The financial services industry and community as a whole therefore welcomed the new Act. During its creation, the Government consulted various sectors of the financial community through fora and mechanisms such as ‘consultation rounds.’ Some were involved in working groups, which the Government asked to analyse specific parts of the Bill and provide practical feedback for the drafters and legislators to consider. It consulted many financial lawyers about some of the more technical text. The financial services industry therefore felt included in the process and very comfortable with the finished product.

However, the introduction of the FSA required further work. All the secondary legislation, or regulations, had to be drawn up. Forty-one sector-specific regulations now provide each part of the financial services industry with a single point of regulatory reference that contains most, if not all, requirements that every regulated firm must meet.

Key changes

One of the main objectives of the Legislative Reform Programme and the new FSA is to consolidate, streamline and reconcile the previously existing legislation. Its reforms include the following.

The ‘permissions’ regime

This new regime consolidates the previous licencing requirements and application process. Under the new FSA, once a firm has met the threshold conditions (described in Schedule 12), it is granted a single licence that allows the firm to carry out one or more regulated financial activities, thus eliminating the previous requirement for firms to submit multiple applications. The firm is naturally subject to the requirements of the relevant subsidiary regulation.

Regulated individuals

Although Gibraltar’s laws always dictated that the regulator ought to approve the appointment of people in key positions or in charge of significant functions, the new FSA has formalised this requirement to a greater degree. The Regulated Individual Regime requires pre-approval from the Guernsey Financial Services Commission for specified types of people and jobs at every firm. Broadly speaking, we can break these down into four main categories: general functions (e.g. directors and money-laundering reporting officers or MLROs), mandatory sector-specific functions (e.g. chief investment officers for investment firms), discretionary sector-specific functions (e.g. chairmen at regulated firms that are also companies) and ‘significant influence’ functions (or people that the regulator believes to be exercising significant influence). Schedules 14 and 15 of the Act helpfully provide a detailed list of these people.

The grandfather clause

In order to ensure a smooth transition from the old legislation to the new, the Act has allowed a ‘grandfathering’ of rights for those individuals who held current regulated positions (e.g. directors, MLROs, etc.) and who were approved by the GFSC. This eliminated the need for these individuals to undergo a “re-approval” process. For those who occupied positions that did not previously require approval, the GFSC contacted all existing regulated entities to establish which individuals in a firm may or may not be carrying out these functions and ensure that all individuals have been appropriately captured and approved.

Sanctioning powers

Before last July, people were worried about the sanctioning powers that the Bill might have been about to introduce, but the FSA simply and accurately corrects the inconsistencies and gaps that existed in the previous legislation and makes sanctions consistent among all regulated sectors.

A decision-making committee

Part 3 Section 24 FSA provides for the establishment of a decision-making committee on the same lines as the Regulatory Decisions Committee of the United Kingdom. The industry believes that this committee will, when it arrives, be independent of the regulator, although it will belong to that regulator. Its job will be to implement enforcement actions and sanctions. It will be able to issue decision notices regarding supervisory or sanctioning powers and to refuse to approve a regulated individual. It will consist of three lawyers and three people with significant expertise in financial services. The GFSC appointed the first of these last month.

Ombudsman

Part 14 FSA provides for another new thing: a financial services ombudsman whose job will include the investigation, facilitation, determination and proposal of solutions to financial service disputes. It will also mediate between parties. This innovation is particular welcome for consumers who previously had no avenue of redress if they were unsatisfied by firms’ responses to their complaints.

A new decade

The FSA is an innovative piece of primary legislation. Its secondary legislation consists of clear regulations. Financial practitioners now find it easy to spot gaps in their approaches to regulatory duties and anyone who seeks a licence can do so in a more streamlined way.

Gibraltar left the European Union on 31 January, the same day as the UK. The new legislation will probably help it come to terms with this. At the time of writing, its financiers still enjoy access to the EU's ‘single market,’ but future arrangements are uncertain.

Gibraltar continues to be a highly attractive jurisdiction for financial services, with its companies providing one in four UK motor insurance policies. The GFSC regulated distributed ledger technology before other regulators. Although there might be some bumps in the road ahead, the FSA provides the jurisdiction with a strong body of law that ought to help it plot a steady course through the new decade that we have just entered.

* Jamie Allan can be reached on +350 200 76651 or at jamie@fid.gi