carry out the duties as competent authority for

all purposes of the AIFM Directive;

"Directive 95/46/EC" means the Directive of the European

Parliament and of the Council of 24 October 1995 on the protection

of individuals with regard to the processing of personal data and on

the free movement of such data;

"ESMA" means the European Securities and Markets Authority

established by Regulation (EU) No. 1095/2010 of the European

Parliament and of the Council of the 24 November 2010;

"ESRB" means the European Systemic Risk Board established

by Regulation (EU) No 1092/2010 of the European Parliament and of

the Council of the 24 November 2010 on European Union macro-

prudential oversight of the financial system and establishing a

European Systemic Risk Board and Council Regulation (EU) No

1096/2010 of the 17 November 2010 conferring specific tasks upon

the European Central Bank concerning the functioning of the

European Systemic Risk Board;

"Member State of reference" shall have the same meaning

assigned to it in the Investment Services Act (Alternative Investment

2013. Fund Manager) (Third Country) Regulations, 2013;

"overseas regulatory authority" means an authority in a country

or territory outside Malta that is not a Member State or EEA State

which exercises any regulatory or supervisory function in relation to

financial services corresponding to a function of the competent

authority as defined in the Malta Financial Services Authority Act;

"third country AIF" means an AIF which is not a European AIF;

"third country AIFM" means an AIFM which is not a European

AIFM;

"the UCITS Directive" means Council Directive 85/611/EEC of

20 December 1985 on the co-ordination of laws, regulations and

administrative provisions relating to undertakings for collective

investment in transferable securities (UCITS), as amended from time

to time, and includes any implementing measures that may be issued

thereunder.

(2) Words and expressions used in these regulations which are

also used in the Act but which are not defined herein shall have the

same meaning as in the Act.

(3) In the event that any of these regulations conflict with the

provisions of the AIFM Directive, the latter shall prevail.

(1) When transferring personal data to a European Transfer of

regulatory authority or to an overseas regulatory authority in personal

a European

accordance with its obligations under the AIFM Directive, the regulatory

authority or

competent authority shall transfer such data in accordance with overseas

regulatory

Directive 95/46/EC.

authority, and

retention of

(2) When receiving personal data from a European regulatory personal data.

authority or from an overseas regulatory authority under the

provisions of the AIFM Directive, the competent authority shall

retain such personal data for a maximum period of five years.

In cases where the activity of one or more AIFs in the Competent

market for a financial instrument could jeopardise the orderly authority

have necessary

functioning of that market, the competent authority shall have all the powers

ensure orderly

powers necessary to take all measures required in order to ensure the functioning of

markets.

orderly functioning of markets.

(1) If any of the activities of the AIFMs cause or Request which

aggravate a substantial threat to the orderly functioning and integrity may

ESMA.

of the financial market or to the stability of the whole or a part of the

financial system in the European Union and there are cross-border

implications, and if the competent authority fails to take measures to

address such threat or if the measures taken do not sufficiently

address the threat, ESMA may, subject to the requirements set out in

sub-regulations (2) and (3), request the competent authority to take

any of the following measures, as appropriate

(a)

prohibit the marketing in the European Union of

units or shares of AIFs managed by non-EU AIFMs or of non-

EU AIFs managed by EU AIFMs without the authorisation

required in Article 37 of the AIFM Directive, or without the

notification required in Articles 35, 39 and 40 of the AIFM

Directive, or without being allowed to do so by the competent

authority in accordance with Article 42 of the AIFM Directive;

(b) impose restrictions on non-EU AIFMs relating to

the management of an AIF in case of excessive concentration of

risk in a specific market on a cross-border basis;

(c)

impose restrictions on non-EU AIFMs relating to

the management of an AIF where its activities potentially

constitute an important source of counterparty risk to a credit

institution or other systemically relevant institutions.

(2) The measures adopted by the competent authority in terms

of sub-regulation (1) shall

(a)

effectively address the threat to the orderly

functioning and the integrity of the financial market or to the

stability of the whole or a part of the financial system in the

European Union or significantly improve its ability to monitor

the threat;

(b)

not create a risk of regulatory arbitrage; and

(c)

not have a detrimental effect on the efficiency of the

financial markets, including reducing liquidity in those markets

or creating uncertainty for market participants, in a way that is

disproportionate to the benefits of the measures.

(3) Before requesting the competent authority to take or renew

any measure referred to in sub-regulation (1), ESMA shall consult,

where appropriate, the ESRB and other relevant authorities.

