CDF Advocates

Establishment & Listing of a Collective Investment Scheme


The setting up of Collective Investment Schemes (CISs) is regulated by the Investment Services Act, 1994, (ISA) which is based on the UK Financial Services Act 1986 and on relevant EU Directives. The Competent Authority which regulates investment services is the Malta Financial Services Authority (MFSA). To read an article on fund redomiciliation click here

What is a CIS?

A CIS is a scheme established for the purpose of collecting and pooling funds from the general public and, subsequently, investing these funds in assets in accordance with certain investment objectives published in a Prospectus.

The value of the units/shares held by the public in a CIS reflects the value per unit/share of the underlying assets of a CIS - in the case of a CIS which is 'open-ended', its size expands and contracts as investors buy and sell units in it, while a 'close-ended' CIS has a fixed share capital.

Types of CISs

CISs may take various forms including:

- unit trusts under the Trusts Act, 1988 although a foreign law must be chosen to govern the trust arrangement.

- investment partnerships as a partnership en commandite or en nom collectif, however in such a case at least one partner (and such partner cannot be a limited liability company) must have unlimited liability;

- open-ended investment companies that are set up in the form of a variable share capital company or SICAV in terms of the Companies Act, 1995; or

- close-ended investment companies (or INVCO) also set up in terms of the Companies Act, 1995.


A CIS operating in or from Malta or which is organised under the Laws of Malta and which has any of the following characteristics will require a license:

- it operates according to the principle of risk spreading; or

- the contribution of the participants and the profits or income out of which payments are to be made to them are pooled; or

- at the request of the holders, units are or are to be re-purchased or redeemed out of the assets of the CIS, continuously or in blocks at short intervals; or

- units are, or have been, or will be issued continuously or in blocks at short intervals.

A Maltese CIS carrying on any activities from abroad must have a valid CIS license.

Exemption from requirement of a license

The following CISs are exempted from the requirement of obtaining a license:

- a scheme involving participants each of which carries on a business other than that which constitutes an investment service and enters into the arrangement for commercial purposes related to that business;

- a scheme which operates according to the principle of risk spreading or in respect of which the contributions of the participants and the profits or income out of which payments are to be made to them are pooled but only if the general purpose of the scheme is commercial and not for investment purposes;

- a CIS which the MFSA is satisfied is essentially private in nature and purpose; and

- a scheme approved by the MFSA and operated by a company for its own employees, former employees and their dependants, or for employees, former employees and/or their dependants of companies in the same group, in instruments issued by a company/companies within that group.

The Players

The Promoters of a CIS need to appoint a Fund Manager and a Custodian (or trustee). The Fund Manager of a CIS and the Custodian must be independent of each other and act independently and solely in the interests of the investors. Any replacement of the Fund Manager or Custodian must be approved by the MFSA. The Manager usually also takes over the function of Registrar of participants in the scheme. It is not uncommon for the Manager to employ a specialist Investment Advisor.

However it is also possible for a CIS not to delegate the power of discretionary management to the Manager but instead retain the power to make investment decisions itself. In such a case the regulators would require the scheme's officers to be suitably qualified and experienced.

Fund Manager

Every licensed CIS must employ the services of an external Fund Manager, unless, in certain circumstances and with the approval of the MFSA, it is constituted as a company with its own management and, therefore, specifically exempted from this requirement.

The Fund Manager must, generally, be set up under the Laws of Malta as an investment services company having an established place of business in Malta and sufficient financial resources to conduct its business and meet its liabilities.

A Fund Manager must be licensed under the ISA enabling it to provide management, administration, safekeeping or investment advice to a CIS. The two local fund managers are Valletta Fund Management Limited (a subsidiary of Bank of Valletta p.l.c.) and HSBC Fund Management Limited (formerly Tri-Med Fund Management Limited).

However, the MFSA has the authority, in appropriate circumstances, to exempt an overseas Fund Manager of sufficient standing and repute from certain of the formalities associated with the licensing. The extent of exemption will mainly depend upon the level of regulation that is exercised in the primary jurisdiction.


