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Alter Domus

MALTA NEWSLETTERJanuary 2018

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Alter Domus

MALTA

Alter Domus is a fully integrated Fund and Corporate services provider, dedicated to international private equity & infrastructure houses, real estate firms, multinationals, private clients and private debt managers. Our vertically integrated approach offers tailor-made administration solutions across the entire value chain of investment structures, from fund level down to local Special Purpose Vehicles.

Disclaimer: Please note that this Update is not intended as a complete study on all applicable legislation nor has it been written with a view to providing legal advice on any matter. Edited January 2018

Founded in Luxembourg in 2003, Alter Domus has continually expanded its global service offer and today counts 33 offices and desks across five continents. This international network enables clients to benefit globally from the expertise of more than 1,200 experienced professionals active in fund administration, corporate secretarial, accounting, consolidation, tax and legal compliance and debt administration services.

We are proud to serve 9 of the 10 largest private equity houses, 6 of the 10 largest real estate firms and 5 of the 10 largest private debt managers in the world.

Alter Domus Malta was established in 2010 and has over 130 employees, 300 clients and 500 structures under administration.

MALTA UPDATE

CREDITREFORM RATING HAS AFFIRMED MALTA’S LONG-TERM SOVEREIGN RATING AT A+......................................................................................04

MALTA TRANSPOSES FOURTH EU ANTI-MONEY LAUNDERING DIRECTIVE ........................................................................................04

DISCUSSION PAPER ON INITIAL COIN OFFERINGS, VIRTUAL CURRENCIES AND RELATED SERVICE PROVIDERS ....................................05

THE CONTRIBUTION OF THE FINANCIAL SERVICES SECTOR TO THE MALTESE ECONOMY ................................................................................05

ALTER DOMUS UPDATE

OPENING OF TWO OFFICES IN SPAIN ................................................................06

ACQUISITION OF CORTLAND CAPITAL MARKET SERVICES LLC ...........06

LAUNCH OF CO-SOURCING SERVICES .............................................................. 07

GENERAL TOPICS

LOCAL BUSINESS UPDATE ......................................................................................08

ORGANISATIONAL UPDATE ....................................................................................09

ALTER DOMUS IN THE MEDIA

CORPORATE SERVICES FOR INTERNATIONAL CLIENTS, AN EVOLVING SERVICE OFFERING ...................................................................... 10

ATTRACTING BUSINESS ............................................................................................. 10

OUTSOURCING CONSOLIDATION: THE KEY TO BETTER PERFORMANCE? ................................................................................. 10

CONTACT ......................................................................................................12

7,000STRUCTURES UNDERADMINISTRATION

1,200EMPLOYEESWORLDWIDE

160bnUSD ASSETS UNDERADMINISTRATION

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Alter Domus

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MALTA UPDATE

CREDITREFORM RATING HAS AFFIRMED MALTA’S LONG-TERM SOVEREIGN RATING AT A+

Creditreform Rating has also affirmed Malta’s ratings for foreign and local currency senior unsecured long-term debt of “A+”. The outlook is stable.

In explaining its decision, the credit rating agency noted very strong growth performance has supported further improving labour market conditions. Output growth is set to remain among the strongest in Europe in 2017-18. Creditreform noted that budget consolidation advanced in 2016 and is set to continue in the medium term, with budget targets being achieved in advance.

Underpinned by budgetary surpluses and robust growth prospects, Creditreform expects Malta to make further progress on debt reduction, with the government’s debt-to-GDP ratio falling close to 50% in 2018. Volatility in the current account balance and a high stock of external liabilities are balanced against a strong external asset position.

The agency notes that Malta’s “macroeconomic assessment balances brisk GDP growth, which supports income convergence towards EU-28 levels and employment growth, against some vulnerabilities arising from Malta’s growth model.”

