HFM Gibraltar2015

HFMWEEK S P E C I A L

R E P O R T

GIBRALTAR 2015 COMPLIANT Fully compliant with AIFMD and friendly to non-EU managers

UNIQUE Offers full EU passporting but exempt from EU VAT

SPEED TO MARKET Fastest fund vehicle in the EU

FEATURING GFIA // Gibraltar Finance // Gibraltar Stock Exchange // Grant Thornton // Hassans // Nexus Fund Administration

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INTRODUCTION

G Joey Garcia, chairman, Gibraltar Funds & Investments Association, for and on behalf of the GFIA Executive: James Lasry, Joanne Sene, Yan Delgado, Carlos Martins, Jon Tricker, Johann Olivera, Benjy Cuby, Moe Cohen.

Published by Pageant Media Ltd LONDON Third Floor, Thavies Inn House, 3-4 Holborn Circus, London, EC1N 2HA T +44 (0) 20 7832 6500 NEW YORK 1441 Broadway, Suite 3024, New York , NY 10018 T +1 (212) 268 4919

ibraltar continues to provide a unique and attractive offering to funds and asset managers within the European context. We remain completely EU compliant and onshore, with the full benefits of the European passport granted to Gibraltar-based investment firms and AIFM’s, while at the same time remaining outside of the EU for the purposes of VAT. This is completely unique.

The Gibraltar story continues to gather momentum and in this year's Global Financial Centre’s Index (16th Edition) Gibraltar ranked higher than Cayman, Malta, the Isle of Man or Jersey as a financial centre.

There are a number of factors that continue to make Gibraltar unique, but as the implications of AIFMD are better understood, in particular by those managers from outside of the EU who are looking for gateway solutions, we expect the Gibraltar offering to be an attractive one.

Unlike many other smaller European countries or territories, Gibraltar already has a full suite of AIFM service providers, including (critically) AIFM depositaries. Align this with the AIFM management companies also offering their services from Gibraltar, and the fund regime fully geared up for AIFMD, and you have an excellent and alternative solution.

However, Gibraltar is not resting on its laurels. There are exciting new projects such as

Gibraltar’s new stock exchange, GSX Limited, which is primarily geared up for fund listings and offers both EU and non-EU funds the opportunity to take a European listing on the exchange. The Gibraltar Finance Centre continues to support the industry and the Gibraltar Funds and Investments Association (GFIA) with its activities in promoting the jurisdiction, both in London and further afield, and GFIA itself continues to actively promote the Gibraltar offering through its executive committee, and its members.

There is never a one-size-fits-all approach to any manager or fund, but GFIA certainly believes that there is a real value proposition for Gibraltar. If we are to see the private placement regimes across Europe expire in or around 2018, it is clear that managers will need to consider even more carefully their options for an AIFM compliant framework.

The frameworks and solutions on offer in some European jurisdiction can be prohibitive, or very restrictive and while we would never propose Gibraltar as a ‘softer’ option in an AIFM context, the reality is that the same benefit of a European passport can be obtained within a Gibraltar framework that can be more flexible than some of the one-size options that exist elsewhere. Managers should be thinking about long-term planning for their businesses, and as an association, GFIA would encourage those managers to consider Gibraltar.

Joey Garcia chairman, Gibraltar Funds & Investments Association

REPORT EDITOR Drew Nicol T: +44 (0) 20 7832 6659 d.nicol@pageantmedia.com HFMWEEK HEAD OF CONTENT Paul McMillan T: +44 (0) 20 7832 6622 p.mcmillan@pageantmedia.com HEAD OF PRODUCTION Claudia Honerjager SUB-EDITORS Eleanor Stanley, Luke Tuchscherer, Mary Cooch CEO Charlie Kerr GROUP COMMERCIAL MANAGER Lucy Churchill T: +44 (0) 20 7832 6615 l.churchill@hfmweek.com SENIOR PUBLISHING ACCOUNT MANAGER Tara Nolan +44 (0) 20 7832 6612, t.nolan@hfmweek.com PUBLISHING ACCOUNT MANAGERS Amy Reed T: +44 (0) 20 7832 6618 a.reed@ hfmweek.com; Jack Duddy T: +44 (0) 20 7832 6613 j.duddy@hfmweek.com; Alex Roper T: +44 (0) 20 7832 6594 a.roper@ hfmweek.com CONTENT SALES Tel: +44 (0) 20 7832 6511 sales@hfmweek.com CIRCULATION MANAGER Fay Muddle T: +44 (0) 20 7832 6524 f.muddle@pageantmedia.com HFMWeek is published weekly by Pageant Media Ltd ISSN 1748-5894 Printed by The Manson Group © 2014 all rights reserved. No part of this publication may be reproduced or used without the prior permission from the publisher