A CIS must also engage the services of an external Custodian which, generally speaking, must have an established place of business in Malta. Alternative custodianship arrangements may be approved by the MFSA where these provide adequate protection for investors and the scheme's assets.

The following entities are eligible to act as Custodian:
- any bank licensed under the Banking Act of Malta that meets certain minimum Financial Resources Requirements; or
- any other institution approved by the MFSA.

Both HSBC Bank plc and Bank of Valletta plc are licensed custodians for CISs.

Application Process with the MFSA

A CIS, whether local or based abroad, or each sub-fund in the case of an umbrella fund, seeking a listing - whether Primary or Secondary - on the Malta Stock Exchange must be licensed under the ISA before it can be listed. A Primary listing is appropriate where the CIS is not already listed elsewhere whereas a Secondary listing refers to a situation where a CIS is already listed elsewhere.

The application requirements and the ongoing requirements to which such licences are subject are summarised below. There are three phases - as follows:-

1. At the outset, it is recommended that the promoters meet with the MFSA to outline their proposal. If a meeting is not possible, the promoters may write with the appropriate information.

2. The next stage is that the promoters submit a draft CIS Licence Application Form(s), together with supporting documents as specified in the Application Form itself. A sample copy of the Application Form is set out in Schedule E of the Guidelines. The supporting documentation to be submitted with the Application Form is listed in Appendix A.
- A Prospectus
- Constitutional Documents (e.g. Memorandum & Articles of the SICAV)
- In the case of a new locally based scheme, a three year business plan
- Details of the marketing plan for units of the scheme
- In the case of overseas based Schemes, copies of the most recent audited annual report and interim report (if any) of the Scheme
- A copy of the Agreement between the Scheme and its Manager, Advisor (if any), Custodian/Trustee and (in the case of locally based schemes) the Registrar
- Copies of the most recent audited financial statements for the Manager, Advisor, Custodian/Trustee and (for locally based Schemes), the Registrar

In the case of locally based schemes, an Individual Questionnaire (Schedule D to the Guidelines) is also required in respect of each Director (in the case of a corporate scheme) or otherwise in respect of each senior officer involved in the operation of the Scheme. In the case of overseas based schemes, Individual Questionnaires will not be required. However a brief CV should instead be submitted in respect of the persons referred to above.

The Application fee, which is not refundable, is due at this stage (see below).

In the case of an overseas umbrella fund, only those sub-funds seeking a listing require a Collective Investment Scheme Licence from the MFSA. (Application Forms are only required in respect of those sub-funds seeking a listing, rather than in respect of all the sub funds constituting the umbrella fund.)

Relevant documentation as specified in the Guidelines should be attached to the Application.

All material submitted should be in English, or if in another language, should be accompanied by an English translation.

3. The draft Application form(s) is reviewed and comments provided to the Applicant who is invited to revert with his own comments. The MFSA may ask for more information and may make such further enquiries as it considers necessary.

"Fit and proper" checks begin at this stage. This entails following up all the information which has been provided in the Application documents submitted. Where applicable, this includes contacting regulators abroad.

4. In the meantime, the MFSA will also review the supporting documentation (see 2 above) submitted with the draft application and will provide comments, where appropriate.

Where an overseas based scheme is to be promoted to the public in Malta, a local Agent licensed to provide investment services by MFSA, must be appointed in terms of SLC 9.12 of the Investment Services Guidelines. The Agent will act as MFSA's and investors' local point of contact, and will be required to submit any promotional material distributed locally, including the scheme's Prospectus, to the MFSA for its approval.

The Prospectus of an overseas based scheme promoted in Malta, which has to be registered with the Registry of Companies at MFSA, must include certain details specifically relevant to local investors. The required details such as listing information on the Malta Stock Exchange, taxation provisions, exchange control requirements, details of the local appointed agent etc., can be provided by means of a supplement or addendum to the Prospectus. The supplement/addendum should be prepared at this stage.

5. In the case of an overseas based scheme which is already supervised by a primary regulator (i.e. the home regulator) who is deemed to be competent and reliable, the MFSA adopts a less intrusive stance.

