The MFSA Asset Management Strategy – Boosting a Key Sector

In Q4 2021, the MFSA published the Asset Management Strategy Discussion Paper – a consultation document seeking stakeholders’ feedback on various initiatives aimed at boosting this important sector.

The need for a specific strategy addressing the asset management sector became evident as a result of several recent economic, market, and regulatory developments. In the past two to three years, these have negatively impacted both the continued operations of a number of existing funds and managers domiciled in Malta, as well as the further growth of additional fund vehicles and asset managers, thereby impinging on the strong position that Malta had built in this sector.

Results from a statistical analysis carried out with regards to a degree of attrition in the growth of locally domiciled asset managers and funds have substantiated further the need for the MFSA to put strategic focus on this sector and to develop a valid plan to address the deficiencies identified.

In formulating the draft Strategy, the Authority engaged directly with senior executive stakeholders from the industry. These included FinanceMalta, consultancy firms,  fund managers and funds and selected individual stakeholders having involvements in local funds whose experience and knowledge of the dynamics of this sector in Malta proved a valuable contribution. This engagement had two main aims: on one hand it was aimed at understanding the critical issues encountered by practitioners in their ongoing relationship with the different regulatory frameworks and with the Authority; on the other, it explored new strategic initiatives, from a regulatory and policy development perspective, that may be adopted by the MFSA.

Taking into account the above engagements, the draft Asset Management Strategy was developed and issued for consultation, seeking interested parties’ feedback on the various initiatives aimed at addressing the criticalities that this sector is facing. While a number of policy initiatives have already been launched, the respective workstreams shall be further boosted by feedback obtained following the publication of this Consultation Document.

The proposed initiatives forming part of the Asset Management Strategy have been classified into four main Strategic Pillars:

• Pillar I deals with initiatives relating to the restructuring and enhancements of the MFSA’s Supervisory Lifecycle processes;
• Pillar II addresses initiatives targeting fund managers and funds, aimed at either enhancing or restructuring existing frameworks, in order to make such frameworks more pragmatic and accessible to the industry;
• Pillar III proposes new regulatory frameworks that may further facilitate the carrying out of asset management activity, also seeking to facilitate the scaling up of FinTech across this industry; and
• Pillar IV sets out the MFSA’s collaboration and outreach efforts at a national level seeking to position Malta as an asset management jurisdiction. This Pillar also entails the continued, active participation of the MFSA in the wider European framework to effectively influence and contribute to policy developments impacting industry players operating in this sector. Furthermore, as part of this Pillar, there is also greater focus on the regulatory dialogue element with other jurisdictions, mainly aimed at facilitating the conduct of international business by local market operators, particularly in non-EU jurisdictions.

With this Strategy, the MFSA not only intends to ensure continued stability and soundness of the sector through effective regulation, but also aims at facilitating business by means of streamlined, pragmatic and dynamic policymaking. The Strategy also encapsulates a holistic approach to asset management, ensuring a stronger business relationship with existing fund managers, as well as greater industry and regulatory outreach and collaboration with local key stakeholders and institutions.

The consultation is open to the public until 17 December 2021. Industry participants and interested parties are invited to send their responses via email to AssetManagementStrategy@mfsa.mt.

Source: Malta Financial Services Authority (MFSA)