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CONTENTS

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06

FINANCIAL SERVICES

STREAMLINING AHEAD

14

ACCOUNTING

GIBRALTAR: THE KEY TO EUROPE FOR US FUND MANAGERS James Lasry, head of funds at Hassans, and president of the Gibraltar American Chamber of Commerce, speaks to HFMWeek about Gibraltar’s position as the gateway to Europe for US managers

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AIFMD – ONE YEAR ON Adrian Hogg, director of Grant Thornton Gibraltar, talks to HFMWeek to explain how AIFMD has been integrated into the business industry in Gibraltar

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A ONE OF A KIND OPPORTUNITY Moe Cohen, CEO of Nexus Fund Administration, talks to HFMWeek about what makes Gibraltar unique as an EU-compliant jurisdiction

Philip Canessa, senior finance centre executive at Gibraltar Finance, discusses Gibraltar’s achievements and plans for 2015 with HFMWeek

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FUND SERVICES

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STOCK EXCHANGE

STOCK EXCHANGE LAUNCHES IN GIBRALTAR Nick Cowan, managing director, Marcus Wohlrab, marketing director, and Philip Young, finance director, of the Gibraltar Stock Exchange, talk to HFMWeek about the exchange’s recent launch

When it comes to funds...

...Hassans leads the way International Lawyers

In recent years, the fund industry in Gibraltar has seen rapid and impressive growth. Gibraltar is now a serious option for individuals and companies considering where to base investment funds.

Hassans has been at the forefront of this development and in 2004 became the first firm in Gibraltar to set up a funds practice, quickly establishing itself as the “go to” firm.

Hassans is ranked as the sole leader for Investment Funds by Legal 500 and EMEA

describe the department as a “Rolls-Royce investment funds practice...led by James Lasry, a leading investment funds lawyer with first-class knowledge of the local and wider market”. (EMEA 2014 Edition) Hassans is fundamental to any fund being set-up in Gibraltar whether Private, EIFs, Non- UCITS Retail Funds, UCITS Funds or Protected Cell Companies.

Hassans - 75 years in Gibraltar.

TAX PLANNING • CORPORATE & COMMERCIAL • FINANCIAL SERVICES • FUNDS • LITIGATION • PROPERTY • TRUSTS

www.gibraltarlaw.com 57/63 Line Wall Road, PO Box 199, Gibraltar. +350 200 79000 • +350 200 71966 • business@hassans.gi

FINANCIAL SERVICES

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STREAMLINING AHEAD PHILIP CANESSA, SENIOR FINANCE CENTRE EXECUTIVE AT GIBRALTAR FINANCE, DISCUSSES GIBRALTAR’S ACHIEVEMENTS AND PLANS FOR 2015 WITH HFMWEEK

HFMWeek (HFM): How has Gibraltar developed as a jurisdiction in the last year?

Philip Canessa joined Gibraltar Finance in September 2013 as senior finance centre executive – funds and asset management, focusing on the development of the funds and asset management sectors. He has more than 30 years of experience in the financial services sector and was managing director of an investment firm managing hedge fund portfolios for 11 years. He also served as a board director of a number of funds in different jurisdictions.

Philip Canessa (PC): There have been a number of developments this year, not least of which was the implementation of the AIFMD which is no small feat for a jurisdiction of our size. Our regulator the Financial Services Commission (FSC) did a lot of work on AIFMD, on understanding how it affects different types of entities, how to remain competitive and all at the same time meeting EU requirements. The FSC created a tailored approach on dealing with some important aspects such as delegation and remuneration and maintaining speed to market for our funds regime. This involved collaboration between the regulator, the financial services industry and the government of Gibraltar.

