The government is proposing a long-term legal framework for Gibraltar firms to access the UK market.
It is also looking to “facilitate the maintenance” of regulatory and supervisory arrangements necessary to support the Gibraltar Authorisation Regime (Gar) policy.
The UK will work with the government of Gibraltar to develop similar provisions in Gibraltar law to give UK firms reciprocity.
Alongside this proposal, there is a consultation to assess the UK-Gibraltar financial services relationship and obtain views on the key features of Gar, which will run from 11 March to 11 May.
The consultation paper considers the requirements for Gibraltar firms looking to access the UK market under Gar, Financial Service Compensation Scheme (FSCS) protections, Financial Ombudsman Service (FOS) coverage, changes to market access and wind-down and contractual continuity arrangements.
“The new framework is intended to deliver certainty for Gibraltar firms and minimise disruption to business. It has been designed to protect financial stability, to promote the safety and soundness of firms, to protect market integrity and to ensure high levels of consumer protection in both jurisdictions,” HM Treasury said in the consultation.
Extending FSCS reach
The UK government is looking at the effects of Gibraltar firms participating in the FSCS for the “long-term viability” of the scheme.
Under the present arrangements, Gibraltar insurers automatically participate in the FSCS sub-scheme for insurance business, and Gibraltar insurance intermediaries can opt into the insurance mediation sub-scheme.
Due to “the volume of consumers benefiting from Gibraltarian products in the retail market”, the UK government is proposing that Gibraltar insurers accessing the UK market, both as a branch and on a cross-border basis, should continue to participate in the FSCS general insurance business scheme.
It also intends to extend compulsory FSCS participation to Gibraltar insurance intermediaries providing services into the UK market, both as a branch and on a cross-border basis to ensure appropriate levels of consumer protection.
Gibraltar Investor Compensation Scheme
At present, Gibraltar investment firms accessing the UK market participate in the Gibraltar Investor Compensation Scheme (GICS), “which has a lower coverage than the relevant UK FSCS sub-scheme, in terms of monetary level and activities covered”.
Gibraltar-based firms with a UK branch can “top up” into the UK FSCS investment protection sub-scheme “to offer the same degree of compensation”.
The UK government is “open to views on the participation of Gibraltar-based investment firms in the UK FSCS”.
FOS proposal
The treasury is also proposing that individuals and “eligible small businesses availing of financial services sold in the UK from Gibraltar firms” should be able to refer disputes to the FOS.
At the moment, some Gibraltarian firms are within the voluntary jurisdiction of the FOS.
Under the Gar, this will extend to all Gibraltar firms operating in the UK.
Firms already under the voluntary jurisdiction will transfer to the compulsory jurisdiction of the FOS “with no loss of eligibility for their consumers in respect of actions occurring before they entered the compulsory jurisdiction”.
The Gibraltar Financial Services Commission (GFSC) will continue to supervise Gibraltar firms in monitoring and enforcing the obligations of Gibraltar firms to UK consumers who undergo the FOS process.
New information sharing arrangements will apply between FOS, GFSC and Gibraltar firms in order to support compliance with the ombudsman’s decisions.
Market access
The Gar will also allow Gibraltar-based financial services firms to access the UK market as “authorised persons” under the Financial Services and Market Act 2000, without having to apply for full UK authorisation from the UK regulators.
Firms authorised under the Gar will be able to carry on the regulated activity on a cross-border service basis and/or via a UK branch.
Gibraltar firms in the Gar will remain subject to the laws and rules of Gibraltar and will be supervised by the GFSC.
“It will primarily be up to the GFSC to communicate any regulatory and supervisory changes to Gibraltar firms, as is the case now,” said HM Treasury. “Firms will also need to comply with additional disclosure requirements identifying themselves to UK consumers as authorised by the GFSC.
“Firms will not be able to carry on regulated activities in the UK for which they do not have authorisation in Gibraltar, or for which the GFSC withholds consent to carry on in the UK.
“The government intends to simplify the existing notification arrangements and is proposing that new Gibraltar firms will be able to access the UK market within two months from the date on which UK regulators receive the GFSC’s notification with all the required information, or earlier if the UK regulator gives the firm a notice to that effect.”
