The Financial Services (Experienced Investor Funds) Regulations 2012 (EIF Regulations) allow for the establishment of experienced investor funds (“EIF’S”). These are funds designed for professional, high net worth or experienced investors (for details on the establishment and operation of such funds please refer to the EIF Regulations).
The Financial Services (Experienced Investor Funds) Regulations 2012 were published on 12 April 2012, replacing the Financial Services (Experienced Investor Funds) Regulations, 2005.
There is a fast track notification process for EIF’s which makes it possible to establish the fund within a short time.
The administrator of an EIF will either:
In both instances the following documentation is required at notification stage:
An EIF has to issue an offer document that complies with the provisions of the EIF Regulations.
It must contain such information as would reasonably be required and expected by participants, and potential participants, and their professional advisers for the purposes of making an informed judgment about the merits of participating in the experienced investor fund and the extent of the risks of participating in the fund. The Commission’s responsibility is not to separately check the documentation for compliance with the requirements. Any breaches subsequently identified may result in the fund ceasing to qualify as an Experienced Investor Fund. The Commission places great importance on the declarations/warranties made by directors, lawyers and administrators of EIFs.
An experienced investor is a person or body who, at the time of the investment falls into one of the following categories:
Each investor has to provide a written confirmation that he is an "experienced investor" and that he has received and accepted the investment warning required to be contained in the EIFs offer document.
A request for name approval of a company with the name ‘Fund’ in its name would be sent to the FSC before the company is registered with Companies House. The following details need to be provided to the FSC:
In practice EIF are primary established as investment companies but unit trusts or partnerships are also possible. An EIF may also be constituted as a Protected Cell Company (PCC); this special type correlates with an Umbrella-fund. With a PCC-structure any assets attributable to that cell (sub funds) are – save to the extent that the company may have agreed so - isolated from other cells and therefore protected; thus, in no case cellular assets not attributable to the relevant cell shall be used to satisfy the liability of that other cell (Section 13 (1) of the Protected Cell Companies Act 2001). Alternatively, an existing EIF, established as a "normal" company, may be converted into a PCC.
The FSC has developed a new process for EIF’s which are set up as PCC’s, or funds with various sub funds. Funds will only be permitted to be set up as PCCs (or funds with various sub funds) if the FSC is satisfied that the associated risks are reduced.
When a new fund PCC name approval or notification is received or in the event that a new cell or sub-fund is launched, then the points listed in the policy below should be followed. The onus will be on the fund to provide details to satisfy the FSC:
There are no investment restrictions for an EIF. Although the Offer Document should be transparent regarding what it will invest in and the specific risks for that type of investment(s).
It is a requirement as per the EIF Regulations that a fund shall have at least two Gibraltar ordinarily resident directors authorised by the Authority to act as the director of an experienced investor fund. In order for an individual to be considered by the FSC, proposed applicants are required to apply for a Class VIII licence under the Financial Services (Investment and Fiduciary Services) Act.
Applicants will be required to submit an Individual Questionnaire and are obliged to accompany this with a summary detailing their fund related experience and the prescribed application fee set by the Experienced Investor Funds (Fees) Regulations 2010 (Fees Regulations). The FSC would expect fund related experience to include, but not be limited to, involvement providing significant services to a fund, oversight of fund related activity or a position of responsibility within a fund.
An applicant for an EIF directorship will traditionally have at least 5 years related experience providing services to funds. The FSC would expect fund experience to include, but not be limited to:
If the length of time servicing funds is less than 5 years, consideration will be given as to whether the individual holds experience, at a senior level, in a related field such as banking, investment, legal, accounting or company management, which supplements any existing fund related experience. This however would need to be to the satisfaction of the FSC.
An individual who has solely been dealing with funds at an adequately senior level for a period of less than 5 years, such as the role of a fund administrator, could also be considered to meet the criteria by the FSC particularly if they also possess the expertise in a related field (as set out above).
If under any circumstances it is not clear as to whether the individual has sufficient experience, they may be considered for a restricted licence. This will enable them to accumulate the required knowledge and experience of such a role.