The Gibraltar Stock Exchange (GSX) was recently granted authorisation by the FSC and has invited firms to apply for membership as ‘listing members’. It expects to be open for listings during the first quarter of 2015. The aim will be to list funds and therefore promote investor awareness of the financial standing and credibility of the issuer due to their obligations to meet the standards of the listing rules. This will enable greater transparency and due diligence on the funds listed. We are very excited about the new Gibraltar Stock Exchange.

We have continued to focus on a culture of compliance and in 2014 signed a Fatca intergovernmental agreement with the US. To date we have exchange of agreements to the OECD standard with 77 countries and territories; a small number of which are pending ratification.

Gibraltar received a glowing review from the OECD on our record on exchange of information. The 115-page phase 2 review report found that we were ‘compliant’

WE HAVE CONTINUED TO FOCUS ON A CULTURE OF COMPLIANCE AND IN 2014 SIGNED A FATCA INTERGOVERNMENTAL AGREEMENT WITH THE US

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(top grade) in seven out of the 10 essential elements examined and ‘largely compliant’ (second highest grade) in the remaining three. Gibraltar’s overall rating was ‘largely compliant’; which is the same as the United Kingdom and Germany.

HFM: How is Gibraltar planning to remain a competitive domicile in Europe?

PC: We will continue to focus on the three criteria, which we consider give us an edge over our competitors. These are: regulation, reputation and speed to market.

HFM: What are the unique advantages of being domiciled in Gibraltar?

PC: Our Experienced Investor Fund (EIF) vehicle with its pre-launch approval regime, where an EIF can be launched in 10 working days, makes it the fastest ‘time to market’ fund vehicle in the EU. Within the AIFMD, an authorised in-scope AIFM – which has already proven that it can meet requirements on risk management and has adequate controls in place – will be able to establish a new EIF and provide the requisite EIF and AIFM notification forms. Assuming that the requirements have been met, it would be registered as an EIF on the 10th day and passported to the relevant EU jurisdiction on 20th.

In Gibraltar there is no wealth, capital gains, investment income, value added or inheritance tax. There is only personal income and corporation tax. Since 2010, the standard rate of corporate tax has been 10%. The effective personal rate of tax is 25%, but if you are working in an industry such as financial services and possess specialist skills, as defined under certain regulations, and fulfil certain conditions, then your personal level of taxation is capped at just below ₤30,000, assuming that you are earning in excess of ₤120,000 p.a. That is also an attraction for investment managers and professionals to relocate to Gibraltar.

HFM: What developments have you planned for 2015?

PC: We will continue to market ourselves in the UK and Switzerland, which have been our traditional target markets but we also have plans to market further afield in Hong Kong and New York.

Within Gibraltar a restructuring of the FSC is planned with the aim of strengthening future delivery with a business change programme. This will further streamline the application and regulatory processes for financial services firms. Q

Established EU Jurisdiction for a wide range of investment funds Fully AIFMD compliant, with passporting right across the EU Specialist European master feeder fund solutions Unique asset manager offering, combining quality of life with fiscal and legislative stability Professional and internationally recognized fund and investment expertise

GIBRALTAR: THE SPECIALIST FINANCIAL JURISDICTION OF CHOICE IN THE EU GFIA members include Funds, Fund Administrators, Stockbrokers, Investment Managers, Audit Firms, Law Firms,

For more information please contact GFIA Executive Coordinator by e-mail on

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GIBRALTAR: THE KEY TO EUROPE FOR US FUND MANAGERS JAMES LASRY, HEAD OF FUNDS AT HASSANS, AND PRESIDENT OF THE GIBRALTAR AMERICAN CHAMBER OF COMMERCE, SPEAKS TO HFMWEEK ABOUT GIBRALTAR’S POSITION AS THE GATEWAY TO EUROPE FOR US MANAGERS

T

James Lasry, is head of funds at Hassans Law Firm.

He has been instrumental in setting up many of Gibraltar’s funds, including the first Experienced Investor Fund and Protected Cell Company Fund and advises the Government of Gibraltar on funds legislation.