(4) In both cases where Malta is the Member State of reference

of a third country AIFM or where Malta is the host Member State of

such AIFM, the competent authority shall be notified by ESMA of its

decision to request such competent authority to impose or renew any

measure referred to in sub-regulation (1). The notification shall at

least specify the following details

(a)

the AIFM and the activities to which the measures

apply and their duration; and

(b) the reasons why ESMA is of the opinion that it is

necessary to impose the measures in accordance with the

conditions and requirements set out in this regulation, including

the evidence in support of those reasons. In both cases where

Malta is the Member State of reference.

(5) ESMA shall review the measures undertaken by the

competent authority in terms of this regulation at appropriate

intervals and at least every three months and if a measure is not

renewed after that three-month period, it shall automatically expire.

Any renewal shall be carried out in the process referred to in this

regulation.

(6) If Malta is the Member State of reference in terms of the

Investment Services Act (Alternative Investment Fund Manager)

2013. (Third Country) Regulations, 2013, of the non-EU AIFM against

whom a measure in terms of this regulation was imposed, the

competent authority may request ESMA to reconsider its decision in

the manner set out in the second sub-paragraph of Article 44(1) of

Regulation (EU) No 1095/2010.

(1) When Malta is the home Member State of the AIFM, Duties of the

the competent authority shall use the information provided to it by the competent

authority when

AIFM in terms of Article 24 of the AIFM Directive for the purposes Malta

home Member

of identifying the extent to which the use of leverage contributes to State of the

the build-up of systemic risk in the financial system, risks of AIFM

leveraged AIFs.

disorderly markets or risks to the long-term growth of the economy.

(2) By means of the procedures set out in Article 50 of the

AIFM Directive on supervisory cooperation, the competent authority

shall

(a)

ensure that all information gathered under Article 24

of the AIFM Directive in respect of all AIFMs that they

supervise and the information gathered under Article 7 of the

AIFM Directive, is made available to European regulatory

authorities , to ESMA and the ESRB; and

(b) provide information bilaterally to the European

regulatory authorities directly concerned, if an AIFM under

their responsibility, or AIF managed by that AIFM, could

potentially constitute an important source of counterparty risk to

a credit institution in terms of article 2 of the Banking Act, or Cap. 371.

other systemically relevant institutions in other Member States

or EEA States.

(3) The AIFM shall demonstrate that the leverage limits set by

it for each AIF it manages are reasonable and that it complies with

those limits at all times.

(4) The competent authority shall assess the risk that the use of

leverage by an AIFM with respect to the AIFs it manages could

entail. Where deemed necessary in order to ensure the stability and

integrity of the financial system, the competent authority, after having

notified ESMA, the ESRB and the European regulatory authority of

the relevant AIF, shall impose -

(a)

limits to the level of leverage that an AIFM is

entitled to employ; or

(b) other restrictions on the management of the AIF

with respect to the AIFs under its management,

to limit the extent to which the use of leverage contributes to the

build-up of systemic risk in the financial system or risks of disorderly

markets.

(5) Through the procedures set out in Article 50 of the AIFM

Directive, the competent authority shall duly inform ESMA, the

ESRB and the European regulatory authority of the AIF, of actions

taken in terms of sub-regulation (4).

(6) The competent authority shall make the necessary

notifications to ESMA, the ESRB and the European regulatory

authority in terms of sub-regulations (4) and (5) by not less than ten

working days before the proposed measure is intended to take effect

or to be renewed. The notification shall include details of the

proposed measure, the reasons for the measure, and when the measure

is intended to take effect. In exceptional circumstances, the competent

authority may decide that the proposed measure takes effect within

the ten working days referred to in this sub-regulation.

(7) After having sent the notifications in terms of sub-

regulations (6) and (7), the competent authority shall receive advice

from ESMA about the measure that is proposed or taken. The advice

may, in particular, address whether the conditions for taking action

appear to be met, whether the measures are appropriate and the

duration of the measures.

(8) On the basis of the information received in accordance

with sub-regulation (2), and after taking into account any advice of

the ESRB, ESMA may determine that the leverage employed by an

AIFM, or by a group of AIFMs, poses a substantial risk to the

stability and integrity of the financial system and may issue advice to

the competent authority specifying the remedial measures to be taken,

including limits to the level of leverage, which that AIFM, or that

group of AIFMs, are entitled to employ. ESMA shall immediately

inform the competent authority, the ESRB and the Commission of any

such determination.

(9) If the competent authority proposes to take action contrary

to ESMA’s advice referred to in sub-regulations (7) or (8), it shall

inform ESMA, stating its reasons. ESMA may publish the fact that

the competent authority does not comply or intend to comply with its

advice. ESMA may also decide, on a case-by-case basis, to publish

the reasons provided by the competent authority for not complying

with its advice. The competent authority shall receive advance notice

about such a publication.

€0.27