Applying for a permission

Investment firm

About

This section sets out:

  • What an Investment Firm is and what this regulated activity would allow you to do
  • Authorisation Process
  • Capital Requirements
  • Additional Information

What is an Investment Firm and what would this regulated activity allow you to do?

There are three main types of firms covered in the Financial Services Act 2019 (Act):

  • Category 1 - Firms are permitted to deal as principal, agent and arrange deals for investors, give investment advice and hold/control customer money and assets.
  • Category 2 - Firms are permitted to deal as agent and arrange deals for investors, give investment advice and hold/control customer money and assets.
  • Category 3 - Firms are only permitted to arrange deals for investors and give investment advice.

The design of the Act is to protect investors and safeguard market integrity by establishing a set of harmonised requirements governing the activities of authorised firms and to promote fair, transparent, efficient and integrated financial markets.

The requirements under the Act (and underlying regulations) are relatively extensive and cover compliance arrangements, internal systems and controls, outsourcing, record keeping, conflicts of interest and the safeguarding of client assets or money held by firms.

Investment Firms, authorised in Gibraltar, are also required to be members of the Investor Compensation Scheme. Further information is available on the Gibraltar Investor Compensation Scheme website at www.gics.gi.

The permission issued will specify the category assigned and will set out, within a 'permitted business schedule' the scope of services and instruments that the firm can carry on business in, from the list below.

Investment Services and Activities – Core Services

  1. Reception and transmission of orders in relation to one or more financial instruments.
  2. Execution of orders on behalf of clients.
  3. Dealing on own account.
  4. Portfolio management.
  5. Investment advice.
  6. Underwriting of financial instruments or placing of financial instruments on a firm commitment basis.
  7. Placing of financial instruments without a firm commitment basis.
  8. Operation of Multilateral Trading Facilities.
  9. Operation of an Organised Trading Facilities.

Ancillary Services – Non-Core Services

  1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management.
  2. Granting credits or loans to an investor to allow him to carry out a transaction in one more financial instruments, where the firm granting the credit or loan is involved in the transaction.
  3. Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings.
  4. Foreign exchange services where these are connected to provision of investment services.
  5. Investment advice.
  6. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments.
  7. Services related to underwriting.

Financial Instruments

  1. Transferable securities.
  2. Money-market instruments.
  3. Units in collective investment undertakings.
  4. Options, futures, swaps, forward rate agreements and other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash.
  5. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event).
  6. Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF.
  7. Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls.
  8. Derivative instruments for the transfer of credit risk.
  9. Financial contracts for differences.
  10. Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistic that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not mentioned previously, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.
  11. Emission allowances consisting of any units recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme).

 

There is a small range of investment activity that is not authorised under the Act, which relates to investment activity where the instrument concerned is not a financial instrument designated within the Act. 

Under the Act, a firm is also able to request authorisation to act as a Multilateral Trading Facility (MTF), an Organised Trading Facility (OTF) and a Regulated Market. If you are interested in applying for an authorisation to act as a MTF, OTF or a Regulated Market, please contact authorisations@gfsc.gi for further information

 

Application Process

Applicants should submit an application pack with all relevant documents. We will not consider an application complete if there are any outstanding documents.

The application pack must consist of:

  • Application Fee;
  • Application Form;
  • Returns should be submitted under the standardised reporting framework established by the European Banking Authority, COREP. If the firm wishes to be exempt from the standardised reporting framework under Article 95(2) of the EU Capital Requirements Regulations (No. 575/2013) it should request such exemption for GFSC approval.
    • Stress Test on Financial Projections;
    • Profit and Loss account;
    • Balance Sheet;
  • Regulated Individual Form (for each Regulated Individual);
  • Non-Executive Director Form (for each non-executive director);
  • Controller Form (for each Controller);
  • Business Plan;
  • Internal Capital Adequacy Assessment document (ICAAP)
  • Recovery Plan (required for Category 1 Investment Firms only) (more information on this please click here);
  • Risk methodology and/or threat assessment matrix; 
  • Mapping assessment of how the application meets the relevant legislative threshold requirements (i.e. statutory/regulatory criteria for licensing under relevant Act); and
  • Any other document the applicant considers the GFSC should take into consideration as part of the application.

Please request cloud access via E-mail at authorisations@gfsc.gi  in order to submit the Application Pack. Please include the following information in the subject field: ‘Name of Regulated Firm/Applicant – Application’. Paper copies are not required unless indicated by the Authorisation team.

Please note that we accept signed signature copies sent via e-mail and electronic signatures, which must originate from the Regulated Firm /Applicant’s domain.  

 

Additional Services

Regulated Firms that are already authorised by the GFSC may apply to extend their permission to provide additional financial or professional services. If you are seeking authorisation for additional services, please contact the Authorisation team in order for us to determine what documents are required for submission.

The below sets out an overview of the expected information requested:

  • Application Fee (if applicable);
  • Revised Business Plan;
  • Financial Projections for the next 3 years, clearly identifying the impact of the additional business:
  • Profit and Loss account
  • Balance Sheet
  • Stress Test on Financial Projections
  • Regulated Individual Form (for any new individual carrying out a Regulated Individual function);
  • Controller Form (for any new Controllers within the structure); 
  • Revised Internal Capital Adequacy Assessment (ICAAP); and
  • Any other document the applicant considers the GFSC should take into consideration as part of the application.

 The Regulated Firm should consider the following:

  • What new services/permissions it requires;
  • The type of new business/activity;
  • Where the business will be sourced;
  • Resources to deal with the additional business;
  • The impact of the additional business on its capital requirements; and
  • What changes are being effected to its systems and controls?

Capital Requirements

The minimum initial and ongoing capital requirements are:

Category 1 Category 2 Category 3
€730,000 €125,000 €50,000

Firms who obtain a permission to carry on an activity with respect to investments are required to hold a minimum initial and ongoing capital of £10,000.

Firms holding multiple permissions may be required to hold the aggregate of the capital required for each permission prior to conducting the proposed activity, and on an ongoing basis. In these cases, we will consider the level of capital on a case-by-case basis. We advise that you discuss this with us ahead of your application.

 

Additional Information

The business plan should comprehensively set out:

  • What services the firm intends to carry out and how it proposes to conduct the activity;
  • Board structure and terms of reference, including details of any sub-committees set up by the Board to assist them carry out their duties;
  • The firm’s risk management function;
  • An assessment of the main risks facing the firm and how these are to be mitigated
  • The resources that are to be made available and the systems that the applicant intends to employ;
  • Target market;
  • How clients will be sourced;
  • How records will be maintained;
  • How, and by whom, any significant decisions will be made;
  • Structure charts outlining both in-house and outsourced operations;
  • Details of its compliance with the Anti-Money Laundering requirements;
  • Details of outsourcing arrangements and how the firm will monitor and oversee these, including the controls implemented by the firm on these arrangements; and
  • If the applicant forms part of a larger group, applicants should provide details of the activities of the group and a description of its structure.

The GFSC will be seeking evidence that the firm has considered, documented and implemented the risk, compliance and operational issues associated with the proposed activities.

Applicants should ensure that the business plan is coherent with the firm’s risk appetite and capacity.