Looking at the financial services sector in general, the agency regarded fiscal risks arising from Malta’s large banking sector as limited. The report describes the resilience of this sector is of paramount importance for the domestic economy. As illustrated by financial soundness indicators, CDB loans were sufficiently covered by deposits (loan-to-deposit ratio 56%). The capitalization of the sector improved in 2016, with the regulatory tier 1 capital rising from 12.2 to 13.4% of risk-weighted assets, while return on assets stood at 0.8%, up from 0.7% one year earlier. Last year’s improvement in profitability can be attributed to lower net impairment losses and an increase in non-interest income coupled with a drop in operating expenses. As a result, the overall NPL ratio of CDBs fell from 7.1 to 5.3%.

The report also notes that Maltese corporates also diversified their funding mix, making greater use of capital

market financing. The attractiveness of market funding has benefited from high liquidity in the Maltese household sector. To ease financing conditions, Malta is establishing the Malta Development Bank, which is expected to have an authorized capital of EUR 200m and to commence its operations by the end of 2017. What is more, Maltese corporates continue to repair their balance sheets, thus improving the shock-absorbing capacity of the Maltese corporate sector.

MALTA TRANSPOSES FOURTH EU ANTI-MONEY LAUNDERING DIRECTIVE

Malta has enacted legislation to fully transpose the Fourth Anti-Money Laundering Directive. This directive has been transposed into Maltese law by virtue of amendments to the Prevention of Money Laundering Act, the enactment of new regulations under said act, and through the publi-cation of various regulations intended to set up beneficial ownership registers for companies, trusts, associations, foundations and other legal entities.

The Fourth Anti-Money Laundering Directive revises and improves upon the Third Money Laundering Directive and incorporates the latest Financial Action Task Force Rec-ommendations in the field of anti-money laundering and counter-terrorist financing.

These legislative enactments will further strengthen the Maltese legal regime for combatting money laundering and funding of terrorism through a number of concrete measures.

The Prevention of Money Laundering Act will now provide for the setting up of a National Coordinating Committee composed of:• the Permanent Secretary of the Ministry for Home

Affairs and National Security,• the Permanent Secretary of the Ministry for Finance,• the Permanent Secretary of the Ministry For Justice,

Culture and Local Government,• the Governor of the Central Bank of Malta,• the Commissioner for Revenue, the Chairman of the

Malta Financial Services Authority,• the Chairperson of the Malta Gaming Authority, the

Commissioner of Police,• the Attorney General, the Chairman of the FIAU and

the Chairperson of the Asset Recovery Bureau.• the Chairperson of the committee shall be the

Permanent Secretary of the Ministry for Finance.

This committee will be coordinating the development of a national strategy to combat money laundering and the

funding of terrorism. The Act continues to enhance the Fi-nancial Intelligence Analysis Unit’s role in the fight against money laundering and the funding of terrorism, especially when it comes to cooperating and exchanging information with international counterparts and local authorities. Fur-thermore, it strengthens the FIAU’s abilities to supervise and sanction breaches of AML/CFT preventative meas-ures.

Another distinctive characteristic of this new set of rules is the greater emphasis placed on the risk-based approach to the implementation of preventative measures by finan-cial institutions, gaming companies, and other operators and professionals. This will provide a greater degree of flexibility for institutions and operators in a bid to ensure that the implementation of preventative measures is more effective, and that it is focused on areas that present high-er risks of money laundering and funding of terrorism. This will result in a more efficient deployment of resources.Regulations issued under the Companies Act, the Trusts and Trustees Act and the Civil Code will introduce stricter transparency requirements on companies, trusts, and oth-er legal entities and their ultimate beneficial owners. The Malta Financial Services Authority will subsequently be keeping a register of beneficial owners of companies and trusts which will be accessible to competent authorities, financial institutions and other operators when carrying out customer due diligence measures, as well as to other persons who are able to demonstrate a legitimate interest in accessing such information.

Finance Minister Edward Scicluna stated that “whilst the Fourth Anti-Money Laundering Directive goes a long way to address current needs, we are pleased to note that the Fifth Anti-Money Laundering Directive has obtained the needed agreement of the Parliament and the Council and now, member states will be given an eighteen month peri-od to transpose it.”

Alter Domus Malta will be discussing this directive further with their clients, more specifically on how it will be effect-ing them and what actions need to be taken to ensure full compliance with this new directive. Any clients, who would wish further details on this directive can contact their per-son of trust at Alter Domus Malta for more information.

