Malta’s regulator is encouraging more custodians to come to the island in response to increased numbers of Ucits fund launches. The MFSA also has oversight plans for hedge fund directors.

Malta's fund sector has seen substantial growth so far this year with more funds and sub-funds licensed between January and September than in all of 2010, according to the chairman of the Malta Financial Services Authority (MFSA), Joseph Bannister.

He attributes this increase to the rise particularly in Ucits-compliant funds launching in the island state. Bannister says the MFSA's open-door policy, encouraging managers and companies to discuss plans and how strategies and ideas fit into regulations is helping attract more hedge funds to Malta.

Bannister talks about how Malta is developing as a jurisdiction for Ucits-compliant funds following a slow start. The regulator is also actively encouraging more custodians to set up in Malta. HSBC and recent newcomer Deutsche Bank as well as Sparkasse, an Austrian bank, and local Bank of Valletta in partnership with JP Morgan are already present in the state. Bannister says more choice is needed if Malta is to expand its Ucits offering and believes it will also be important once the alternative investment fund managers (AIFM) directive comes into effect.

In a wide-ranging interview, Bannister also talks about how in general the regulator is encouraging the development of the hedge fund industry. He says the MFSA is already looking at the AIFM directive and will decide by the end of the year on how to implement it. He believes 90% of the directive's strictures will be able to be addressed through Malta's 'rule book' or guidelines issued by the MFSA which have the force of law. "We will be looking at a category of hedge fund managers which will be difference to Ucits and non-Ucits and unlike any other jurisdiction," he reveals.

Other topics covered include Malta's competitive edge compared with other European jurisdictions as well as the MFSA's legislative priorities for 2012.

Bannister says his plans for oversight of directors of hedge funds are progressing. "We have just finished a major exercise and are now deciding how to apply [the results]," he says.

While not agreeing with the idea of putting a number limit on the number of directorships an individual can hold, instead Bannister is thinking about a weighting system that would assign points according to what a director is doing, including acting as an anti-money-laundering or compliance officer as well as being a member of the investment committee.

He thinks by giving directors an overall maximum point limit, the sector will be able to regulate itself. Bannister says he is now starting a consultation which will include talking with other regulators and operators outside Malta and what they think the best approach will be. He expects to have a system in place early in 2012.

The interview will form part of the Malta special report, to be published in December 2011.