Regulation: Keeping in step

  • Author : Neill Perera
  • Author : Michael Adamberry
  • Date : December 2012
ABOUT THE AUTHOR: Neill Perera is Head of the Fiduciary Services Supervision Division and Michael Adamberry is a Regulatory Officer in the Fiduciary Services Supervision Division at the Gibraltar Financial Services Commission

It is not just the (sometimes) friendly Barbary Macaques that raise eyebrows in Gibraltar. Professionals working in the fiduciary sector may be interested to know that Gibraltar was among the first jurisdictions in the world to regulate company management and professional trusteeships. Both of these are listed as controlled activities under the Financial Services (Investment and Fiduciary Services) Act 1989.

Gibraltar has developed a highly diversified finance centre that has continued to grow throughout the past decade despite the current global economic conditions. Recent developments have seen Gibraltar reposition itself from a tax perspective, moving away from being an ‘offshore’ finance centre towards being an onshore EU finance centre. This was evidenced by the introduction of the Income Tax Act 2010, which did away with the exempt status regime and introduced a 10 per cent corporate tax rate across the board for all companies, keeping Gibraltar in step with the EU.

The local fiduciary sector has continued to take advantage of this growth. It is made up of large international and domestic firms, with a mix of professional accountancy firms, legal firms, niche and specialist practices, all falling under the umbrella of trust and corporate service providers (TCSPs). Recent times have seen some of the larger TCSPs seek expansion by acquiring smaller operations, lowering the number of licensed entities. In terms of companies and trusts under management, the industry remains very active, with 3,965 trusts and 31,689 companies under management during the financial year 2011-2012. While this is a reduction from previous years, this has mainly been as a result of TCSPs focusing on attracting and retaining quality business rather than on quantity.

Since its inception in 1991, the Financial Services Commission (FSC) has strived to bolster the Rock’s reputation as the jurisdiction of choice for international financial services business. The FSC’s mission statement is:

‘To provide financial services regulation in an effective and efficient manner in order to protect the public from financial loss and enhance Gibraltar’s reputation as a quality financial centre.’

While many regulators would be expected to have similar goals, certain factors set the FSC apart. Few regulators rival the FSC in terms of its risk-based approach and the supervision of licensed firms. Last year’s 20th anniversary celebrations coincided with the introduction of a new risk assessment methodology that focuses on the probability of materialisation of a risk to one of the FSC’s ‘regulatory objectives’ as prescribed in the Financial Services Commission Act 2007.

The FSC has been successfully applying a risk assessment methodology across all its supervisory divisions since 2003. It has re-engineered the methodology by building on this experience, to deliver a more efficient and effective process through which the risks of a firm may be assessed and mitigated. During the revision, the FSC sought to concentrate on high-level risks rather than regulatory compliance. The methodology is geared towards determining the ability and competence of a firm’s senior management when it comes to both identifying and mitigating risks, and implementing adequate systems of control to meet regulatory requirements. Following this assessment, the intensity and frequency of the FSC interfacing with a firm will be completely dependent on the perceived risks that the firm poses to its customer base and the jurisdiction.

Gibraltar covers less than seven square kilometres, and this has been another contributing factor in establishing close and personal contact, allowing the FSC to understand the risks posed by its licensees and for these licensees to have easier access to their regulator. The FSC will continue to work closely with industry to strengthen its ability to supervise the fiduciary sector, while considering the requirements of its key players. To this end, the FSC continues to work towards increasing the efficiency and effectiveness of its supervision of its licensees, to ensure that Gibraltar’s regulatory environment remains fit for purpose.

What’s past is prologue. It is building on what has already been achieved that we consider fundamental to achieving this aim.


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