Transparency in Monetary and Financial Policies

IMF Code of Good Practices on Transparency in Monetary and Financial Policies

Requirement FSC position

V Clarity of Roles, Responsibilities and Objectives of Financial Agencies Responsible for Financial Policies
5.1 The broad objective(s) and institutional framework of financial agencies should be clearly defined, preferably in relevant legislation or regulation. The Financial Services Commission’s statutory objectives are contained in Section 6 of the Financial Services Commission Act 1989.
5.1.1 The broad objective(s) of financial agencies should be publicly disclosed and explained. The FSC’s objectives of supervision and principles of Good Regulation appear on the FSC’s web-site at http://www.fsc.gi/fsc/principles.htm

Objectives of supervision
In meeting our statutory requirements we seek to achieve the following:
(a) To promote market confidence;
(b) The reduction of systemic risk
(c) To promote public awareness
(d) The protection of the reputation of Gibraltar;
(e) The protection of consumers; and
(f) The reduction of financial crime, including the funding of terrorism.

Additionally the website also contains the FSC’s mission statement:

Our Mission Statement
To provide financial services regulation in an effective and efficient manner in order to protect the public from financial loss and enhance Gibraltar's reputation as a quality financial centre.
5.1.2 The responsibilities of the financial agencies and the authority to conduct financial policies should be publicly disclosed. The responsibilities that the FSC is required to abide by are its Statutory Duties and the Objectives of supervision as outlined above.
5.1.3 Where applicable, the broad modalities of accountability for financial agencies should be publicly disclosed. The accountability of the FSC is contained within the Financial Services Commission Act

The Financial Services Commissioner is accountable to the Governor of Gibraltar who is responsible for the appointment and removal of the person from office. However, the Commissioner, as the competent authority for the regulation of financial services providers is also responsible to the Government of Gibraltar.

5.1.4 Where applicable, the procedures for appointment, terms of office, and any general criteria for removal of the heads and members of the governing bodies of financial agencies should be publicly disclosed.

The Financial Services Commission Act lays down in section 8 the process for the appointment of the Commissioner -

“Appointment of Commissioner.
8.(1) The Governor acting with the approval of the Foreign and Commonwealth Secretary shall appoint a person to be Commissioner.

(2) The Commissioner shall be the executive officer of the Commission and shall in addition perform such other functions, and exercise such powers, as are from time to time conferred upon him by this or any other Act or regulation or are delegated to him by the Commission. In particular he shall supervise institutions licensed to provide any financial services with a view to ensuring that such supervision complies with any applicable Community obligations and, where these obligations apply, establish and implement standards which match those required by legislation and supervisory practice governing the provision of financial services within the United Kingdom.

Appointments are usually 3 years in duration. Both parties can agree to renew the appointment for further period..

Subsection 8(3) lays out the criteria for the dismissal of the Commissioner.

(3) In the event of the illness, death, retirement, suspension or removal from office or absence from Gibraltar of the Commissioner, the Governor acting with the approval of the Foreign and Commonwealth Secretary shall appoint a person to act as Commissioner.”

With respect to the Commission Members section 3 of the Act lays out the structure of the Commission “Board”, how it operates and the appointment of the Commission Members -

“Establishment of the Financial Services Commission.
3.(1) There is hereby established the Financial Services Commission which shall consist of -

(a) the Commissioner, as Chairman;

(b) seven other persons appointed by the Governor, acting with the approval of the Foreign and
Commonwealth Secretary after consultation with the Commissioner, of whom -

(i) four shall have experience of regulation and supervision of finance business or shall practise as a solicitor, barrister, auditor or actuary in the United Kingdom; and

(ii) three shall be a solicitor, barrister, auditor or actuary and practise as such in Gibraltar or have experience in the practice of finance business in Gibraltar.";

(2) Every member of the Commission shall hold office for such period and upon terms as may be specified in the instrument appointing him.”

Additionally the Governor is able to dismiss a Commissioner member if -

“(3) If the Governor is satisfied that any member of the Commission -

(a) has been absent from three consecutive meetings of the Commission without the permission of the Commission;

(b) has become bankrupt or made any arrangement with his creditors;

(c) has been convicted of a criminal offence punishable by a term of imprisonment of 3 months or more;

(d) is incapacitated by physical or mental illness; or

(e) is in material breach of the terms under which he was appointed; or

(f) is otherwise unable or unfit to discharge the functions of a member.

the Governor acting with the approval of the Foreign & Commonwealth Secretary may by notice in the Gazette declare his office as a member of the Commission to be vacant and thereupon his office shall become vacant.

(4) Notwithstanding the foregoing provisions of this section, any member may resign his office by giving written notice to the Commission.

(5) Any member of the Commission who ceases to be a member shall be eligible for re-appointment except where he ceases to be a member by virtue of sub-section (3) of this section or where he would have ceased to be a member in that manner but for his voluntary resignation.”

The above appointments or removal from office are notified in the Official Gazette.

