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Investment Services & Funds

The proposed EU AI Act will provide for four risk classifications of artificial intelligence. Each classification will trigger different rules. In this insight briefing we analyse the use of AI in investment funds to determine which one of the four AI classifications would be applicable.
Investment Services & Funds

AI & Funds #3 – Risk Classifications

If the draft EU regulation on Artificial Intelligence (“AI”) titled ‘Proposal for a Regulation laying down harmonised rules on artificial intelligence’ (the “draft EU AI Act”) becomes law, investment funds could have an additional risk which would need consideration, namely, the AI risk. As outlined in previous briefings in this insight-series, the definition of AI as provided in Article 3 of the draft EU AI Act will be an umbrella term which includes machine-learning and algorithms which are already being used in the asset management industry according to a report1 by the European Securities and Markets Authority. The draft EU…
Mario Mizzi
23rd February 2023
In this insight briefing, we analyse the draft EU directive on non-contractual liability relating to AI and compare it with non-contractual liability in the UCITS V directive and the AIFMD to decipher how AI’s non-contractual liability can impact EU-licensed investment funds.
Investment Services & Funds

AI & Funds #2 – non-contractual liability

In addition to the draft EU regulation on Artificial Intelligence (“AI”) titled ‘Proposal for a Regulation laying down harmonised rules on artificial intelligence’ (the “draft EU AI Act”), the EU Commission is also proposing a separate draft directive on non-contractual liability relating to AI titled ‘Proposal for a Directive on adapting non-contractual civil liability rules to artificial intelligence’ (the “draft AI Liability Directive”). Whilst the draft EU AI Act aims to define AI and mitigate risks by safeguarding fundamental rights in the use of AI within the EU, the draft AI Liability Directive sets forth provisions allowing persons to bring…
Mario Mizzi
16th February 2023
we share our insights on when the investment discretion shifts from humans to AI by analysing whether a legal definition of artificial intelligence has been determined.
Investment Services & Funds

AI & Funds #1 – investment discretion

When one instructs a painter to draw a portrait (no matter how detailed the instructions may be) the painter will always have discretion in executing the final product. Likewise, in investment funds, the investment manager is instructed to invest according to various rules and timeframes which are detailed in the investment strategy as approved by the competent financial regulator, but there will still remain investment discretion on how the investment strategy is executed. This discretion is normally based on a number of statistically orientated formulas which analyses quantitative and qualitative data. Artificial Intelligence (“AI”) is being increasingly used in these…
Mario Mizzi
8th February 2023
In this series of weekly briefings, insights will be shared on the impact that artificial intelligence is making on the asset management industry and investment services in general.
Investment Services & Funds

AI & Funds – insight briefings

The impact that Artificial Intelligence (“AI”) is making on investment services has been the subject of a recent publication, dated 1st February 2023, which was issued by the European Securities and Markets Authority (“ESMA”). The publication, entitled “Artificial intelligence in EU securities markets”, provides data on the methods that stakeholders are implementing to incorporate powerful digital tools in their regulated financial products. ESMA’s publication makes reference to the inherent notion that AI is an “umbrella” term which incorporates machine-learning as well as other forms of Big Data solutions. In fact, ESMA notes that in the funds industry certain managers use…
Mario Mizzi
3rd February 2023
Banking & FinanceInsurance & ReinsuranceInvestment Services & FundsNews and PublicationsRegulatory Compliance

Regulatory Compliance Quarterly Update | Q4 2022

We are pleased to issue our third edition of the Regulatory Compliance Quarterly Updates. These updates are intended to keep Maltese regulated entities informed of regulatory changes and developments taking place in the local financial services space. In this issue, we focus on the sector specific and cross-sectoral regulatory updates relating to Investment Services and Asset Management; Credit and Financial Institutions; Company Service Providers and Insurance Undertakings and Insurance Intermediaries. Our Regulatory Compliance Quarterly Update can be found here. Our third Regulatory Compliance Quarterly Update can be found hereThe Regulatory Compliance Quarterly Update does not purport to give legal, regulatory,financial…
Mamo TCV Advocates
25th January 2023
MFSA issues a Consultation Document on the Proposed Notified PIF Framework
Investment Services & Funds

MFSA issues a Consultation Document on the Proposed Notified PIF Framework

On 22 December 2022, the Malta Financial Services Authority (‘MFSA’ or ‘the Authority’) issued a stakeholder consultation on the proposed establishment of a new framework for Notified Professional Investor Funds (‘NPIFs’). The NPIF framework proposal seeks to introduce a new fund structure, complementing the existing fund frameworks in Malta. The framework will bring about lower barriers to entry for professional investor funds through a risk-based and proportionate approach. On 28 October 2021, the MFSA issued a Discussion Paper on its Asset Management Strategy. The introduction of a NPIF regime was one of the proposals set out in Pillar III –…
Martha Chetcuti
20th January 2023