DISCUSSION PAPER ON INITIAL COIN OFFERINGS, VIRTUAL CURRENCIES AND RELATED SERVICE PROVIDERS

The Malta Financial Services Authority (MFSA), has issued a Discussion Paper on Initial Coin Offerings, Virtual Currencies (VCs) and related Service Providers. The purpose of the Discussion Paper is to present to the

industry a proposed policy to be adopted by the MFSA for the regulation of the ICOs, VCs and service providers involved in ICO and/or other VC activity. This is in line with the government’s policy to develop the digital economy.

The aim of the MFSA’s proposal is to devise a policy framework that supports the innovation and new technologies for financial services in the area of VCs whilst ensuring effective investor protection, financial market integrity and financial stability.

The discussion paper was preceded by a period of consultation on a rulebook that the MFSA developed to regulate Professional Investor Funds (PIF), which have the investment in virtual currencies as their investment objective. This period of consultation ended on the 10th of November, 2017. In view of the risk associated with the investment model of collective investment schemes investing in virtual currencies, it has been decided that, for the time being, the legal structures for PIFs making such investments should be limited to SICAV and INVCO structures, which are required to have a board of directors responsible for the overall conduct of business of the collective investment scheme.

The rulebook published for consultation builds on the existing rules applicable to PIFs and adds further rules, which specifically aim to mitigate the potential risks of investing in virtual currencies. The main proposals introduced within this new rulebook aim at safeguarding the interest of investors and the integrity of the financial market in the context of virtual currencies. In this regard, the rulebook imposes specific requirements on the governing bodies of the collective investment schemes and, in certain instances, the collective investment schemes’ service providers, in relation to competence, risk warnings, quality assessment, risk management and valuation.

The MFSA is seeking feedback from the industry before proceeding with detailed proposals for a legal framework on ICOs, VCs and related service providers.

THE CONTRIBUTION OF THE FINANCIAL SERVICES SECTOR TO THE MALTESE ECONOMY

A recent study published by the MFSA presents an analysis of the economic contribution of the financial services sector. The study places a special emphasis on the direct, indirect and induced effects generated by the sector both at an aggregate as well as at a sub-sectoral level.


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The picture that emerges is that of a industry largely dominated by the activity of banks, investment funds and special purpose entities. In recent years, however, auxiliary services and pension and insurance activities appear to be outpacing the dominant activities in terms of growth.

The report also presents a review of the input and output structure of the sector. On the input side, the sector is highly dependent on imports, particularly from firms operating in the same sector.

In spite of the high import content, the analysis also shows the financial services industry as a major purchaser of domestic inputs for some sectors, accounting for example for 12.3% and 7.4% of the total domestic sales of security and office administration and legal and professional services respectively.

Legal and accounting activities; activities of head offices; management consultancy activities sectors, is the second highest ranked sector from which the financial services industry purchases inputs. At €195 million, it represents 4.2% of the total input purchases of the sector. Turning to output, foreign demand is found to be a main driver as most of the sector’s output is exported, with less than one fifth being purchased locally. Despite only a small proportion being purchased by domestic firms, output from the sector is still found to be a key input for certain sectors locally.

To allow for a more comprehensive estimate of the impact of the financial services industry, simple and total multipliers were calculated using the Leontief inverse matrix. These multipliers portray how an increase in final demand could potentially impact the economy, through direct, indirect and induced effects.

At a sub-sector level, findings suggest that the total effect of an increase in final demand appears to be greater for the insurance, pension funding activities and auxiliary financial services. At an aggregate level, the total multipliers obtained for the financial services industry are relatively lower in comparison with other dominant sectors in the economy. This is largely attributed to the high import content within the sector, which is affected by the activities of Special Purpose Entities (SPEs).

Furthermore, the calculation of total accounting multipliers, which implicitly also capture the size of the sector, put the total contribution of the sector amongst the highest in the Maltese economy. In fact, the sector as a whole has been estimated to account for a very significant 11.6% of total Gross Value Added (GVA) and 10.2% of employment.

