Joey Garcia and Selwyn Figueras from ISOLAS were in Geneva last week to attend the Gibraltar Day in Geneva lunch hosted by the Minister for Financial Services and Gaming, Albert Isola, as well as to attend the Invest ’15 conference organised by Voxia which took place at the Bâtiments des Force Motrices.
The Gibraltar Day lunch was attended by a large number of Geneva-based financial services professionals who heard from the Minister about the latest developments in Gibraltar and how Gibraltar offers one of a limited number of solutions to the many independent asset managers in Switzerland who are now facing a new era of financial services regulation, which although largely equivalent to EU standards, does not guarantee access to the European market.
Gibraltar as a domicile of choice for independent asset managers seeking to access the EU
“Gibraltar as an alternative option for independent asset managers facing this potentially existential crisis to consider” is the message that Gibraltar Finance and ISOLAS, with a number of other stakeholders, also took to the two days of the Invest ’15 conference. Joey Garcia spoke at the Invest 15 conference about the practicalities and benefits of a European ‘passport’ for financial services from Gibraltar across the EU, highlighting that a MiFID or AIFM licence from Gibraltar would have the same effect as an equivalent license from Luxembourg, London or Frankfurt.
The impact of the regulations taking effect from 2016 cannot be overstated. By most accounts an industry of thousands of independent asset managers will likely condense to become a fraction of its size, possibly numbering in the hundreds. For those who believe in their growth opportunity within the developed EU market, or those who wish to maintain client relationships with EU domiciled individuals, the Gibraltar option is one that should be actively considered.
The EU accounts for only 7% of the global population but 23.8% of global wealth (around $17.95 Trillion) and is likely to remain a highly relevant market for Swiss managers. Regulation will continue to develop, and although regulatory arbitrage may become a thing of the past, there will continue to be arbitrage in terms of the costs of running such operations, and arbitrage in what that regulation offers an asset management business (in terms of automatic EU access from Gibraltar, but additional requirements in respect of a Swiss regulated business seeking to gain access under third country provisions).
Options for setting up in Gibraltar
The Gibraltar establishment options are varied. One possibility is that of using a platform or incubator that can assist in the establishment of your business, as well as providing the necessary resources. Another is as a newly established stand-alone operation. ISOLAS are able to advise and assist with either option. Joey Garcia commented that ‘it is important to understand the likely differences between the requirements to establish a regulated presence in Gibraltar versus the establishment of a Swiss Branch in a European domicile after the introduction of MiFID II. The reason for this is that an EU member state may require a Swiss regulated manager to establish a branch in that country before being able to provide services there. This would mean that firstly, the Swiss firm would be required to meet the equivalent standard of regulation; secondly, the Swiss firm would also be required to comply with the governance requirements of MiFID II and the Capital Requirements Directive (CRDIV), as well as being required to be a member of an EU investor compensation scheme. Thirdly the Swiss firm would also need to comply with various organisational, conduct of business, trading and other MiFID II requirements and become subject to the supervision of the EU national competent authority where the branch is established. In that context it is certainly worth considering a stand-alone licensed EU operating presence in order to ensure EU access.’
ISOLAS is confident about the opportunities that Gibraltar offers for Swiss asset managers looking for a strong and reliable commercial foothold as the operating environment at home becomes ever more challenging for them but there can be no doubt that Switzerland will emerge from this very difficult episode in a stronger position than it is today. The MoU signed between the Gibraltar FSC and the Swiss regulator FINMA earlier this year offers the possibility of a Gibraltar AIFM solution for Swiss managers seeking to passport and sell their funds to professional investor in the EU. The introduction of the new wave of Swiss regulation at the same time as the introduction of MiFID II, also offers interesting solutions to Swiss managers seeking to gain, maintain or secure EU access.
Selwyn Figueras, Head of Business Development, explained that the survival of the Swiss financial services industry is not in question, even if it will look a little different when the dust settles. Switzerland, as a centre for private client and financial service business “clearly continues to have much to offer over many other financial business centres around the world. The importance of the Gibraltar solution to Switzerland is that it offers a complementary solution that will help soften the blow to Swiss business today and open doors to the European marketplace for pioneering Swiss asset management professionals proactively working to guarantee the medium to long term viability of their business tomorrow.”