INVESTMENT SERVICES ACT (EUROPEAN SOCIAL ENREPRENEURSHIP FUNDS) REGULATIONS

SUBSIDIARY LEGISLATION 370.27

INVESTMENT SERVICES ACT (EUROPEAN SOCIAL

ENREPRENEURSHIP FUNDS) REGULATIONS

28th March, 2014

LEGAL NOTICE 106 of 2014.

(1) The title of these regulations is the Investment Services

Act (European Social Entrepreneurship Funds) Regulations.

(2) The purpose of these regulations is to implement the

relevant provisions of the EU Regulation, as hereinafter defined, on

European Social Entrepreneurship Funds, and these regulations

shall be interpreted and applied accordingly.

In these regulations, unless the context otherwise requires -

"the Act" means the Investment Services Act;

"AIF" means an alternative investment fund which is a collective

investment scheme, including the 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 Directive 2009/65/EC of the European Parliament and of

the Council of 13 July 2009 on the coordination of laws,

regulations and administrative provisions relating to undertakings

for collective investment in transferable securities (UCITS);

"ESMA" means the European Securities and Markets Authority

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

Parliament and of the Council of 24 November 2010;

"EU Regulation" means Regulation (EU) No 346/2013 of the

European Parliament and of the Council of 17 April 2013 on

European social entrepreneurship funds, as amended from time to

time and as applicable to the managers of qualifying social

entrepreneurship funds that wish to use the designation "EuSEF" in

relation to the marketing of qualifying social entrepreneurship

funds in the European Union;

"European manager of qualifying social entrepreneurship funds"

means a manager of qualifying social entrepreneurship funds,

which manager is established in an EU Member State or EEA State

other than Malta and is subject to registration with the regulatory

authority of its home Member State in accordance with the EU

Regulation;

"Financial Services Tribunal" means the tribunal established in

terms of article 21 of the Malta Financial Services Authority Act;

"home Member State" means the EU Member State or EEA State

where the manager of a qualifying social entrepreneurship fund is

established and is subject to registration with its regulatory

authority;

"host Member State" means the EU Member State or EEA State,

other than Malta, where the manager of a qualifying social

entrepreneurship fund markets qualifying social entrepreneurship

funds in accordance with the EU Regulation;

"host regulatory authority" means the national authority which a

host Member State may designate, by law or regulation, to

undertake the registration of managers of qualifying social

entrepreneurship funds in terms of the EU Regulation;

"Maltese manager of qualifying social entrepreneurship funds"

means a manager of qualifying social entrepreneurship funds,

which manager is established in Malta and is licensed with the

competent authority in accordance with the EU Regulation and in

terms of the Act; and

"qualifying social entrepreneurship fund" means a collective

investment scheme licensed as an AIF that

(a) intends to invest at least 70% of its aggregate capital

contributions and uncalled committed capital in assets

that are qualifying investments, calculated on the basis

of amounts investible after deduction of all relevant

costs and holdings in cash and cash equivalents, within

a time frame laid down in its rules or instruments of

incorporation;

(b) does not use more than 30% of its aggregate capital

contributions and uncalled committed capital for the

acquisition of assets other than qualifying investments,

calculated on the basis of amounts investible after

deduction of all relevant costs and holdings in cash

and cash equivalents; and

(c) is established within the territory of a EU Member

State or EEA State, including Malta.

(2) Words and expressions used in the Act shall, in these

regulations, have the same meaning as is assigned to them in the

Act.

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

provisions of the EU Regulation, the latter shall prevail.

The Malta Financial Services Authority, established by the

Malta Financial Services Authority Act, shall be the designated

competent authority in Malta for the purposes of implementing the

relevant provisions of the EU Regulation, and any reference in

these regulations to the competent authority shall be read and

construed accordingly.

(1) The competent authority shall exercise all the

functions, obligations and powers and shall satisfy all the

requirements imposed on competent authorities by the EU

Regulation.

(2) Without prejudice to sub-regulation (1), the competent

authority may, for the better implementation of the EU Regulation,

exercise any of the powers assigned to it under the Act in relation

to Maltese managers of qualifying social entrepreneurship funds

and European managers of qualifying social entrepreneurship funds

marketing their funds in Malta.

For the better carrying out of the provisions of the EU

Regulation and of these regulations, the competent authority may,

from time to time, issue and publish Investment Services Rules

which shall be binding on all Maltese managers of qualifying social

entrepreneurship funds. Such rules may lay down additional

requirements and conditions in relation to such managers and any

other matters as the competent authority may deem appropriate

including

(a) the operation of the EU Regulation or of these

regulations;

(b) any matter relating to the functions, obligations and

powers of the competent authority under the EU

Regulation; and

(c) any other matter arising in connection with the EU

Regulation or these regulations.

The competent authority shall supervise compliance with

the requirements prescribed in the EU Regulation by Maltese

managers of qualifying social entrepreneurship funds and by

European managers of qualifying social entrepreneurship funds

marketing their funds in Malta.

(1) In the case of a Maltese manager of qualifying social

entrepreneurship funds marketed in a host Member State, where

there are clear and demonstrable grounds that lead the host

regulatory authority to believe that the Maltese manager is in

breach of the EU Regulation in the host Member State, and upon

receipt of the relevant notification, the competent authority shall

take appropriate measures.

(2) Where, despite the measures taken by the competent

authority, or because the competent authority has failed to take

measures within a reasonable time, the Maltese manager persists in

acting in a manner that is clearly in breach of the EU Regulation,

the competent authority shall receive notification by the host

regulatory authority of any measures proposed to be taken in order

to protect the investors of the relevant qualifying social

entrepreneurship fund, including the possibility of preventing the

Maltese manager from carrying out any further marketing of its

qualifying social entrepreneurship funds in the host Member State.

(1) Where the Maltese manager of a qualifying social

entrepreneurship fund contravenes or fails to comply with any

provisions of the EU Regulation, these regulations and any

Investment Services Rules issued thereunder, the competent

authority may, by notice in writing and without recourse to a court

hearing, impose on such manager an administrative penalty not

exceeding one hundred and fifty thousand euro (€150,000).

(2) The competent authority shall notify the European

Commission and ESMA of the provisions on administrative

penalties and measures applicable to breaches of the provisions of

the EU Regulation, the Act, these regulations and any Investment

Services Rules issued thereunder by 16 May 2015. The competent

authority shall also notify the European Commission and ESMA of

any subsequent amendment thereto.

A right of appeal to the Financial Services Tribunal shall

lie from a decision of the competent authority

(a) to impose a penalty in terms of regulation 8; or

(b) made in the exercise of its functions under Chapter III

of the EU Regulation.

(1) Where there are clear and demonstrable grounds that

lead the competent authority to believe that a European manager of

qualifying social entrepreneurship funds is in breach of the EU

Regulation in Malta, it shall promptly inform the regulatory

authority of the home Member State of the European manager. The

regulatory authority of the home Member State shall take the

necessary measures.

(2) Where, despite the measures taken by the regulatory

authority of the home Member State, or because the regulatory

authority has failed to take measures within a reasonable time, the

European manager of qualifying social entrepreneurship funds

persists in acting in a manner that is clearly in breach of the EU

Regulation, the competent authority may, after informing the

regulatory authority of the home Member State, take all the

appropriate measures in order to protect the investors of the

relevant qualifying social entrepreneurship funds, including the

possibility of preventing the European manager from carrying out

any further marketing of its qualifying social entrepreneurship

funds in Malta.