Financial Services Bill 2019 Legis islative Reform Programme 18 July 2019 1
LRP Regime: Current Regime Strategically important for Gibraltar & GFSC 23 65+ 1 Sector- LRP Specific Separate Sets of Financial Introduces Regulations Acts Regulations Services Act Powers & procedures, modernised, updated & harmonised Need for: Standardised approach to authorisation x Substantive reform & consolidation Introduction of Regulated Individuals’ regime x Consistency across sectors Independent Decision Making Committee x Procedural clarity Existing legislation consolidated & rationalised x Fit for purpose regulatory & legislative framework Streamlining of regulatory framework Benefits to the financial services industry 18 July 2019 2
Note: Main Architectural Parts of the New Act The following sectors instead use the approaches currently in place: • Statutory auditors & audit firms • Insolvency practitioners Umbrella system for a single authorisation • Regulated products (CIS, occupational process under a consolidated Act & personal pension schemes) Part 2 Part 6 Part 7 Permissions & Threshold Conditions Authorisation & Exemptions Regulated & Prohibited Activities Sets out: Sets out: Sets out: • What constitutes a regulated activity • Kinds of authorised persons Threshold conditions General supervisory powers • Excluded activities • Provisions for exempt persons • General prohibition • Must be met to obtain Examples • Provisions for exercise of rights • • Restrictions on financial promotion permission Variation / cancellation of permission under single market directives • Imposition of requirements • Apply to all regulated firms • Exercise of power in support of overseas regulator • Supplemented by Sector Requirement to be reasonable & proportionate To carry out a regulated Two types of procedures: Specific Regulations (SSRs) activity, a person must be: Grounds • Examples • Failing or likely to fail to meet Threshold Conditions o Location of offices • Significant risk to designated objectives • o Business to be conducted No business in the last 12 months Regulated EEA firms qualify An exempt person An authorised person • in a sound & prudent Sector-specific grounds firms apply for for authorisation E.g. appointed manner by satisfying permission Procedure representatives & establishment or Regulated under Part 7 o Firm must be able to be EEA • Warning / written notice, representations, Decision tied agents services conditions firm firm effectively supervised Making Committee (DMC), decision notice, appeal • o Fit & proper requirements Directions can take effect immediately in urgent cases 18 July 2019 3
Regulated Individuals (RIs) & Regulated Functions (RFs) • Individuals performing RFs will require GFSC approval • Applies to regulated firms, audit firms & incoming branches Types of RF Schedule 15 RFs (can be waived by GFSC and do not apply if not Sector-specific RFs Those that apply to all relevant to regulated activity carried out by firm) regulated & audit firms Insurance AIFM • Chair ● • Head of Business Continuity ● Head of Investment Head of Actuarial Function • Director • Chief executive / MD ● • Head of Customer Care ● Head of Internal Audit Head of Internal Audit • Chair of Risk Committee ● • Head of Trading ● ● • Head of Compliance Head of Risk Management Head of Risk Management • Chair of Audit Committee ● • Head of Operations ● ● Head of Finance Head of Account (Valuations) • MLRO • Head of Credit ● • Head of Finance DLT UCITS • Chief Operating Officer • Head of Underwriting ● • Partner / sole trader Head of Security Head of Investment • Head of Client Asset Oversight • Head of Claims ● Head of Technology Head of Account (Valuations) • Branch manager Head of Risk Management • Head of Markets ● Head of Internal Audit Head of Finance ● Companies only ● DLT only ● Regulated Markets only Head of Risk Management ● Credit institutions only ● Investment firms only Credit Institutions Regulated Market ● Insurance or reinsurance undertaking or intermediary Head of Finance Head of Markets (if trading) Significant Influence Functions Chief Operating Officer Head of Regulation Head of Treasury A person (“P”) exercises significant influence over a regulated firm if: Non-Bank Mortgage Creditors Head of Risk Management • P performs a regulated function; Head of Credit Head of Internal Audit • P instructs or purports to instruct the person that performs a Incoming Branches regulated function; or Investment Firms • Branch Manager The person that formally carries out the regulated function Chief Investment Officer performs the role in accordance with P’s wishes or instructions MLRO Head of Risk Management 18 July 2019 4
Regulated Individuals (RIs) & Regulated Functions (RFs) Approvals Criteria Approval Process Other Considerations Cessation of RI Function • F&P Candidate will satisfy approval Pre-application Approval may be withdrawn if Provisional • Capacity to criteria, once specified requirements vetting by individual no longer satisfies approval perform RF complied with in specified time approval criteria, including: applicant Withdrawal of Approval • In exceptional circumstances, serious misconduct Conditional • approval may be subject to misleading GFSC approval Submission of • conviction of an offence conditions application RI approval granted to those … Someone other than the RI may (inc. Statement of carry out the RF when: Responsibilities) Currently Previously approved OR considered RI ceases to be an RI by GFSC F&P by GFSC AND Interview Temporary Transitional It is unreasonable to expect the Otherwise … position arrangements firm to find a new RI immediately They have GFSC has 6 AND Consideration 12 months months to The firm is taking all the by GFSC AND to submit RI consider necessary steps to find a new RI (30 days) application application 18 July 2019 5
Regulated Individuals (RIs) & Regulated Functions (RFs) Other Information An RI must report to the GFSC … Procedures • When they cease to be an RI (including Standard procedures apply (warning notices, decision reason) notices, representation, DMC, appeal) where GFSC proposes to: • Any disciplinary action linked to performance of RFs • Refuse an approval • Whenever there is a significant change in • Approve subject to conditions their responsibilities • Withdraw an approval • Refuse an application to vary an approval • Vary an approval 18 July 2019 6
The Decision-Making Committee (DMC) Independent statutory committee of the GFSC Members Purpose The DMC makes ‘specified regulatory decisions’, as set out in Section 24 of the Bill 3 Financial 3 Lawyers Services Examples include: 10+ years professional standing Significant experience • To refer to the DMC: Supreme Court Barrister / in 1+ sectors regulated • Decision notices linked to supervisory or sanctioning powers solicitor by GFSC (unless the recipient has agreed to the warning notice in writing) • ‘Urgent’ notices that impose a supervisory or sanctioning power • 6 members in total, appointed by Minister without having been preceded by a warning notice • Must be ordinarily resident in, or carrying out business in & from, Gibraltar • To publish information about a sanctioning action • The Chair must be one of the legal members • To apply to the Court for permission to publish a decision which is, or • A panel of 3 members required for decision. At least one must be a legal may be, subject to an appeal member. • To impose an inspection costs order • Chair must preside unless not present or unable to act (so other legal • To publish an inspector’s report member presides) • To refuse an RI’s approval • In urgent cases, the Chair alone may exercise the DMC’s functions 18 July 2019 7
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