Home News and Publications Articles Financial services in Gibraltar - mapping the road ahead
Financial services in Gibraltar - mapping the road ahead PDF E-mail
Written by Marcus Killick   
Thursday, 05 November 2009 15:59
The past four years has been one of great change within the Financial Services Commission.

This is in no small part due to the pace of growth of the financial sector itself. Between the end of 2002 and June 2007, the number of insurers grew from 22 to 57, and collective investment schemes from 45 to 67.  During the same period the number of licences granted to those engaged to company and trust services rose from 345 to 504.  Other parts of the financial services sector have also shown significant, if not as dramatic, growth.

At the same time a tide of new EU legislation has had to be implemented, not least the Capital Requirements Directive and the Insurance Mediation Directive. The Investors Compensation Scheme has come into being and Gibraltar investment service firms, as well as those engaged in insurance mediation can now passport their services across the EU.

The tide of directives coming from the European Union, whilst abating, is still significant.  Over the months ahead the Markets in Financial Instruments Directive (MiFID), the Distance Marketing of Consumer Financial Services Directive, the Transparency Obligations for Securities Issuers Directive, the Reinsurance Directive, the Third Money Laundering Directive and the Statutory Audit Directive will all form part of Gibraltar law.

Some of these, particularly MiFID, will have a significant impact on the way financial services firms do business.  Others may open new growth opportunities.

Yet not all legislation is led by the EU. The finance sector, working with Government is also proactive in seeking out new opportunities. Over recent years we have seen the creation of the Experienced Investors Fund (EIF). Further fund types are likely to follow. In addition to this legislation to facilitate the growth of Sharia’h based financial products is currently with government.

In responding to this the Commission has had to double in size rising from a compliment of 14 in 2003 to 28 now.  It has also been important that such growth is done efficiently and effectively, avoiding the unnecessary increase in headcount that may other wise result.

This has been achieved by a series of internal changes designed to deliver that efficiency. In addition to finalising the change to being a risk based regulator and enhancing our internal processes, partially by the adoption of IAS 9000 standards and Investors in People recognition. Further improvements have been achieved through legislative changes

Earlier this year saw the enactment of the most significant legislation to impact the running of the Commission since the original Financial Services Commission Ordinance was passed in 1989.  The Financial Services Commission Act 2007.

This Act moved accountability for the work of the FSC from the UK to the Government of Gibraltar. The requirement that the majority of the Commission members came from the UK was removed and the role of Chairman and Chief Executive split. Other changes included updating the statutory duties of the Commission and further enhancing its independence.

During this period of change the Commission has been subject to two detailed external independent reviews. The first, in 2004 was a review of our compliance with our statutory duties. Then, in early 2006 Gibraltar underwent its second review by the IMF, undertaken as part of their ongoing assessment of the so named “Offshore Financial Centres”. Gibraltar was one of the first to take part in the second round of assessments, with other centres participating during the months ahead. The report was published on 21st May 2007.

The report, which is published both on the IMF and Gibraltar Financial Services Commission websites, was extremely positive. It found that in the area of Banking Supervision Gibraltar was fully compliant with 27 and largely compliant with 3 out of the 30 applicable international standards.  This was matched with 24 observed and 3 largely observed out of 28 applicable standards for Insurance Supervision. The remaining insurance standard, which was marked as Partly Observed, related to market statistical data.

Other recent legislation saw the introduction of a Financial Sector Skills Council.  This council, made of representatives of the various financial sectors and professional representative bodies, together with Government and the Commission, will set the standards of training and competence expected of those working in the finance sector. The requirements set, and aimed to be both practical and effective, so ensuring that those who seek financial advice or other services can be comfortable with the level of skill of those on whom the rely.

The Government is currently considering the introduction of an approved person’s regime.  Under this key individuals, like firms will be, in essence, licensed.  Whilst many of these individuals are currently subject to fitness and propriety checks before being appointed, some categories are not, and, under the current law, some assessments only occurs after appointment.  The new regime will consolidate this approach and make it consistent across all areas of the financial sector.

Combined with the approved persons regime will be a further emphasising of the role of senior management in ensuring firms comply with their regulatory requirements.  The Commission places considerable emphasis on the importance of corporate governance.  This is both good business and allows the Commission to adopt a lighter regulatory touch.

The Commission has also been given responsibility for the trustees of pension funds as well as becoming the competent authority under the Market Abuse, Prospectus and Listing Acts.  Later this year the Commission is likely to assume responsibility for the licensing and supervision of Bureau de Change and money transmission services.

Yet this growth has not been without incident. The collapse of Rock Financial Services and the Traded Endowment Plan (TEP) issue have caused pain to many investors. Whilst no financial centre can have a zero failure, any loss must be looked at to see if lessons can be learned, whether by government, regulator or the finance sector itself.

The Commission does not take such matters lightly, nor indeed does it ignore complaints about licensees.   Whilst we do not have the power to arbitrate or act as an ombudsman in respect of complaints we do act where we see they are the result of regulatory failings.  The fact that we cannot always publicise our actions may be seen as frustrating to some, however, we still consider dealing with issues privately as a far more likely route to a successful resolution.

The Commission remains committed to its culture of working with its stakeholders, of being part of and not aloof from, the industry it regulates. In doing so we will protect our independence and the reputation of Gibraltar, whilst at the same time being part of and not an inhibitor to, Gibraltar’s continued development as a quality finance centre.
Last Updated on Thursday, 05 November 2009 16:00
 
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