With respect to the Heads of Division i.e. the Head of Banking Supervision, Investment Services, Insurance and Fiduciary Services, the Commissioner, in consultation with the Commissioner Members, appoints them. The Commissioner, for similar reasons as those described above can remove a Head of Division from office.

5.2 The relationship between financial agencies should be publicly disclosed. The FSC is the sole financial services regulatory body within Gibraltar.
5.3 The role of oversight agencies with regard to payment systems should be publicly disclosed. There are no payment systems in operation in Gibraltar.
5.3.1 The agencies overseeing the payment system should promote the timely public disclosure of general policy principles (including risk management policies) that affect the robustness of systemically important payment systems. N/A
5.4 Where financial agencies have oversight responsibilities for self-regulatory organizations (e.g., payment systems), the relationship between them should be publicly disclosed. There are no SROs in Gibraltar.
5.5 Where self-regulatory organizations are authorized to perform part of the regulatory and supervisory process, they should be guided by the same good transparency practices specified for financial agencies. N/A

VI. Open Process for Formulating and Reporting of Financial Policies

6.1 The conduct of policies by financial agencies should be transparent, compatible with confidentiality considerations and the need to preserve the effectiveness of actions by regulatory and oversight agencies

Regulatory policy making is subject to a public consultation, the basis of which is disclosed on the FSC’s web-site at http://www.fsc.gi/fsc/consult.htm. All regulatory policy also needs to comply with the FSC’s Regulatory Objectives and Principles of Good Regulation.

6.1.1 The regulatory framework and operating procedures governing the conduct of financial policies should be publicly disclosed and explained. See 6.1.
6.1.2 The regulations for financial reporting by financial institutions to financial agencies should be publicly disclosed.

The regulations for the reporting of financial information from institutions licensed by the FSC governed by legislation are published on the FSC’s website. These regulations include guidance as to minimum requirements and formats :.

Banking - http://www.gibraltarlaws.gov.gi/articles/1992-11o.pdf

Investment and Fiduciary Services - http://www.gibraltarlaws.gov.gi/articles/1989-47o.pdf

Insurance - http://www.gibraltarlaws.gov.gi/articles/1987-10o.pdf
6.1.3 The regulations for the operation of organized financial markets (including those for issuers of traded financial instruments) should be publicly disclosed.

During 2005 the Prospectus Directive (2003/71/EC) was transposed into Gibraltar law. Additionally legislation is being prepared for the regulation of a listing exchange in Gibraltar. Q1 of 2006 will also see the transposition of the following directives linked to a listing exchange -
Securities Listing – 2001/34/EC
Transparency Obligations for securities issuers – 2004/109/EC

In addition to primary legislation the FSC will produce relevant guidance notes where necessary and inform industry accordingly. The above information will as is customary be provided on the FSC website.

6.1.4 Where financial agencies charge fees to financial institutions, the structure of such fees should be publicly disclosed.

Fees are set down in various Regulations, depending on the licenses carried by a particular institution.

Banking - http://www.gibraltarlaws.gov.gi/articles/1992s125.pdf

Investment & Fiduciary Services - http://www.fsc.gi/download/adobe/regsfees.pdf

Insurance - http://www.gibraltarlaws.gov.gi/articles/2007s046.pdf

All fee legislation is available from the Government of Gibraltar web-site at http://www.gibraltarlaws.gov.gi and the FSC web-site.

6.1.5 Where applicable, formal procedures for information sharing and consultation between financial agencies (including central banks), domestic and international, should be publicly disclosed.

The FSC has powers to share supervisory information with overseas regulators under the various Acts it operates – see reply 5.2

The FSC has also published on its web-site the format and preconditions for the handling of international regulatory requests.

6.2 Significant changes in financial policies should be publicly announced and explained in a timely manner.

Before there are significant changes to how the FSC regulates the financial services industry the FSC will consult the stakeholders involved. It gives those being supervised and other interested parties the opportunity to express their views on the perceived impact of the proposal.

The full text of the FSC’s consultation policy is readily accessible on the FSC’s website .

6.3 Financial agencies should issue periodic public reports on how their overall policy objectives are being pursued.

The FSC is required under the Financial Services Commission Act to publish an Annual Report. The Report contains an Executive summary of the policies objectives pursued.

The FSC’s Annual Report is available from the FSC’s website at
http://www.fsc.gi/fsc/annualreports.htm
6.4 For proposed substantive technical changes to the structure of financial regulations, there should be a presumption in favour of public consultations, within an appropriate period. Responsibility for amendments to the legislative framework falls upon Government of Gibraltar who consult with industry bodies.

VII. Public Availability of Information on Financial Policies

7.1 Financial agencies should issue a periodic public report on the major developments of the sector(s) of the financial system for which they carry designated responsibility. The FSC publishes the major regulatory developments relating to the financial sector as part of its annual report and continuously updates its web-site.
7.2 Financial agencies should seek to ensure that, consistent with confidentiality requirements, there is public reporting of aggregate data related to their jurisdictional responsibilities on a timely and regular basis.