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he advent of the Alternative Investment Fund Managers Directive (AIFMD or the Directive) has dramatically changed the scope of services that European finance centres, such as Gibraltar, can offer American fund managers.

US fund managers are very used to setting up Cayman funds with Delaware feeder funds for US taxable investors.

In the past they would market these funds to European investors via the private placement regimes as it was almost impossible to get these funds authorised in the various European jurisdictions. The AIFMD has caused a significant tightening of many of the private placement regimes in Europe. In fact, under the Directive, they are to be phased out by 2018. Therefore, for American managers to market their funds in the EU, they must rely on what remains of the private placement regimes or on a concept known as ‘reverse solicitation’.

It is genuinely arguable whether a fund that targets European investors can rely on the premise of reverse solicitation. It is an artificial doctrine at best. Furthermore, it places existing investors at risk. If a fund is deemed to have been promoted improperly in a jurisdiction, the investor may rescind the investment contract at any time. This means that the investor may be able to obtain a restitution of the amount initially invested. This amount would be payable by the fund to the detriment of the other investors. It is arguable that funds that rely on reverse solicitation should add a risk warning, informing investors of the dangers that it may present.

The safest way for American managers to market into the EU is for them to set up a European fund that can be passported into other EU jurisdictions. Depending on the strategy, this will be either a Ucits fund or an AIFM fund.

In either case it can be legitimately promoted to the appropriate European investors. Structures often used are such that the Cayman fund will itself act as a feeder into the European fund, which will then make the relevant investments (see Fig 1: European/Gibraltar master fund).

Alternatively, the European fund can serve as a parallel fund to the Cayman fund (see Fig 2: European/Gibraltar parallel fund).

It is unlikely, because of EU regulatory constraints, that the EU fund will be able to act as a feeder into the Cayman as is the case, for example, with Delaware feeders for US investors.

US managers may continue to use Cayman vehicles for their non-EU business, but these managers will now

FIG 1: EUROPEAN/GIBRALTAR MASTER FUND US taxable investors

Delaware feeder Non-taxable & offshore investors

Cayman feeder

European investors Gibraltar parallel fund Investment

FIG 2: EUROPEAN/GIBRALTAR PARALLEL FUND European investors

US taxable investors

Delaware feeder

Non-taxable & offshore investors

Cayman feeder

Gibraltar parallel fund

Investment

be looking to European jurisdictions to be able to market to European investors. It stands to reason that in their search for European vehicles for their funds, they should look to the jurisdiction which is closest legally, and in regulatory approach to what they are used to in the Cayman Islands. Gibraltar being a common law jurisdiction with the UK Privy Council as the ultimate Court of Appeal and with English as its primary language, is likely to cause less of a culture shock for US managers who have decided to use a European vehicle. Furthermore, Gibraltar is the only European jurisdiction that allows for the pre-authorisation launch of a fund, as Cayman does.

LEGAL

THE ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE Since 22 July 2013, European Alternative Investment Fund Managers (AIFMs) managing EU Alternative Investment Funds (AIFs), such as Gibraltar AIFs, have been able to obtain authorisation under AIFMD and therefore benefit from the EU marketing passport provided for by the Directive. Such AIFMs will be able to market to professional investors freely within the EU. There is the possibility that managers from third jurisdictions such as those in the US, the Caribbean and the Channel Islands will be able to obtain authorisation and therefore access to the EU marketing passport under AIFMD subject to certain conditions, but only from mid-2015 at the earliest. There is some doubt in the industry, which is probably justified, as to the true willingness of Esma to approve certain non-European jurisdictions, particularly some of those in the Caribbean as authorised third jurisdictions under the Directive. At least one member of the European Parliament who was involved in the drafting of the Directive has expressed such doubts.

There will no doubt remain a place for the better offshore jurisdictions. The ‘if it ain’t broke, don’t fix it’ attitude that structures the vast majority of funds through the Cayman Islands is simply less relevant in an investment industry that has changed almost beyond recognition from that which existed just a few years ago.

fered by the Directive. Accordingly, Gibraltar has kept its Experienced Investor Funds (EIF) regime for those funds and managers that are out of scope of the Directive while allowing those that wish to, in order to avail themselves of the EU-wide marketing passport, to opt in to the AIFM regime even if they are below the de minimis thresholds.