The FSC allows applicants who do not appear to hold sufficient said experience to be issued with a restricted licence limited to a specific fund. This shall only be permitted where the board collectively has sufficient fund related knowledge and experience. Applicants that have a restricted licence are encouraged to submit to the FSC, at the initial stages of setting up a fund, evidence relating to the fund knowledge and experience of individuals on the board. It is envisaged that this restricted licence will be expanded to a full licence to provide EIF directorships once the individual has been able to provide evidence that sufficient general knowledge, expertise and experience has since been obtained.
Process for restricted directors being appointed to EIFs
Please note that in order for a restricted director to be able to provide an EIF directorship, the FSC should be contacted and the relevant information submitted for each individual EIF directorship to be considered and if approved the FSC will amend the director’s licence accordingly.
Approval to provide directorships to specific EIFs will depend on the collective skills and experience of the other directors of the EIF. Therefore, for each separate EIF, a restricted EIF director will be required to provide the FSC with evidence of fund related knowledge and experience of each individual, and hence the board as a whole, together with the investment objectives and strategy of the fund prior to appointment as an authorised director to that EIF.
If it is considered necessary the FSC will meet the restricted EIF directors to fully comprehend their understanding and responsibilities to the fund.
For new EIF notifications, intention to act as an EIF director, together with the other directors’ fund related experience, should be provided to the FSC well in advance of the EIF registration document being submitted.
For existing EIFs, please note that changes to the offer document and the relevant material change documents should not predate the date that the FSC extends or grants a restricted EIF directorship’s licence.
The FSC’s policy does not permit both EIF directors, acting in an authorised capacity on an EIF’s Board, to hold restricted EIF director licences.
This policy will be reconsidered in specific cases and will involve a consideration of the competence of the board to ensure appropriate diversity of qualities and the effective functioning of the fund.
The FSC will take into consideration as part of its assessment the following:
In accordance with the residency requirements of an authorised EIF director, as specified in the EIF Regulations, the current approach taken by the FSC when determining the residency requirement for EIF directors is set out below.
The EIF Regulations stipulate that an EIF director is to be “Gibraltar ordinarily resident”. The FSC has interpreted this requirement to mean that the applicant has a real and tangible connection with Gibraltar for instance, working in Gibraltar for a significant proportion of the year. That is to say that an EIF director is connected to Gibraltar via his place of residency or that his regular place of work is in Gibraltar (albeit the individual may reside in Spain, however within reasonable distance from Gibraltar).
The above interpretation therefore does not seek to confirm an applicant’s tax residence, but serves to ensure that the FSC is able to effectively exercise its powers by virtue of the individual being normally located within, or within a reasonable distance from, Gibraltar. Hence avoiding a situation where the FSC is unable to contact a licensee.
The matter will be dealt with on a case by case basis.
The conditions of an EIF director on ordinary residence will depend on several factors; these include, but are not limited to:
An application to obtain a licence as an EIF Director should be submitted together with the application fee, currently prescribed at £250.
Where consent is granted to issue an EIF director licence, prior to its issue the annual fee should be paid.
The EIF Fees Regulations set out the prescribed fees payable by EIF Directors. It should be noted that subsequent annual fees will be invoiced to EIF Directors in April and shall be paid within 28 days from 1 April in any financial year, as stipulated by the EIF Fees Regulations.
It should be noted that if the relevant annual fees are not paid in a timely manner, penalty fees will be payable.
The EIF Director Return should be completed in respect of the period ending 31 December and submitted within 4 months after the period end, i.e. no later than 30 April after the stated reporting period.
The questions should be answered in relation to all funds to which EIF directors provide directorship services to.
EIF directors are expected to notify the FSC of any significant concerns they may have in relation to EIFs.
Additionally, the FSC expects to be informed in cases where the EIF director resigns from a board as a result of concerns with the fund.