Every licence is issued subject to SLCs. With the Manager's/Agent's assistance, a review of the SLCs is carried out with the objective of identifying those that could be disapplied or amended. This approach avoids the possibility of duplicating a requirement already imposed by the primary regulator and also identifies any supplementary conditions which may need to be applied. The objective is to draft SLCs tailored to reflect the Application concerned, and which will then be tabled for discussion and agreement. These licence conditions are very important since they represent the ongoing requirements to which the Applicant will be subject, once licensed.

6. In the case of a new locally based Scheme, the MFSA will consider the nature of the proposed Scheme and the kind of investors to whom it is to be marketed. It will also look at the experience and track records of all parties associated with the scheme. The SLCs in the Guidelines will form the basis for discussions with the MFSA. The Guidelines are modelled on UK standards, especially the Core Conduct of Business Rules issued by the Securities and Investment Board (the predecessor of the UK Financial Services Authority) and the Code of Conduct of the Investment Management Regulatory Organisation (IMRO).

The MFSA may permit some derogation from the standard requirements where the Scheme is not to be marketed to the public, or where the circumstances justify such treatment, as long as there is adequate protection of investors. The applicant will have the opportunity to consider the conditions before the licence is granted. Particular conditions apply to licences granted to specialist funds, such as venture capital or futures and options funds.

7. Once the review of the Application documents has been completed and the draft licence conditions have been agreed, signed copies of the Application form(s) and the supporting documents in their final format will be required.

8. Once the Application is received in its final format, an estimate can be carried out of how long it will take the process to reach completion. Every effort is carried out to accommodate the promoters' time frame.

9. The Executive Committee of the MFSA is responsible for deciding whether or not to grant a licence. A licence fee becomes payable upon the issue of a licence - and annually thereafter.

Listing on the Malta Stock Exchange

The application procedure and Listing Requirements involve the following steps:
- appointing a member of the MSE to act as sponsoring stockbroker;
- appointing a Fund Manager and a Custodian (or Trustee) acceptable to the MSE;
- having a minimum net asset value (NAV) of 0.5 million Malta liri (or the equivalent in any foreign convertible currency);
- appointing an independent auditor acceptable to the MSE and submitting the relevant audited financial statements;
- having operators with adequate financial expertise; and
- maintaining a sound investment policy.

The CIS seeking a listing must be established in conformity with all applicable legislation in the jurisdiction of incorporation. Shares must be freely transferable.

The number of directors must be not less than 3, none of which may be corporate directors.

Copies of the directors' service contracts must be made available to the general public for inspection at the time of the Annual General Meeting of the CIS.

The directors of the CIS are to accept full responsibility for the contents of the Listing Document and are to acknowledge in writing to the MSE that they accept full responsibility for the CIS's compliance with all Exchange requirements and continuing obligations.

The CIS's investment policy must provide for an adequate spread of risk and should be clearly defined.

Unless a CIS's Fund Manager or Custodian perform these functions, a CIS should appoint a Registrar and a Paying Agent.

In the case of overseas CISs which are already in existence, their Annual Report and Audited Accounts must be prepared in accordance with International Accounting Standards and independently audited and reported on in accordance with International Accounting Standards on Auditing.

An overseas CIS that advertises or carries out any promotional activity in Malta must appoint an authorized agent licensed by the MFSA in terms of the ISA.

The Listing Document (or prospectus) must contain, inter alia, all the information required by the MFSA to be contained in an Offering Document (or prospectus) in respect of a CIS together with any other information that may be required by the exchange.

The Listing Document must also specify the name of the stock exchange on which the Primary Listing is or is to be together with particulars of any other stock exchange on which any of the shares are listed or dealt in.

The Listing Document must be accompanied by a letter signed by every director of the CIS confirming that it includes all such information within their knowledge that investors and their professional advisors ought to know.

In the case of an overseas CIS seeking a Secondary Listing, the MSE may authorize the omission of any information otherwise required to be included in the Listing Document.

No material amendment to the final proof Listing Document will be allowed without the consent of the MSE.