All the supervisory divisions collect supervisory statistical data from licensed institutions. The FSC publishes industry wide statistical data which is available of the FSC website at - http://www.fsc.gi/fsc/statistics.htm

This data is updated regularly by each division.

7.3 Where applicable, financial agencies should publicly disclose their balance sheets on a preannounced schedule and, after a predetermined interval, publicly disclose information on aggregate market transactions. The FSC is under a statutory obligation to publish its annual report within three months from its audit.
7.3.1 Consistent with confidentiality and privacy of information on individual firms, aggregate information on emergency financial support by financial agencies should be publicly disclosed through an appropriate statement when such disclosure will not be disruptive to financial stability. Not applicable as the FSC does have the vires to provide emergency financial support.
7.4 Financial agencies should establish and maintain public information services. The FSC maintains a detailed website, containing inter alia, details of legislation, regulation, guidance and policy as well as details of licence holders.
7.4.1 Financial agencies should have a publications program, including a periodic public report on their principal activities issued at least annually. The FSC produces an annual report of its activities; this is also available on its website
 
7.4.2 Senior financial agency officials should be ready to explain their institution's objective(s) and performance to the public, and have a presumption in favour of releasing the text of their statements to the public. The FSC maintains open and transparent communications with all its stakeholders (which include members of the public) with its web-site being its main method of interfacing with stakeholders.
7.5 Texts of regulations and any other generally applicable directives and guidelines issued by financial agencies should be readily available to the public.

All financial services legislation is available from the FSC’s website at www.fsc.gi. Additionally administrative notices (secondary legislation), guidance notes and newsletters are readily available on the website.

Any amendments to the above documents or changes to FSC policy are notified to industry stakeholders via electronic message.

7.6 Where there are deposit insurance guarantees, policy-holder guarantees, and any other client asset protection schemes, information on the nature and form of such protections, on the operating procedures, on how the guarantee is financed, and on the performance of the arrangement, should be publicly disclosed.

As with the rest of the EU Gibraltar has deposit insurance scheme arrangements and an investor compensation scheme. The full details for these schemes are available for industry and consumer stakeholders from the following websites –

www.gdgb.gi (Gibraltar Deposit Guarantee Board)

www.gics.gi (Gibraltar Investor Compensation Scheme)

Note: Both of the schemes also produce freely available booklets which explain the mechanics of the respective schemes.

7.7 Where financial agencies oversee consumer protection arrangements (such as dispute settlement processes), information on such arrangements should be publicly disclosed. The FSC does not provide a dispute resolution process or act as an ombudsman in relation to complaints. There does exist a separate Citizen’s Advice Bureau and a Department of Consumer Affairs.

VIII. Accountability and Assurances of Integrity by Financial Agencies

8.1 Officials of financial agencies should be available to appear before a designated public authority to report on the conduct of financial policies, explain the policy objective(s) of their institution, describe their performance in pursuing their objective(s), and, as appropriate, exchange views on the state of the financial system. There is currently no formal mechanism through which this Principle can be satisfied other than through the Statutory review of the activities of the Commissioner under section 12A of the Financial Services Commission Act.
 
8.2 Where applicable, financial agencies should publicly disclosed audited financial statements of their operations on a preannounced schedule. The FSC is under a statutory obligation to publish its annual report within three months from its audit.
 
8.2.1 Financial statements, if any, should be audited by an independent auditor. Information on accounting policies and any qualification to the statements should be an integral part of the publicly disclosed financial statements.

The Annual Accounts of the FSC have to be audited by an independent auditor and the basis of auditing is disclosed in the notes to the financial statements and auditors report.

 
8.2.2 Internal governance procedures necessary to ensure the integrity of operations, including internal audit arrangements, should be publicly disclosed.

During 2005 the FSC subjected itself to a review of its operational procedures against the UK’s Combined Code of Corporate Governance. The full line by line assessment of how the FSC squares up to the code is published on the FSC’s website at -

http://www.fsc.gi/fsc/combinedcode.htm

Additionally the FSC has two Sub-committees one of which is look at the performance of the Commissioner the other is an Audit Committee.

8.3 Where applicable, information on the operating expenses and revenues of financial agencies should be publicly disclosed annually.

The operating expenses and annual revenue are published annually in the FSC’s audited financial statements.

www.fsc.gi/fsc/annualreports.htm
8.4 Standards for the conduct of personal financial affairs of officials and staff of financial agencies and rules to prevent exploitation of conflicts of interest, including any general fiduciary obligation, should be publicly disclosed.

The Commission publishes on its website details of the other commercial interests (including directorships) of Commission Members
http://www.fsc.gi/fsc/interests.htm

Officers are also subject to specific conditions of employment and declarations to prevent such conflicts from arising.
8.4.1 Information about legal protections for officials and staff of financial agencies in the conduct of their official duties should be publicly disclosed. Under Section 18 of the Financial Services Commission Act 1989 the Commissioner, Commission Members and Officer or Servants (i.e. staff or appointed professionals) are provided an immunity from liability if acting in good faith.