The whole of Gibraltar's financial services legislation is being reviewed and its regulator, the Financial Services Commission, is looking at ideas for new guidelines. Chris Hamblin of Compliance Matters has been talking to some compliance officers on the spot.

The legislation appears to be mainly consolidatory, the government publishing a histogram in its publicity PDF that shows the mounting annual number of 'statutory provisions' (presumably including secondary legislation, which itself includes regulations) rising bumpily from 2 in 1987 to 28 in 1998, staying fairly static till 2003, then rising steeply through the 30 barrier to reach 60 in 2009, with a further steady rise to 90 in 2014.

An unwieldy regime

The government therefore thinks that the financial services regime is now too unwieldy, too hard to understand (or 'navigate', to use its own word), too inconsistent between sectors (although when modern regulation was set up in the 1980s no regulator in either the UK or Gibraltar - or probably on Earth - had the slightest desire to promote consistency between them, seeing them as very different businesses), and not giving enough power to the regulators.

One compliance officer told Compliance Matters: "If you look at the FSC website, there are guidance notes, guidelines, newsletters put out by the FSC. You have to keep looking for different bits in different places, so it's not easily accessible. They also put out new things on their Twitter feed." The government is making a massive effort to consolidate this.

E pluribus unum

The result will be a codifying Financial and Professional Services Act, a universal rulebook or 'handbook' of regulation, a financial services ombudsman along the lines of that of the UK, a new appeals body to make the system look more just to the uninitiated, and other scraps of legislation here and there. The current 23 Acts - including the Supervisory Acts - will be gathered into one and 63 regulations will go into the 'handbook' which, one suspects, no human hand will be able to lift. The FSC has already begun to restructure itself - the main aim here seems to be to . Whether it will cease to be an 'elephant's graveyard' for moribund British regulators remains to be seen.

Gibraltar is home to banks, e-Money Institutions, investment firms, payment service firms, insurance Companies (General, including Insurance Linked Securities), occupational pension schemes, life offices, bureaux de change, reinsurance companies, a stock exchange, insurance intermediaries, trustee firms, insurance managers, company managers, alternative investment fund managers, auditors, experienced investor funds,insolvency practitioners and collective investment schemes.

A vague consultative timetable

The colonial government and the regulator have not begun the inevitable consultative exercise yet. In view of the mountainous nature of the task they are not even promising that it will occur this year.

A tentative timetable, however, has been published. Sometime in the first half of the year (before June, according to its forecast) the government says that it wants to consult interested parties about the main points that the eventual bill ought to have. It also proposes to ask the public about arrangements for ombudsman activity and 'compensation' - a word it is presumably not using to mean executive pay - before June. It expects the Financial Services Ombudsman to come into being in mid-to-late 2015. A more in-depth consultative process about the bill, including this time a discussion of the handbook and 'implementing legislation', will then take place. Then, in 2016, will come the second 'handbook consultation' and the handbook will come into force, along with the new law. Although regulatory experts from other jurisdictions might view this timetable as too optimistic, the FSC has a good reputation among compliance officers for sticking to its deadlines when consulting people.

The government seems concerned about the fact that these dates do not include the timetable for all of the European Union directives that will come into effect during the lifetime of the reform programme. Why this matters to the government in the context of this legislative project is a mystery; perhaps (although it does not say this) it expects some of the firms under its aegis to start obeying such EU legislation before it is enshrined in Gibraltar's new law and/or rulebook. Whatever the reason, it intends to set out the EU's legislative timetable in various consultative exercises to follow, perhaps thinking that the EU's own consultative processes are inadequate and require its support.

On the subject of ombudsman-related reforms, it appears that respondents will not have much of a say. The European Union has gone there first, passing an Alternative Dispute Resolution Directive in 2013. As for the reforms regarding 'compensation', these are to follow the Deposit Guarantee Scheme Directive of 2014.

Confessions?

In its proposals for legislative reform, the government seems to make a couple of stunning confessions: "By virtue of the new Act and handbook, firms and individuals will experience a risk-based approach to authorisation, supervision and enforcement. There will be clarity in terms of the FSC’s expectations for firms and individuals, and transparency of decision making. The plans set out in this paper will also assist the FSC in delivering a more proportionate and outcomes focused approach to supervision."

This wording strongly suggests that British-style 'risk-based' regulation has yet to come to Gibraltar and, moreover, that the regulator is unclear about what it expects of firms and individuals when it deals with them. In fact, according to another Gibraltarian compliance officer: "In any dealings I have ever had with them, they've taken a risk-based approach. This is the way they've been doing things for years. The regulatory visits they go on and the documentation they send out are all done on a risk-based approach. I agree that they are making themselves look terrible by saying this, but I think they're [really] saying that they want to put it in legal writing for the first time." As for the admission about a lack of transparency: "It's the same here. They certainly are taking a transparent approach to firms and individuals, it's just a bit fragmented. There are no guidance notes on certain minor things. I think they're just documenting [this approach for the first time.]"

However, as for 'transparency' in decision-making, i.e. the public laying-bare of the process and rationale behind every decision, the Gibraltar FSC is unlikely to become the first regulator in the world to achieve a thing that has eluded all others.