Obviously those that opt in will have to abide by all the terms of the AIFM regime as if they had been in scope.

EIFs will therefore form the basis for the regulatory regime to be used as the in scope AIF. As they have to comply with the terms of the Directive they will essentially be ‘super EIFs’. This is very significant because, as mentioned below, this is likely to dramatically reduce the licensing time of in scope AIFs thus retaining Gibraltar’s place as the European jurisdiction with the quickest potential for time to market for new funds.

AIFMs wishing to set up Gibraltar funds will be able to do so by establishing super EIFs utilising the existing pre-authorisation launch process available to out of scope EIFs. In other EU jurisdictions, AIFMs wishing to establish in scope AIFs will have to undergo an authorisation process for those AIFs (which can take anywhere between a few days in some cases to several months depending on the fund and the jurisdiction). The Gibraltar process, however, is simply to establish and commence trading the EIF on the basis of the pre-authorisation launch process. This entails the submission of the EIF documentation to the FSC along with an opinion from Gibraltar Counsel stating that the fund has been properly established. At the same time the passporting notices can be submitted to the FSC. The FSC will then have up to 20 business days to consider the AIF documentation and the passporting notices.

The streamlined authorisation process for EIFs should not be mistaken as light regulation. The authorisation process may be quicker due to the fact that EIFs require two directors on each board that are resident in Gibraltar and which are authorised by the FSC to act as fund directors. Furthermore, the documentation must be signed off both by senior Gibraltar Counsel and by the fund administrator. Once the fund is authorised, the FSC has a plethora of investigatory and enforcement powers.

American managers will be used to this more businessfriendly regulation as it echoes some of the ways in which American managers are regulated by the Securities and Exchange Commission.

The FSC will follow the UK/FCA’s proportionality approach in respect of remuneration. Furthermore, delegation will be permitted so long as overall supervision and responsibility remains within the jurisdiction. Depositary requirements are probably the most difficult of the three issues with many operational questions remaining open among all of the European jurisdictions. In any case, the depositary provisions have been deferred until 2017 so that any European depositaries may be used until that time.

Ultimately, the AIFMD has provided European jurisdictions and particularly Gibraltar with an opportunity to genuinely add value to US managers in the marketing of their funds to the EU – a market of 520 million people. Q

THE NATIONAL PRIVATE PLACEMENT REGIMES, WHICH UNDER THE DIRECTIVE ARE TO BE PHASED OUT BY 2018, HAVE ALREADY BEGUN TO BE TIGHTENED BY SOME OF THE MEMBER STATES

PERMISSIBLE DISTINCTIONS – GIBRALTAR’S ADVANTAGE The national private placement regimes, which under the Directive are to be phased out by 2018, have already begun to be tightened by some of the member states. In Germany, for example, a market which is not insignificant, it is nearly impossible for a non-European fund to use their private placement regime. A European fund, on the other hand, can use Germany’s private placement regime even if it is out of scope of the Directive simply because of the fact it is domiciled in the EU. For this and other reasons, we are seeing US managers setting up parallel or master AIFs (as opposed to feeder) in Gibraltar and other EU jurisdictions in order to assist with their European marketing efforts.

In their implementation of the Directive, member states were free to decide how they exercise the derogations provided for in AIFMD. They also decided whether they wished to ‘gold plate’ the Directive by adding provisions to their national fund regimes that were not required by the Directive. Critical distinctions in implementation may exist in such topics as regulation of the national fund regimes for funds and managers that are below the de minimis thresholds of the Directive (i.e. €100m for openended funds and €500m for closed-ended funds without leverage), including application of the depositary regime in the Directive to funds that are out of scope of the Directive and applicability of any private placement regimes.

