22 Oct Revamped regulation of Gibraltar funds
It has now been just over two and a half years since the United Kingdom voted to leave the European Union. The Gibraltar funds industry however, is adamant that the infamous vote, which brought with it a heavy dose of pessimism and uncertainty, can instead be good news for Gibraltar in furthering its offering as an emerging and growing hub for investment funds and managers.
Following extensive consultation between the Gibraltar Funds and Investments Association (“GFIA”) Executive and its members, the Gibraltar Financial Service Commission (“GFSC”) and the Minister with responsibility for Financial Services, the new legislative framework for investments funds has been drawn up.
The new legislative framework creates Gibraltar’s dual-fund regime which maintains the status quo (i.e. EU access pre-Brexit) and provides a duality so that the necessary vehicles post-Brexit are permitted and clients may continue operating outside of the EU and, subject to the Brexit deal agreed between the UK with the EU, a vehicle which will allow access to the EU’s single market on the basis of reciprocity and/or equivalence. The key changes include:
Experienced Investor Funds (EIF)
- Every EIF will require a minimum of 2 EIF directors. At least 1 EIF director has to be resident in Gibraltar but the GFSC will now have the power to dispense with this requirement. This does not, however, mean that the EIF directors will need to be licensed by the GFSC. Instead, EIF directors must now have a GFSC consent to act as an EIF director.
- The new regulations further clarify the term “Experienced Investor” to include, amongst others, persons who invest €100k into an existing EIF. The lower threshold of €50,000 on the basis of having been advised by a professional advisor has been left unchanged.
- The EIF’s unique deemed authorisation route has been clarified – i.e. if the board resolves to become an EIF and a notification is submitted to the GFSC with all the required documents as stipulated by the Regulations within the 10 days. Once that is completed, the EIF is deemed to be authorised by the GFSC from the date of the board resolution. With this clarification, the EIF continues to be the funds vehicle with the best speed to market on the European continent.
- The safe custody of assets has been clarified and the principal duty of the bank and/or broker providing the service is to keep the assets that are under its control safe and accounted for.
- For closed-ended EIFs, the submission date to the GFSC for audited accounts has been extended to 9 months from the year end. This change has been brought about to allow greater flexibility to, for example, private equity funds.
- Clarification on the ability of promoters of EIFs (which are in the process of being established) being able to discuss the investment with potential investors before the EIF is established.
- The requirement to disclose service providers in the private placement memorandum has been clarified to include material service providers: directors, investment managers, investment advisors, legal, administrator, secretary, bank, broker and auditor.
Gibraltar Alternative Investment Fund (“Gibraltar AIF”)
Under the new framework, EIF’s which are “in-scope” or have opted-in to the Alternative Investment Fund Manager Directive (AIFMD), may be known as a Gibraltar Qualified AIF. It would also be required to comply with the Financial Services (Experienced Investor Funds) Regulations and the Financial Services (Alternative Investment Fund Managers) Regulations. This has effectively created a new product that is part of a ‘dual-regime’ offering.
For more information on the changes to the legislation, please feel free to contact the financial services team.
Financial Services Team
Triay & Triay
28 Irish Town
T: (+350) 200 72020
Text by: Finance Team