22 - 28 March 2001

Fears that two funds may seek de-listing from MSE

by David Kelleher

There are fears and rumours going round the financial community that two big names with a presence in Malta are considering de-listing their funds from the Malta Stock Exchange.
Financial sources told The Malta Business Weekly yesterday that the uncertainty that has been created by Finance Minister John Dalli following the introduction of 15 per cent tax on Collective Investment Schemes has forced the two big foreign funds to reconsider their presence here in Malta.
“When these funds came to Malta they did not come here looking for uncertainty in the market. While the 15 per cent tax on interest from CIS is acceptable, they are worried that this could become a tax on capital gains – something they had not bargained for,” the sources said.
Despite Mr Dalli saying that the 15 per cent tax is not a capital gains tax, financial advisers, basing their arguments on legal advice, are not so sure.
“The law is open to interpretation. It is not a question of ‘yes’ or ‘no’ but rather ‘maybe’. If there is a doubt that this could be changed to a ‘yes’ then the market is going to react unfavourably to what is being said,” the sources added.
The Malta Business Weekly has also learnt that local fund advisers have called on the international society of finance professionals for advice on how to tackle the issue and, if possible, “talk some sense into Mr Dalli”.
As one financial adviser said: “He (Mr Dalli) seems to be keen on ending all that has been achieved through the MFSC over the past seven years.”
Financial advisers and fund managers are also worried that legal notice 55 and Act IX 2001 will only serve to kill off the small fry. LN 55 states that the Category 1 licence will cease to exist by 28 February 2001 and all of these holders will have to apply for a Category 2 licence. There is a catch, however.
Granting of a Cat. 1 licence is granted if a company has Lm20,000 in fixed assets, Cat. 2 for those with net assets of Lm50,000 and Cat.3, Lm300,000 in net assets.
“The removal of the Cat. 1 licence means that either smaller companies will have to find extra capital to raise the value of their net assets or else fold up. In the short-term, Cat. 2 holders may say that their direct competitors are being forced out. But what happens if the government decides to remove Cat. 2 licences as well, say in two or three years’ time? In the long term, everyone should be worried,” the sources asked.
Attempts to contact Mr Dalli yesterday evening proved futile.