Legislative Reform Programme (“LRP”)
This page provides information on how you and your firm may be affected by the Legislative Reform Programme (LRP).
The GFSC will update this webpage on a regular basis. Please subscribe to the GFSC RSS feeds for the latest LRP information.
For any enquiries, please email LRP@gfsc.gi
What is the LRP?
HM Government of Gibraltar (HMGoG) published the Financial Services Bill in the Gazette on 30 May 2019 and was passed by Parliament at the beginning of July 2019, the key part of the Legislative Reform Programme (LRP). The GFSC worked closely with HMGoG in the development and drafting of the Bill. The Bill provides a legislative framework for all financial services sectors that fall within the GFSC’s supervisory perimeter.
The LRP consolidates and rationalises over 90 financial services legislative instruments into one Act and additional supporting, sector specific regulations. The LRP has concurrently implemented all EU legislation transpositions and local legislative initiatives during the lifetime of the programme.
The LRP, through the new Financial Services Bill, provides a clear, more navigable and accessible legislative framework for financial services that will facilitate innovation.
The GFSC held LRP industry sessions on the new Financial Services Bill during the last week of June. These were delivered to the different industry sectors and provided an overview of the LRP and the main areas of change introduced by the Bill.
Slides delivered at these sessions are available here.
Please note that the Regulated Individual & Regulated Functions slide (Slide 4) has been updated following changes to the Bill in a letter of amendment (both the Bill and the letter of amendment were passed by Parliament in July 2019). The change converts the Schedule 15 list of functions (previously a proposed list of examples of significant influence functions) into an additional list of regulated functions that are mandatory, but limited to certain sectors. Unlike the other regulated functions, these can be waived by the GFSC and will only apply if relevant to the regulated activity of the firm. Non-executive directors, who were previously listed on the Schedule 15, have now been removed and will only require pre-approval if they perform one of the specified regulated functions. The significant influence definition has also been changed, making it clearer in terms of who it would apply to.
A consolidated Bill, including the amendments mentioned, will be published in due course.
Key features of the LRP
The LRP will bring:
• A harmonised approach to authorisation and obtaining permission to carry on regulated activities
• A Regulated Individuals’ Regime
• A new Decision Making Committee
• Procedural clarity and consistency across the board
• Harmonised cross-sectoral powers and related processes
What are the key changes?
The Permissions regime allows for the issuance of a permission to carry out specific regulated activities to firms.
This does not affect any regulated activity that firms are currently carrying out as existing licences and services will be mapped across to the permissions and regulated activities. The GFSC will advise firms of the permission and regulated activity granted and this will be reflected on the GFSC regulated entities register.
Once the Financial Services Act is enacted and the permissions come into effect, firms will be grandfathered into the new regime. The GFSC will communicate details of your permission and regulated activities. This information will also be reflected on the GFSC’s registered entities register.
Firms will be given the opportunity to query any discrepancies and advise us whether they are still carrying out the regulated activities.
The Regulated Individuals (RIs) Regime requires certain functions within a firm to be approved prior to being appointed by the GFSC, these are known as regulated individuals. These also include sector specific functions as well as positions within a firm that exercise significant influence over the running of the firm.
Schedule 14 and 15 of the Bill set out a list of RIs.
A Significant Influence Function (as per the letter of amendment) is a person (“P”) that exercises significant influence over a regulated firm if, despite not formally having that role:
• P performs a regulated function;
• P instructs or purports to instruct the person that formally has that role as to how that person should perform a regulated function; or
• the person that formally has that role habitually or to a material extent performs the regulated function in accordance with P’s wishes or instructions.
Regulated individuals can be appointed on a temporary basis under specific circumstances, e.g. where it would be unreasonable to expect the firm to find a replacement immediately.
A person is only permitted to perform a regulated function, including on a temporary basis, if the individual has been approved by the GFSC.
Firms should be familiar with Part 8 of the Bill that sets out the Regulated Individuals Regime and Schedule 14 and 15 that provides a list of the notifiable functions within a firm.
The GFSC is currently carrying out an information gathering exercise to complete our understanding of what individuals are carrying out regulated individual functions at the firm. This is a one-off exercise and designed to provide the GFSC with the information needed to align current information with requirements under the LRP.
For existing firms, we understand that several functions will already have been notified to us, however, the new Act sets out specific functions per industry sector that in addition to the core functions, a firm needs to have in place.
Once we have processed information provided, we may advise firms to provide further information. This will only be requested in cases where firms name an individual as providing a RI function that has not previously been notified/approved by the GFSC.
Decision Making Committee
The Decision Making Committee ("DMC") will be an independent statutory Committee of the GFSC that will make certain regulatory decisions.
The DMC will consist of six members including three lawyers and three individuals with significant financial services expertise.
The DMC will make specific regulatory decisions as set out in Section 24 of the Bill. Some examples of these include:
• Decision notices linked to supervisory or sanctioning powers (unless the recipient has agreed to the warning notice in writing)
• ‘Urgent’ notices that impose a supervisory or sanctioning power without having been preceded by a warning notice
• To refuse a Regulated Individual’s approval