In conducting it affairs, and particularly when considering new regulatory requirements, the Commission takes into account the following regulatory objectives:

(a) To promote market confidence;
(b) The reduction of systemic risk
(c) To promote public awareness
(d) The protection of consumers; and
(e) The reduction of financial crime, including the funding of terrorism.

Whenever possible the FSC will also publish a summary of how new requirements meet these statutory objectives. There are, however, cases where regulatory requirements must be imposed, for example in the case of EU Directives, where such considerations may not be practicable.

Principles of good regulation

In addressing our statutory objectives, we will have regard to several principles of good regulation. These are not set out in statute but rather represent what we consider necessary to achieve our statutory objectives. When undertaking any action we consider these principles

The need to use our resources in the most efficient, effective and economic way;
The principle that the duty to manage a business falls upon the senior management of that business. The Directors of a licenceholder, both executive and non-executive have ultimate responsibility for ensuring that the business is properly run and operates in accordance with regulatory requirements;
The principle that a burden or restriction which is imposed upon authorised firms should be commensurate with the benefits expected to result from such action, so ensuring that the Authority is striking the right balance between achieving the statutory objectives and ensuring that the impact on those being regulated is not such as to be counterproductive;
The desirability of facilitating innovation in connection with regulated activities;
The international character of financial services and markets and the desirability of maintaining the competitive position of Gibraltar; and
The need to consider the adverse effects of regulation on competition and consumer choice.

The first principle, recognises that our resources are finite. These are derived from fees paid by regulated firms (which are therefore reflected in the prices that consumers pay for financial services), together with a contribution (as reflected in our Annual Report) from the Government of Gibraltar.

But the number of regulatory actions we might undertake is potentially unlimited. Against this background, we must therefore decide how to use our resources in the most efficient way.

As well as the direct financial cost, employing resources in a given function has an opportunity cost (i.e. resources devoted to one function are not available to another). This requires a rigorous process for determining priorities among the tasks we undertake

In the second principle, we expect a firm's management to be responsible for its activities and for ensuring that the firm complies with regulatory requirements. This guides us away from being unnecessarily intrusive and towards placing responsibility on a firm's management to adopt proper controls.

The principle of proportionality means that we have to assess the cost of any proposed solution against the benefits that are likely to result. It also requires us to assess whether lower cost options are available.

The fourth principle guides us towards actions that facilitate innovation by avoiding unreasonable barriers to entry or restrictions on firms launching new products or services. This principle is linked to the following three in that diverse and competitive markets are most likely to promote consumer choice and product development.

Under the fifth we consider the impact of overseas factors on the Gibraltar markets and consumers. It, too, is concerned with competition, making specific reference to the need to preserve the competitiveness of the Gibraltar finance industry internationally.

The last principle addresses competition directly. Their starting point is that competition confers benefits, and therefore we should avoid unnecessarily impeding competition and should choose options that promote it where possible. This includes avoiding creating barriers to entry into markets.