Primary Listing

An application for a Primary Listing must be done on the appropriate application form to which must be attached the following documentation:
- 2 copies of the Listing Document marked in the margin to indicate where the relevant requirements of the Exchange have been met;
- a certified copy of the Memorandum and Articles of Association or other document constituting the CIS;
- in the case of a CIS which is already in existence, 2 copies of the Annual Report and Accounts for each of the 5 consecutive years immediately preceding the date of the Listing Document or, if less, each of the consecutive years since the CIS was formed;
- 2 copies of the Annual Report and Accounts for each of the Management company, Custodian and Investment Advisor for the last 3 financial years;
- 2 copies of the application form to subscribe or purchase the shares of the CIS for which the listing is being sought;
- 2 copies of the Individual Questionnaire and the Application for a CIS license submitted to the MFSA when the CIS license was applied for;
- copies of all letters and documents submitted to the MFSA in support of or in connection with the CIS license;
- copies of the Management Agreement and any other contracts requested by the MFSA together with a list of waivers, if any, granted by the MFSA;
- a letter from the MFSA confirming that the CIS possesses a valid CIS license;
- a copy of the advertisement proposed to be issued in connection with the proposed listing or issue of shares in the CIS together with a letter from the MFSA confirming that it has approved the advertisement;
- a certified copy of the resolutions of the Board of Directors or other governing body of the CIS, of the Management company, of the Custodian and, where applicable, of the Investment Advisor, authorizing: (i) the application for listing; (ii) the signing of the Listing Agreement; and (iii) the issue of the Listing Document;
- a copy of the Listing Agreement in the form prescribed and set out by the Exchange whereby the signatories undertake to comply with the continuing obligations of the Exchange after the listing has been obtained. Specific exemptions from some of these continuing obligations may be obtained by overseas CISs seeking a Primary Listing on the Exchange; and
- the Exchange may, at its absolute discretion, exempt an overseas CIS seeking a Secondary Listing from any or all of the continuing obligations and to request, instead, a certificate of compliance issued by the overseas stock exchange where the CIS has a Primary Listing.

Secondary Listing

For those companies already listed outside Malta, the procedure for seeking a Secondary Listing on the MSE is rather straight-forward and the required documentation has been kept to a minimum:
- the applicant proves that it holds a Primary Listing on an exchange acceptable to the MSE;
- the CIS satisfies the MSE that it is suitable for listing;
- the CIS submits a certificate of compliance from the exchange where it has a Primary Listing; and
- the CIS submits any documentation previously filed with the exchange where it has a Primary Listing.

Once listed, the continuing obligations for secondary listings are, essentially, limited to ensuring that future disclosures to the exchange regulating the Primary Listing are simultaneously submitted to the MSE.

Marketing the Fund

All advertisements and other documentation which is made available to the public must obtain the prior approval of the MFSA in terms of Section 11 of the Investment Services Act.

Once documentation is approved, simply making it available to the public or verbally transmitting information contained therein, does not require a separate licence. Nevertheless it is highly improbable that a fund is marketed in such a manner.

Promoting the fund to the public, which as a minimum also includes arranging for prospective investors to invest in the CIS, requires a separate licence under the Investment Services Act. Stockbrokers can exercise this function without need of a separate licence in virtue of an exemption in Section 3(d) of Legal Notice 6 of 1995 as amended by Legal Notice 95 of 1995. The major local banks are suitably licenced to sell funds to the public.


A CIS is required to submit monthly returns and semi-annual and annual audited reports to the MFSA. The annual report must include a report by the Custodian which must state, inter alia, whether in its opinion, the CIS has been managed:
- in accordance with the limitations on investment and borrowing powers imposed by the constitutional documents and the MFSA; and
- otherwise, in accordance with the provisions of the constitutional documents and license conditions.

Local agents appointed by CISs based overseas are required to submit an annual report confirming adherence by the CIS to its license conditions.


A CIS is required to provide a Prospectus to its investors free of charge. MFSA approval is required before publication of the Prospectus and before any amendments may be made to it. A Prospectus must contain sufficient information for investors to make an informed decision about the proposed investment and, accordingly, must, inter alia, contain a description of the CIS's investment objectives and criteria along with sufficient disclosure to inform investors of the risks associated with their proposed investment.