ALTER DOMUS UPDATE

OPENING OF TWO OFFICES IN SPAIN

Alter Domus is very pleased to inform its clients that the company now has opened two new offices in Spain – one in Madrid and another in Barcelona. Spain becomes the 19th country where Alter Domus has established a presence with local offices. Spain is a key place to invest not only for its domestic market but also for the possibility of operating with third countries within Europe, Middle East and Africa (EMEA), due to its privileged geo-strategic position within the European Union.

Laurent Vanderweyen, Chief Executive Officer of Alter Domus, has shared the following thoughts with the press: “The opening of these new offices in Spain, in important financial capitals, will strengthen the company’s platform in Europe and is a result of our commitment to continually broaden our international presence, and bring our high quality services to every jurisdiction within our expanding reach. Having Spanish-based offices will offer significant opportunities for us to target inbound and outbound investments in the Spanish and European economies.”

Oscar Garcia, has been announced as the Country Executive of Spain, and he joined Alter Domus in November of 2017, to take on this new role and develop the Iberia Operations.

ACQUISITION OF CORTLAND CAPITAL MARKET SERVICES LLC

Alter Domus has announced the signing of an agreement to acquire Cortland Capital Market Services LLC, as part of the ongoing strategy to explore international expansion opportunities and to significantly leverage the Alter Domus operations in the US.

Cortland Capital Market Services LLC is a leading independent investment servicing company providing third-party fund administration and middle back-office outsourcing to financial institutions including alternative investment managers, real estate private equity firms and credit funds.

Headquartered in Chicago and with offices in New York, London, Los Angeles, Austin, Indianapolis, and China, Cortland is a leading independent investment servicing company providing third-party fund administration and

middle and back-office outsourcing to financial institutions, including alternative investment managers, real estate private equity firms and credit funds. It currently has over USD180bn of assets under administration. The firm was founded in 2008 by Doug Hart CEO, Tim Houghton, Lora Peloquin and Russ Goldenberg who are all former LaSalle Senior Executives and currently employs over 400 experienced professionals who are all expected to join Alter Domus as part of the acquisition.

Laurent Vanderweyen, Chief Executive Officer of Alter Domus said, “We are delighted to welcome the Cortland team to Alter Domus as a major step in our long-term strategy to develop the U.S. market as one of our key locations in offering vertically integrated services to our international client base. Cortland has an impressive track record of growth, a strong management team, and the same focus on quality and client service which has been at the core of Alter Domus’ own success over the years. Furthermore, this acquisition complements perfectly our recent acquisition of CARTA Fund Services in February 2017. Our combined services offerings will provide our clients and prospects with seamless access to Alter Domus’ global reach of offices and service lines for all of their U.S. and international needs.”

Doug Hart, Chief Executive Officer of Cortland added, “This is a very compelling transaction for Cortland, its employees and its customers. Alter Domus has established itself as one of Europe’s premier fund administration and corporate services companies, and the firm’s service offerings and geographic footprint in Europe and Asia serve as an excellent complement to Cortland’s capabilities and client base. Becoming part of the Alter Domus Group gives us the ideal platform to expand our real estate and private credit service offerings and accelerate the expansion of our market leading loan services solutions deep into Europe and Asia Pacific. With the combination of these two companies, the Cortland team and I look forward to working alongside Laurent and the Alter Domus team to create the global leader in alternative investment servicing.”

Doug will become ‘Regional Executive North America and Country Executive US’ on completion of the transaction.

The transaction is subject to certain regulatory approvals and other customary closing conditions.

LAUNCH OF CO-SOURCING SERVICES

Alter Domus has extended its service offering through the launch of the co-sourcing services, which provide clients and prospective clients with a range of in-house flexible and extremely competent individuals and teams to their specific resource requirements with the ability to also scale up and down accordingly.

Organisations today often face pressures around having adequate resources to manage situations as peak periods, specific projects, employees on maternity leave, long term sickness or in case of departure during business growth. These challenges are often unforeseen and can leave an organisation with an immediate critical resource problem.

