1 Trusts and Private Clients Seminar – “The regulatory environment” Marcus Killick, Financial Services Commissioner Manchester - Thursday 24 February 2005

2 The Financial Services Commission (FSC) Mission Statement “To supervise and regulate Gibraltar’s financial services to protect the public and enhance Gibraltar as a quality financial centre."

3 The Financial Services Commission (FSC) Created under the Financial Services Commission Ordinance 1989, therefore One of the oldest independent regulatory bodies offshore Unitary regulator Commitment to transparency of approach Policy of consultation Risk-based, case-by-case approach rather than “one size fits all”

4 Regulatory scope Banking Insurance Investment Services Mutual Funds/Collective Investment Schemes Fiduciaries/Company service providers

5 FSC structure Commissioner plus 18 staff Divided by sector (Banking, insurance, investment services, fiduciaries) together with support staff Sector specialisation allows for better understanding of and relationship with industry

6 Obligations on FSC regarding supervision Subject to EU directives and regulations Commitment to continuing to meet relevant international standards Statutory obligation to “match” UK in supervisory standards FSC has also adopted regulatory objectives and principles of good regulation similar to the FSA’s

7 Quality control on the FSC The FSC has been the subject of three recent independent reviews IMF 2001 FATF 2002 Statutory review 2004/5 Each has been positive. "Gibraltar has in place a robust arsenal of legislation, regulations and administrative practices to counter money laundering". [FATF] “Supervision is generally effective and thorough and that Gibraltar ranks as a well-developed supervisor".[IMF] “a regulatory regime developed to a good standard and staffed by competent regulators with a manifest determination to improve performance further”[Statutory Review]

8 Fiduciaries In Gibraltar

9 Regulation of fiduciaries Regulated since 1991, first jurisdiction to regulate activity Activities covered (by way of business) are: Company Management Formation, management or administration of companies, partnerships or other unincorporated bodies Provision of directorships Provision of company secretary or other officer (other than director) of a company, partnership or other unincorporated body Nominee shareholdings Registered office Professional Trusteeship Holding out or soliciting for business as a professional trustee

10 Regulation Fit and proper requirement Subject to conduct of business regulations Subject to anti money laundering/ combating the funding of terrorism obligations Ongoing supervision, including on site visits

11 Conduct of business obligations High standards of integrity and fair dealing/conflicts of interest Due skill, care and diligence High standards of market practice Know your customer Handling of customer assets Maintenance of adequate financial resources Proper internal organisation Relations with the Commissioner

12 Anti money laundering/CFT For fiduciaries Gibraltar is fully 2 nd Money Laundering Directive Compliant “Gibraltar’s standards with respect to the application of the [Second Money Laundering] Directive to professional trustees and company managers exceed those in the UK”. Statutory Review Para 4.28 Gibraltar also already meets likely obligations to be imposed under the Third Directive. Therefore, No “evolutionary jump” issues when 3 rd Directive enters into effect, this provides stability.

13 Impact Reduction of abuse and incompetence No “nominee” directors No promises of “guaranteed” bank accounts, No “no records kept in jurisdiction” promises Policy re bearer shares (originals to be kept under safe custody); Policy re unlimited Powers of Attorney (in scope and time). Result Better professionalism, Better reputation; Greater client confidence.

14 The future “Approved” persons regime, also covering, Corporate Governance Role of non executive directors Enhanced Training and Competency requirements

15 Conclusion Mature regulatory environment Transparent Known Independently verified Offering good client confidence, with Good industry/regulator relationship