The Alternative Investment Fund Managers Directive II (AIFMD II) introduces a pivotal change for Malta-based AIFs: the ability to appoint depositaries in other EU Member States. This update addresses a long-standing challenge in Malta’s fund ecosystem, limited local depositary options while enhancing operational flexibility for fund managers.
Limited Depositary Infrastructure in Malta
Malta’s Alternative Investment Funds (AIFs) regime has evolved significantly, yet the limited number of local depositaries has remained a bottleneck. This has particularly impacted fund managers with complex investment strategies requiring specialised custodial services.
Regulatory Shift Under AIFMD II
AIFMD II, to be transposed by April 2026, introduces a derogation allowing AIFs to appoint depositaries in other EU Member States, subject to strict conditions. This is not a full depositary passport, but it marks a significant step forward.
What the Derogation Enables
The new rules allow Malta-based AIFs to appoint a depositary in another EU country if:
- The AIFM can demonstrate to the MFSA that suitable depositary services are unavailable locally.
- The total assets held by local depositaries do not exceed €50 billion.
- The MFSA notifies ESMA and retains oversight of cross-border arrangements.
Strategic Benefits for AIFMs
- Operational Flexibility: Fund managers can align depositary services with their investment strategy and jurisdictional needs.
- Access to Specialised Services: Enables partnerships with depositaries that offer niche expertise or broader infrastructure.
- Enhanced Investor Confidence: Demonstrates proactive risk management and regulatory compliance.
Real-World Application
A Malta-based AIF focused on infrastructure investments across the EU faced challenges securing a local depositary with sector-specific expertise. Under AIFMD II, the fund successfully appointed a Luxembourg-based depositary with a strong track record in infrastructure assets. This enabled:
- Faster onboarding of institutional investors.
- Improved alignment with the fund’s risk profile.
- Streamlined reporting and compliance across jurisdictions.
Key Outcomes
- 20% reduction in operational delays.
- Enhanced investor due diligence outcomes.
- Greater scalability for future fund launches.
How ARQ Group Can Help
At ARQ Group, we understand the regulatory complexities surrounding depositary arrangements under AIFMD II. Our team of legal, compliance, and governance professionals is committed to helping you navigate these changes with clarity and confidence. Whether you’re seeking strategic guidance on cross-border depositary appointments or need support with MFSA engagement and documentation, we are here to ensure your fund remains compliant and competitive.
For more information, please speak to Denia Ellul – Director – ARQ Advisory Ltd, ARQ Corporate Ltd and ARQ Fiduciaries Ltd.
Denia Ellul
Director of ARQ Advisory Ltd, ARQ Corporate Ltd and ARQ Fiduciaries Ltd.
A lawyer by profession, Denia attended the University of Malta and successfully completed a Bachelor of Laws degree, followed by a Doctor of Laws degree in 2014. Following her graduation from the University of Malta, Denia commenced her employment with a local law firm which helped her gain the necessary knowledge in various fields of law, including corporate and commercial law, cross-border tax planning and financial-legal matters.
