Investment funds and investment services are regulated by the Investment Services Act (ISA). A fundamental part of the ISA is provided in terms of the Schedules to Act relating to those activities that are considered investment services and those instruments considered as investment instruments giving rise to the application of the ISA to each situation. Those persons that are providing investment services in relation to instruments require a licence in terms the Investment Services Act.
While the ISA provides the regulatory framework while subsidiary legislation and standard licence conditions provide detailed rules applicable to different categories of licences. The Standard Licence Conditions provide for four categories of investment services licences:
Category 1a – Licence Holders authorised to receive and transmit orders in relation to one or more instruments and/or provide investment advice and/or place instruments without a firm commitment basis but not to hold or control Clients’ Money or Customers’ Assets. (This Category does not include managers of Collective Investment Schemes.)
Category 1b – Licence Holders authorised to receive and transmit orders and/or provide investment advice in relation to one or more instruments and/or place instruments without a firm commitment basis solely for professional clients and/or eligible counterparties but not to hold or control Clients’ Money or Customers’ Assets. (This Category does not include managers of Collective Investment Schemes.)
Category 2 – Licence Holders authorised to provide any Investment Service and to hold or control Clients’ Money or Customers’ assets (including investment managers and fund managers), but not to operate a multilateral trading facility or deal for their own account or underwrite or place instruments on a firm commitment basis.
Category 3 – Licence Holders authorised to provide any investment service and to hold and control Clients’ Money or Customers’ Assets
Category 4a – Licence Holders authorised to act as trustees or custodians of Collective Investment Schemes.
Category 4b - Licence holders authorised to act as custodians to the following:
- Alternative Investment Funds marketed in Malta in terms of regulation 7 of the Investment Services Act (Alternative Investment Fund Manager) (Third Country) Regulations; or
- Alternative Investment Funds which have no redemption rights exercisable during the five year period from the date of initial investment and which generally do not invest in assets that must be held in custody in terms of the Investment Services Rules.