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
  • Additional Services
  • Capital Requirements
  • Additional Information

Investment Services Firms Classification

Under the IFPR, investment firms fall into four classes as follows:

  • Systemically important investment firms (or Class 1A firms) – those investment firms considered to be sufficiently important to the orderly functioning of the financial markets in which they operate that they should be classified as credit institutions and subject to the prudential requirements in the current Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR). 
  • Large investment firms (or Class 1B firms) – large (but not systemically important) investment firms that deal on own account and/or carry out underwriting/placing on a firm commitment basis. These firms will remain subject to the prudential requirements under the current CRD/CRR.
  • Non-S-NII (Non-small and non-interconnected investment) firms (or Class 2 firms) – non-systemic investment firms that exceed specific quantitative thresholds. These firms are subject to the full scope of the IFPR.
  • S-NII (Small and non-interconnected investment)  firms (or Class 3 firms) – small investment firms with simpler business models and a reduced scope of activities. These firms are subject to requirements under the IFPR which are proportionate to the risks that they pose to the public and the financial markets in which they operate.

For further information about IFPR, please click here.

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

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 (Schedule 2 of the Financial Service Act) will specify the class 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 products, which include spread betting and rolling spot foreign exchange (FX).
  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 [email protected] for further information.

 

Application Process

Following successful completion of the pre-application process, applicants should submit an application in line with the Staged Application for Authorisation Approach.

Initially, the applicant will only submit the Stage 1 application information - it is important that only Stage 1 information is provided at the outset of the application process.

The GFSC will communicate to the applicant that the application can progress to the next stage once the GFSC is satisfied with the content provided at the current stage. The applicant will then be invited to submit the further information required at the next stage of the application process.

Please request cloud access from the GFSC to submit the information requested, via e-mail to [email protected], stating in the subject field: ‘Name of Applicant – Application’.  Paper copies are not required unless indicated by the 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.  

Stage 1 - Business Model, Capital & Key Individuals

The following is to be submitted for Stage 1: 

  • Application Fee (in full);
  • Application Form;
  • Stage 1 of the Investment firms Comprehensive Business Plan (not including Stages 2 and 3).  To note that the applicant’s business plan should be bespoke and tailored to the business of the applicant;
  • Controller Form (for each Controller);
  • Internal Capital Adequacy and Risk Assessment (ICARA) document;
  • Establishment of Risk Committee (if applicable);
  • Confirmation of Professional Indemnity Insurance;
  • Where products/services are shared across the Group, evidence that an independent transfer pricing exercise has been carried out.

On receipt of the application fee and Stage 1 documents, the GFSC will confirm the GFSC Supervisor who has been assigned to assess the application for authorisation.

Any missing or additional sector-specific documents and/or information required by the GFSC to complete Stage 1 will be communicated to the applicant during Stage 1.

When the GFSC is satisfied with all the responses and information/documentation received, the GFSC will inform the applicant that its application can progress to Stage 2.

Stage 2 - Risk Management, IT Systems, Corporate Governance & Financial Crime

The following is to be submitted for Stage 2: 

  • Stage 2 of the Investment firms Comprehensive Business Plan (not including Stage 3);
  • Documentation and information including, but not limited to:
    • Corporate Governance and control
    • Business Continuity Management Plan
    • IT infrastructure, Cyber and systems including outsourcing arrangements
    • Operational & Outsourcing Risk including material outsourcing arrangements
    • Systems controls & Risk Management
    • Financial Crime controls, compliance with Anti-Money Laundering/Combating the Financing of Terrorism requirements (as applicable)
    • Risk Methodology and framework policy documents
    • Risk Register & controls - showing consideration of K factors (K-CON)
    • Disaster Recovery Plan 
    • Updated business plan, if required. 

Any missing or additional sector-specific documents and/or information required by the GFSC to complete Stage 2 will be communicated to the applicant during Stage 2.

When the GFSC is satisfied with all the responses and information/documentation received from an applicant, the GFSC will inform the applicant that its application can progress to Stage 3.

Stage 3 - Conduct of Business, Non-Financial Resource, Policies & Procedures

The following is to be submitted for Stage 3: 

  • Stage 3 of the Investment firms Comprehensive Business Plan;
  • Documentation and information including, but not limited to:
    • Non-financial resources
    • Compliance structure
    • Conduct of Business (Full Conduct Risk Framework documents)
    • Detail of KPIs
    • Consumer Duty compliance (as applicable)
    • Operational Resilience compliance (as applicable)
    • Remuneration Policy 
    • ESG Policy
    • Diversity Policy
    • Investment Policy
    • Conflict of Interest Policy
    • Conflict of Interest Register
    • Liquidity/solvency policies
    • IFPR liquidity requirement
    • Internal Audit Plan 
    • Complaints Handling Policy 
    • Terms of Reference of the Board, Board sub-committees, Risk Committee and/or Audit Committee, Underwriting/Pricing committees, as applicable 
    • Audit, accounting, and banking arrangements 
    • Disruptions Log
    • Professional Indemnity Insurance 
    • Client facing documents, where advice is to be provided
    • Contracts with parties to whom material operational functions are outsourced 
    • Completed and signed Regulated Individual Forms and Non-Executive Director Forms
    • Mobilisation Plan (if applicable).

When the GFSC is satisfied with the Stage 3 responses and information, the application will move to a GFSC decision for authorisation. 

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 defined by IFPR. 

Refer to the Own Funds and Initial Capital under the IFPR section here.

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.