The Alter Domus Co-Sourcing solution will ensure that the Alter Domus specialists provided will bring with them their expertise from the full range of corporate and fund services. These include; Accounting, Corporate Secrecy, Consolidation, Legal etc.

Clients opting for this service can expect:

• Risk Mitigation – By knowing that they are working with a successful and trustworthy service provider

• High Level of Quality – As the employee will continue to be supervised by Alter Domus

• An Extension of your Team – The employee will work at your offices alongside your team

• Confidentiality – Guaranteed that client’s information will be valued and protected

• Efficiency – Strict deadlines and requirements will be met

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GENERAL TOPICS

LOCAL BUSINESS UPDATEMALTA ASSET MANAGEMENT FORUMAlter Domus Malta in collaboration with Deloitte Malta and Ganado Advocates, has organised for the 3rd consecutive year the Malta Asset Management Forum on the 2nd of November. The Aim of the Forum, held at the Hilton Hotel in St Julians, was to give industry players the opportunity to explore legal and regulatory developments affecting the operations of fund managers. A number of practical issues were discussed, including the valuation of assets, compliance with reporting requirements and the supervision of asset managers, and other matters which are at the core of the operations of fund managers.

The Forum mainly included panel discussions as this enabled the attendees to actively participate in the discussion by also sharing any concerns being currently faced by asset managers in the current regulatory environment. It was quite a successful Forum as indicated both by the presence of 100 plus participants and also from the positive feedback provided through the post-event questionnaires.

Chris Casapinta, Country Executive Malta, moderated one of the panels entitled “Fintech: Will it reshape the Financial Services sector?” The panellists included Joe Cuschieri (Malta Gaming Authority), Leonard Bonello (Ganado Advocates) and Claudine Cassar (Deloitte Malta).

PARTICIPATION IN A FINANCE MALTA EVENT IN ZURICH On the 30th of November, Chris Casapinta, Country Executive Malta, joined a delegation from Malta who participated in an event sponsored by Finance Malta in Zurich. This event was entitled “Structuring Solutions for the European and UK Marketplace” and it was organised by ClearView Financial Media. Chris participated in a panel discussion entitled “Private Wealth Structures”. This panel was moderated by Tom Burroughes (ClearView Financial Media), and the other panellists were Francis J Vassallo (Francis J Vassallo & Associates Ltd) and Sandra Louw (Trident Corporate Services AG).

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PARTICIPATION IN A FINANCE MALTA EVENT IN LONDON On the 5th of November, Przemyslaw Koger (PK), Director & Head of Relationship Management Malta, joined a delegation from Malta who participated in an event sponsored by Finance Malta in London. This event was entitled “ClearView Family Wealth’s 5th European Forum” and it was organised by ClearView Financial Media. PK participated in a panel discussion entitled “Asset Allocation & Investment Strategies”. This panel was moderated by Tushar Patel (Dhandsa Investments Family Office), and the other panellists were Fred Fruitman (Loeb Holding Corporation), Ben Hakham (Albatroz Management), Alexandra E Caminer (JAG Gapital Group) and Hans van der Loo (Advisory Council of IIER).

ORGANISATIONAL UPDATEMARIESTELL DALLI AWARDED THE 2017 LINO BUTTIGIEG PRIZEMariestell Dalli, Corporate Services Manager Malta, was awarded the 2017 Lino Buttigieg prize by the Institute of Financial Services practitioners (IFSP) for being the student who got the highest grades in the IFSP Foundation Certificate in Trusts Law and Management exam.

PARTICIPATION IN THE KPMG BIENNIAL CONFERENCE On the 9th of November, Chris Casapinta, Country Executive Malta, was invited to join a panel discussion entitled “Financial technology as a tool for growth within investment services”. The panel was moderated by Claire Tanti (KPMG), Antonio Giannino (Amagis Capital), Andrew Zarb Mizzi (Swissquote Financial Services) and Andrew J Zammit (GVZH Advocates).

