According to the researched published this week, Malta is one of the only EU member states that are fully compliant with the EU rules on hedge funds. Malta complied with the rules in time along with the 11 other countries; Austria, Croatia, Cyprus, Denmark, Germany, Ireland, Latvia, Luxembourg, the Netherlands, Sweden and the UK. The Alternative Investment Fund Managers Directive (AIFMD), was first drafted in 2009 and aims to create a single regulatory framework for the hedge funds, private equity funds, investment trusts and other such funds that fall under its regulations.
It introduces various requirements such as reporting, disclosure and risk management limits to ensure financial stability is protected in a more prudent way than it previously was pre-crisis. The rules also apply to non-EU managers that are operating or are seeking to operate within the EU. The main risk for the remaining 16 EU states that failed to meet the AIFMD deadline is the damage to their states’ own alternative fund industries. Speculation is increasing that fund companies in the non-compliant states may have to halt their alternative fund sales to certain countries as the system of “passporting” under the AIFMD will be unavailable to them.
This area of hedge funds and, also passporting, play a vital role in Malta’s success in the financial services industry and is a major enticement for fund managers seeking to license their activities in Malta. A survey of 220 hedge fund managers which was conducted July by Preqin research group, showed that just 22 per cent of fund managers were compliant with many of non-compliant managers still waiting for guidance from their local authorities. The report has highlighted Belgium, Finland, Spain and France as key states that missed the deadline and Belgium, Finland and Spain have only published draft regulation so far. All the countries that have failed to comply with the AIFMD could be subject to face sanction by the European Court of Justice as early as this year.