When a director wishes to surrender his/her licence the following must be provided to the FSC:
All documentation must be submitted by no later than 31 March. Note that if the EIF Director has not submitted all relevant documentation for deregistration prior to 31 March, the annual fee will remain payable.
The surrender of the licence will take effect once all the relevant information and documentation have been received by the FSC.
Subject to the EIF Regulations an EIF shall have a depositary. In practise usually a credit institution based in Gibraltar will be appointed, however a registered office in Gibraltar is not required.
An EIF is not required to have a depositary where the fund is a closed end fund or the Authority makes a determination to that effect.
The administrator of an EIF must be domiciled and regulated in Gibraltar or, if not so authorised, be established in a jurisdiction where it is regulated in accordance with a legislative and regulatory regime that provides at least equivalent protection to the regime in Gibraltar. The appointment of fund administrators established outside of Gibraltar requires the Commission’s consent and is also subject to the consent of the Minister with responsibility for financial services.
Where an administrator has been given consent by the Minister, these will be listed on the Commission’s website.
Consent and listing of non-Gibraltar administrators does not mean that these have been approved or licensed by the Commission. The Commission has no regulatory oversight of these entities and such cannot be considered as approval/licensing of the entity.
The appointment of fund administrators based outside of Gibraltar will only be considered in certain circumstances such as redomiciliations or funds of a significant size.
An agent for service, based in Gibraltar, should also be appointed in these instances who will be the point of contact locally for the Commission and other stakeholders of the fund.
Details of material changes should be notified to the Commission within 20 (working) days of the change taking place. It is the responsibility of the fund’s controller to ensure that all material changes to information originally provided are notified to the FSC.
In accordance with Regulation 12 of the EIF Regulations, a return must be submitted on an annual basis by the controller in respect of each experienced investor fund. Audited financial statements are also to be submitted within six months of the fund’s year end.
Generally, EIFs are required to submit a copy of the AFS to the FSC within 6 months of the end of its financial reporting period. However, if it is not submitted by this date, rationale for the delay will be sought and the issue monitored. Furthermore, the fund will also be advised of the penalty fees accruing.
Where this is outstanding for over two weeks, the Commission will issue reminders to the EIFs and continue to advise that penalty fees will be accruing until the outstanding AFS is submitted. Moreover, if after a period of three months from the submission deadline the AFS has still not been received, the Commission will consider making a recommendation to restrict the EIF’s activity.
The FSC undertakes to process notifications for EIFs within 10 working days.
Essentially all notifications received 10 working days before the establishment of the fund will receive a written notice from the Commission within 10 working days (as per Regulation 4(4)). If further information is requested the Commission will endeavour to review and get back to the fund or register the fund within 10 working days.
For funds notifying within 10 working days of the establishment of the fund, the Commission will endeavour to register the fund within 10 working days.
There may be instances where these service level standards are not attainable, such as where there are significant areas of the notification that need to be explored further, in these instances the fund's contact person will be made aware of this.
It should be noted, however, that these timeframes can only be met when the notification is complete and it is therefore up to the fund to ensure that a full submission of a notification and accompanying documents has been made.
The FSC undertakes to process all notifications for External Fund Administrators to be listed on the FSC’s list of approved External Fund Administrators within 28 working days.
There may be instances where these service level standards are not attainable, as the FSC may seek independent verification or further research. Furthermore, information may also be requested from the relevant regulator. This can sometimes cause delays to the processing. In these instances, the External Fund Administrator’s contact person will be made aware of this.
It should also be noted that as per Regulation 2(b) of the EIF Regulations the FSC also needs to request the consent of the Minister with responsibility for Financial Services. The FSC's Service Level standards will therefore cover the work involved by the FSC. Please note that once the FSC receives consent from the Minister of Finance, this will be processed by the FSC within 5 working days.
It should be noted that these timeframes can only be met when the External Fund Administrator Form is complete and it is therefore up to the External Fund Administrator or its legal advisor to ensure that a full comprehensive submission of the External Fund Administrator Form has been made.
For queries please e-mail the funds division at: firstname.lastname@example.org.