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STRATEGY WEEKEND FOR THE SENIOR MANAGEMENT TEAM2017 was another year of growth for Alter Domus Malta, and it was a year where the Senior Management Team was extended, strengthened and consolidated through promotions and recruitment. Being the backbone of the Malta organisation, a strategy weekend for senior managers was held between the 1st and the 3rd of December, where the objective of this weekend was to plan, discuss and agree on the strategic direction that Alter Domus Malta would take starting from 2018 but with a view of the years to come as well. Having reached a certain level both in terms of organisational size and in terms of the business size, this strategic weekend was deemed to be detrimental for the continued growth and success of the Malta organisation. The general feedback from the senior managers was in fact very positive, with all agreeing that the strategy weekend had served to strengthen the team dynamics, give clarity and also a clear sense of direction.

CORPORATE SOCIAL INTIATIVES DURING THE FESTIVE SEASONDecember is the month for giving, and as part of the Corporate Social Responsibility Programme, employees voluntary participated in a Secret Santa initiative. Gifts were bought by employees for those less fortunate children residing at Dar L-Appogg, Mount Carmel’s YPU and the Richmond Foundation Kids Centre. The gifts where presented to these children together with various food and drink supplies donated to be used during the children’s Christmas party.

Alter Domus also presented a donation to the Malta Community Chest Fund (MCCF) as part of the funds collection initiative organised annually during the festive season, ‘L-Istrina’. The aim of the MCCF is to support individuals and entities to improve their health, quality of life and the well-being of people in their time of need.

Another donation was also presented to L-Ghabex Emergency Shelter, whose mission is to provide a safe environment to women and their children suffering violence in family and intimate relationships as well as women victims of Human Trafficking.

ALTER DOMUS IN THE MEDIA

CORPORATE SERVICES FOR INTERNATIONAL CLIENTS AN EVOLVING SERVICE OFFERINGAndrea Debattista, Corporate Services Manager, penned an article that was published on the autumn issue of the Accountant. Andrea discussed how corporate services have evolved throughout the years and has identified the main reasons that lead to this evolution of corporate services, which are; Changes in fiscal and regulatory framework, Changes in business strategy and Advances in technology. Andrea concluded the article by emphasising the importance of tailoring the service provision to the clients’ needs and to ensure that quality is crucial in the service provided.

ATTRACTING BUSINESSPrzemyslaw Koger (PK), Director and Head of Relationship Management Malta, was interviewed by a journalist on his recent move from the UK to Malta, and on whether the Alter Domus approach changes from one country to another. Topics also discussed in this interview include the potential of Malta’s Financial Services Industry and whether this sector can grow further by attracting business from the UK due to Brexit. The interview then moved on to discuss how Alter Domus is seen as a key player in the local Financial Services Sector. The interview was published in the Sunday Times of Malta.

OUTSOURCING CONSOLIDATION: THE KEY TO BETTER PERFORMANCE?Mariestell Dalli, Corporate Services Manager Malta, penned an article that was published in the Finance Malta Newsletter, December issue. Mariestell discussed the reasons which companies should consider when deciding whether to outsource consolidation services, with the main reason being the increased reporting requirements. She gave some advice on the common pitfalls when outsourcing consolidation services, and conclude on how the right service provider should be selected when outsourcing these services.

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OFFICEAlter Domus (Services) Malta LimitedVision Exchange Building Territorials Street Mriehel BKR 3000 Malta

T + 356 22 05 1000

[email protected]

www.alterDomus.com

WE’RE WHERE YOU NEED US.

2013, 2014, 2015 & 2016

CHRIS CASAPINTACountry Executive Malta

+356 22 05 10 [email protected]

Alter Domus (Services) Malta Limited Registered to act as a Company Service Provider by the MFSA. Alter Domus Fund Services (Malta) Limited is recognised by the MFSA in terms of Article 9A(1) of the Investment Services Act (the "Act") and has been granted a Category 4B licence in terms of Article 6 of the Act by the MFSA.

MAIN CONTACTS

PRZEMYSLAW KOGERHead of Relationship Management and Director

+356 22 05 10 [email protected]

To keep in touch with further updates: www.alterDomus.com

You are invited to discover the following Malta brochures available on our website:

• Malta NAIF• Malta Maritime Industry• Malta Licensed Investment Services Entities

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