Investment Restrictions

Appendix B lists the standard investment restrictions to which a CIS is subject. Additional restrictions may be imposed by the MFSA or by the CIS in its prospectus.


For the CIS (excluding sub-funds), the Application Fee is Lm650 while the Annual Fee is Lm700. For each sub-fund of the scheme there is:
- an Application Fee of Lm125 and an Annual Fee of Lm125 (for each of the first fifteen sub-funds)
- if the scheme has Sixteen sub-funds and over there is an Application Fee of Lm75 and an Annual Fee of Lm75.

Registrar of Companies - Registration Fees

The fees payable by a company to the Registrar of Companies upon registration are calculated according to the company's authorised share capital as follows:
- Up to Lm2,000 - Lm100
- Over Lm2,000 but not exceeding Lm5,000 - Lm100 plus Lm6 for each Lm1,000 or part thereof in excess of Lm2,000
- Over Lm5,000 but not exceeding Lm100,000 - Lm118 plus Lm1 for each Lm1,000 or part thereof in excess of Lm5,000
- Over Lm100,000 - Lm213 plus 40 cents for every Lm1000 or part thereof exceeding Lm100,000; provided that a maximum fee does not exceed Lm573.

MSE - CIS Listing Fees

The MSE charges an Initial Fee of Lm500 plus an Annual Listing Fee of Lm500 payable in advance within one month of the Scheme obtaining a listing and subsequently within one month of the anniversary of listing.

Where the Scheme lists Multiple Classes of Securities, the Annual Fees are:
- Lm500 per class on the first 5 Classes,
- Lm400 per Class for the 6th to the 10th Class,
- Lm300 per Class for the 11th to the 15th Class and
- Lm200 per Class for any other Class in excess of the 15th Class.

If the Collective Investment Scheme has a primary listing on an overseas exchange, the annual and initial fees due to the Exchange will be equivalent to 50% of the standard rate.


Licensed CISs may choose between 2 alternative fiscal regimes, namely:

1. CIS Exempt from Income Tax

A licenced CIS may choose to be exempt from income tax in Malta but, in that case, they cannot avail themselves of Malta's vast network of Double Taxation Treaties. However the exemption does not apply in the case of investment income of a Prescribed Fund. Prescribed Funds are those which have at least 85% of their assets situated in Malta. A withholding tax is imposed on all income derived by these Funds at the following rates:
- 15% on all bank interest
- 10% on all other investment income.

2. CIS paying 25% Income Tax

CISs set up as SICAVs (but not as unit trusts or partnerships), may elect to be liable to income tax at the favourable rate of 25% (as opposed to the standard corporate tax rate of 35%) and benefit from Malta's Double Taxation Treaties. For obvious reasons, this fiscal regime is more suitable for CISs that intend investing internationally.

It should be pointed out that non-resident shareholders (i.e. investors) in a SICAV are entitled to a two-thirds (2/3) refund of the Malta tax paid by the SICAV upon receipt of a dividend paid out of the foreign source profits of the SICAV. The refund may even be of 100% in the case of a 'qualifying participation'.

In the following example it is being presumed that the CIS has elected to be liable to tax at 25% and that it is eligible for the Flat-Rate Foreign Tax Credit (FRFTC):

CIS's point of view
Net foreign income received in Malta 100
Add FRFTC @ 25% 125
Chargeable income in Malta grossed up 125
Malta CIS tax @ 25% 31
Less FRFTC 25
Malta tax due 6
Distributable profits to non-resident shareholder 94

Non-Resident Investor's point of view
Distributable dividend to non-resident 94
2/3rds refund of Malta tax (i.e. 2/3rds of 6) 4
Dividend received by non-resident shareholder 98
Total tax suffered in Malta 2
Net effective rate of tax on net foreign income 2%

Although the above calculation presumes that the FRFTC credit would apply, this is not necessarily so. In fact, which of the various types of relief is available depends on the location of the source country and the evidence provided to the Maltese Revenue Authorities.

Dividends paid by a CIS to a Maltese resident out of profits allocated to either the Foreign Income Account or the Untaxed Account are subject to a final withholding tax of 15% on the net amount of the dividend.

