By Jonathan Garcia, Partner, Head of FinTech & Funds, ISOLAS LL
Recently the regulations surrounding Experienced Investor Funds (EIF’s) in the jurisdiction changed – and for the better as well.
Experienced Investor Funds are specialist funds designed for high net worth, professional, or experienced investors. Experienced Investor Funds are highly versatile vehicles suited to holding assets in numerous sectors, traditionally, these funds face a lower regulatory burden compared to other fund structures thanks to their use by more experienced investors. However, the Gibraltar Financial Services Commission (GFSC) maintains the right level of oversight to protect both investors and the reputation of the sector in Gibraltar.
An increased pool of directors
The Government of Gibraltar has evolved the regulations in the Financial Services (Experienced Investor Funds) Regulations 2020 by removing the local residency obligation for certain directors and other controllers of Experienced Investor Funds. The move will add to the talent pool that can already be accessed locally to act as directors of funds choosing to domicile on The Rock. With an increased pool of directors and abilities to draw from, it is expected that more funds may seek to domicile in Gibraltar. The new increased flexibility to hire foreign directors will also bring new perspectives to Gibraltar business and further broaden the expertise of the industry in the jurisdiction. The changes to the regulations came into force on the 1st of September 2022.
The previous regulations, enacted in 2020, meant that it was necessary for at least one director of Experienced Investor Funds to be a Gibraltar resident. The new law removes the residency requirement altogether, but two directors are still required to be appointed. To protect investors and the financial system, the GFSC will still apply the same rigorous criteria for anyone wishing to serve as a director.
“The move will add to the talent pool
that can already be accessed locally
to act as directors of funds choosing
to domicile on The Rock”
In order to become a director of an Experienced Investor Fund, it must be demonstrated to the GFSC that the proposed individual has at least five years of relevant experience in providing services to investment funds and has the ability to ensure that that Experienced Investor Fund will be governed, controlled and monitored effectively having regard to a Policy Statement issued by the GFSC outlining its expectations. The success of the Experienced Investor Fund regime is reliant upon its directors understanding and complying with their obligations and responsibilities as directors, and the importance of this cannot be understated.
The changes to the regime come as Gibraltar maintains its position as a top destination for cryptocurrency hedge funds. In the fourth annual report compiled by PwC and Elwood Asset Management, the jurisdiction was named the third preferred choice for managers globally, behind only the Cayman Islands and the British Virgin Islands – and ahead of the United States.
Gibraltar welcomes the change in regulation. We believe that it is a further signal to the international business community that Gibraltar is an evolving and modern jurisdiction.
Right touch, not light touch
We believe the changes underscore the reason for international investors to do business in Gibraltar. Removing the need for a director to be a Gibraltar resident brings us in line with many of our international competitors, which, when viewed alongside our common law legal system, favourable tax system and ‘right touch, not light touch’ regulator reinforces our position as a major jurisdiction in the industry.
Peter Isola, Senior Partner at ISOLAS commented: “…changes to the EIF regulations showcase Gibraltar’s innovative, vibrant, and robust financial services system, giving businesses the confidence and security, they need to invest and grow.”