Last July Gibraltar’s parliament passed the Financial Services Act 2019, which took effect on 15th January this year. Its innovations include the introduction of an ombudsman, a local variant of the UK's Regulatory Decisions Committee, a tighter regime for the approval of people in their posts, tidier sanctioning powers and a pragmatic 'grandfather clause' to ease the process of reform.

The FSA was drafted by officials and legal drafters from the Government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) during a four-year Legislative Reform Programme, as it was called. This programme was a complex consolidating exercise. Gibraltar’s previous financial service legislation had developed through decades of updates, predominately through the transposition of the European Union’s directives. These laws were also scattered across 90 different pieces of legislation, making them difficult to use, inconsistent and frequently duplicated. The legislative foundations of Gibraltar’s financial laws were showing cracks and nearing their end. As a body of law it was no longer sustainable because it failed to provide financial firms and supervisory authorities with a clear understanding of the things it required of them. Such was the confusion that the supervisory authority was not sure of the legal and supervisory powers that were available to it or appropriate for it to use.

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.