Capital Gains

A capital gain made by a non-resident upon the disposal of his shares in a CIS is not liable to tax.

A capital gain made by a Maltese resident upon the disposal of shares in a CIS quoted on the Malta Stock Exchange are also exempt from tax, except in the case of a CIS which is a Non-Prescribed Fund. A Non-Prescribed Fund is one which invests more than 15% of its assets in foreign securities. In such a case a final withholding tax on capital gains of 15% is charged on any gains realised on redemption, or switching of investments. The capital gain will be calculated as follows: Proceeds of Disposal, less Cost of Acquisition. On the occasion of the first disposal of shares after 28th February 2001, shares held by the investor on that date shall be deemed to have been acquired at the price of the shares as last quoted on the Malta Stock Exchange prior to the 1st March 2001. Where an investor invests more than once in a Fund, the calculation of the withholding tax on capital gains shall be based on the average cost of the acquisition of these shares. Capital gains realised by non residents (who are covered by the exemption provided in section 12(1) (c) (ii) of the Income Tax Act) on the transfers (including redemptions) of Shares in the Company, are exempt from tax in Malta, even if the fund is not listed on the Malta Stock Exchange.

Other Fiscal Benefits

In addition, the following attractive features should also be highlighted:
- if listed on the MSE, no stamp duty is payable on share issues or transfers;
- no tax on the Net Asset Value of a CIS; and
- no withholding tax on dividends paid to non-residents.
- The fund is exempt from exchange control (although investors therein are subject to the personal investment allowance, currently Lm30,000 per annum).


List of documents that need to be submitted with the CIS license application:

- the constitutional documents of the CIS (e.g. Memorandum and Articles of Association of a SICAV)
- any other documents affecting the rights of participants in the scheme;
- the latest annual report and any interim reports, if available;
- a prospectus;
- the rules of the scheme;
- a business plan covering, at least, the first 3 years of operations in the case of a scheme that has not been in existence for, at least, 3 years;
- if the scheme has been in existence for 3 or more years, further information about past and current operations of the scheme will also be required;
- copies of the fund management agreement, custodian agreement and other relevant agreements;
- individual questionnaires in respect of each director or other senior officers involved in the operation of the scheme are required in the case of locally based schemes. In the case of overseas based schemes, a brief CV should, instead, be submitted in respect of the persons referred to above;
- copies of the audited accounts for the Fund Manager, Custodian, Advisor and Registrar; and
- details regarding the marketing and distribution of the units/shares.


The Investment Services Guidelines include the following restrictions on the investment and borrowing powers of a CIS:

- no more than 10% of assets may be invested in securities which are not traded on a liquid and highly regulated market;
- no more than 10% of assets may be invested in securities of any one issuer;
- no more than 10% of assets should be on deposit with any one entity (or no more than 30% with a bank licensed in Malta or approved by the MFSA);
- a scheme should not hold more than 10% of any class of security issued by a single issuer;
- a scheme and its manager should not control more than 20% of the share capital or votes of a company, or sufficient instruments to exercise significant influence over an issuer;
- with MFSA approval, a scheme may invest up to 100% of its assets in securities issued by one state or government;
- with respect to shares of other investment companies, (i) no more than 20% of assets should be invested in such other schemes, (ii) if assets are invested in another scheme with the same manager, the manager should waive any fee it is entitled to charge for its own account and (iii) where the manager receives a commission because of an investment in another scheme, the commission should be paid into assets of the scheme;
- schemes may employ techniques and use instruments for efficient portfolio management or to provide protection against exchange rate and other risks subject to MFSA conditions and limitations;
- schemes may not be leveraged or geared through the use of futures, options or other derivatives;
- a scheme may invest in nil paid or partly paid shares and subscribe for placements or underwriting as long as the amount due to be paid does not exceed 5% of assets;
- a scheme may borrow up to 10% of net assets; and
- particular conditions apply to special types of funds such as venture capital funds, money market funds, real property funds, futures and option funds, umbrella funds, master-feeder funds and closed-end funds.

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