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Trusts and Private Clients Seminar –“The regulatory environment”

Marcus Killick, Financial Services Commissioner

Manchester - Thursday 24 February 2005

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The Financial Services Commission (FSC) Mission Statement

“To supervise and regulate Gibraltar’s financial services to protect the public and enhance Gibraltar as a quality financial centre."

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The Financial Services Commission (FSC)

Created under the Financial Services Commission Ordinance 1989, therefore

One of the oldest independent regulatory bodies offshore

Unitary regulatorCommitment to transparency of

approachPolicy of consultationRisk-based, case-by-case approach

rather than “one size fits all”

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Regulatory scope

BankingInsuranceInvestment ServicesMutual Funds/Collective Investment

SchemesFiduciaries/Company service

providers

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FSC structure

Commissioner plus 18 staffDivided by sector (Banking, insurance,

investment services, fiduciaries) together with support staff

Sector specialisation allows for better understanding of and relationship with industry

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Obligations on FSC regarding supervisionSubject to EU directives and

regulationsCommitment to continuing to meet

relevant international standardsStatutory obligation to “match” UK in

supervisory standardsFSC has also adopted regulatory

objectives and principles of good regulation similar to the FSA’s

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Quality control on the FSC

The FSC has been the subject of three recent independent reviews IMF 2001 FATF 2002 Statutory review 2004/5

Each has been positive. "Gibraltar has in place a robust arsenal of legislation,

regulations and administrative practices to counter money laundering". [FATF]

“Supervision is generally effective and thorough and that Gibraltar ranks as a well-developed supervisor".[IMF]

“a regulatory regime developed to a good standard and staffed by competent regulators with a manifest determination to improve performance further”[Statutory Review]

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Fiduciaries In Gibraltar

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Regulation of fiduciaries

Regulated since 1991, first jurisdiction to regulate activity

Activities covered (by way of business) are:Company Management Formation, management or administration of companies,

partnerships or other unincorporated bodies Provision of directorships Provision of company secretary or other officer (other

than director) of a company, partnership or other unincorporated body

Nominee shareholdings Registered office

Professional Trusteeship Holding out or soliciting for business as a professional

trustee

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Regulation

Fit and proper requirementSubject to conduct of business

regulationsSubject to anti money laundering/

combating the funding of terrorism obligations

Ongoing supervision, including on site visits

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Conduct of business obligations

High standards of integrity and fair dealing/conflicts of interest

Due skill, care and diligence High standards of market practice Know your customer Handling of customer assets Maintenance of adequate financial

resources Proper internal organisation Relations with the Commissioner

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Anti money laundering/CFT

For fiduciaries Gibraltar is fully 2nd Money Laundering Directive Compliant “Gibraltar’s standards with respect to the application of the [Second Money Laundering] Directive to professional trustees and company managers exceed those in the UK”. Statutory Review Para 4.28

Gibraltar also already meets likely obligations to be imposed under the Third Directive. Therefore,

No “evolutionary jump” issues when 3rd Directive enters into effect, this provides stability.

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Impact

Reduction of abuse and incompetence No “nominee” directors No promises of “guaranteed” bank accounts, No “no records kept in jurisdiction” promises Policy re bearer shares (originals to be kept

under safe custody); Policy re unlimited Powers of Attorney (in scope

and time).

Result Better professionalism, Better reputation; Greater client confidence.

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The future

“Approved” persons regime, also covering, Corporate GovernanceRole of non executive directors

Enhanced Training and Competency requirements

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Conclusion

Mature regulatory environmentTransparentKnown

Independently verifiedOffering good client confidence, withGood industry/regulator relationship