The Gibraltar approach to the above issues, following an in-depth consultation involving a collaboration of government, the Financial Services Commission (FSC), and the Gibraltar Funds and Investments Association (GFIA), the representative body of Gibraltar’s funds and investment industries, retains as much flexibility as possible as is of-

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AIFMD – ONE YEAR ON ADRIAN HOGG, DIRECTOR OF GRANT THORNTON GIBRALTAR, TALKS TO HFMWEEK TO EXPLAIN HOW AIFMD HAS BEEN INTEGRATED INTO THE BUSINESS INDUSTRY IN GIBRALTAR

Adrian Hogg joined Grant Thornton Gibraltar in 2005 and became a director in 2007. He has been involved in the funds profession in Europe and the Caribbean for over a decade. He is a fellow of the Institute of Chartered Accountants in England and Wales, is a former chairman of the Gibraltar Funds and Investments Association and is a former member of the Gibraltar Finance Centre Council.

O

n 22 July 2013, the Alternative Investment Fund Managers Directive (AIFMD and/or Directive) became EU law.

AIFMD introduced harmonised requirements for entities involved in the management of alternative investment funds (AIFs) that are managed and/or marketed to professional investors in the EU. In terms of scope, AIFMD encompasses all EU AIFs and their managers (AIFMs) as well as all non-EU AIFMs that market to investors in the EU. AIFMD is wide reaching, covering all possible strategies and legal forms and, as such, encompasses conventional ‘trading’ funds (trading equity, options, derivatives, etc) to alternative asset classes such as real estate and private equity.

The impact of AIFMD on most existing AIFMs was deferred by a one-year transitional period which ended on 22 July 2014, after which AIFs managed and/or mar-

keted in the EU must be compliant with the Directive, unless a relevant exemption applies.

It is estimated that there are more than 1,200 firms caught by the Directive across Europe, with the largest number of firms based in the UK. The FCA (the UK regulator) expects to receive in the region of 800 appli-

THE IMPACT OF AIFMD ON MOST EXISTING AIFMS WAS DEFERRED BY A ONE-YEAR TRANSITIONAL PERIOD WHICH ENDED ON 22 JULY 2014

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cations for AIFM authorisation. The actual number of AIFMD approvals across Europe has been low by comparison. Up until recently, less than 500 firms had been authorised in the UK, Ireland, Luxembourg, France, Germany and other jurisdictions throughout the EU. Despite the requirement to do so, it is believed a large number of AIFMs have not yet submitted an application to their regulator.

IF YOU ARE AN AIFM AND YOU ARE NOT YET AUTHORISED, YOU SHOULD CAREFULLY CONSIDER YOUR OPTIONS

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WHAT SHOULD YOU DO IF YOU ARE AN AIFM THAT IS NOT AUTHORISED? The Directive requires that where an AIFM is unable to ensure compliance with the requirements of AIFMD, it shall immediately inform the competent authorities in its home member state and, if applicable, the competent authorities in the host member state of the AIF concerned.

The competent authorities of the home member state of the AIFM shall require the AIFM to take the necessary steps to remedy the situation.

If non-compliance persists, and in so far as it concerns an EU AIFM or an EU AIF, the competent authorities of the home member state shall require that it resigns as AIFM of that AIF. In that case, the AIF shall no longer be marketed in the EU. If it concerns a non-EU AIFM managing a non-EU AIF, the AIF shall no longer be marketed in the EU. If you are an AIFM and you are not yet authorised, you should carefully consider your options, of which there are principally two: (i) seek an exemption from the scope of AIFMD, or (ii) become compliant.

EXEMPTIONS FROM THE SCOPE OF AIFMD There are several exemptions to the scope of AIFMD, the main of which being the de minimus test of an AIFM with aggregate total assets of (a) less than €100m (including leverage); or (b) less than €500m (unleveraged) and that does not have redemption rights during a period of five years following the date of initial investment in the AIF. Such AIFMs are referred to as ‘small AIFMs’.

BECOME COMPLIANT AIFMs operating under existing licences should seek authorisation for a variation of permission from their regulator. Organisations acting as AIFMs, that have not previously been authorised, should submit an application for authorisation to their regulator. In terms of authorisation, AIFMD sets out rules that include but are not limited to conduct, capitalisation and insurance requirements. AIFMs are required to undertake portfo1 2 H F M W E E K . CO M

lio management and risk management functions (one of which can be delegated under certain circumstances). As with all EU directives, there is a certain amount of complexity and legality to be observed.

THE GIBRALTAR SOLUTION Gibraltar is fully compliant in respect of EU investment business and fund legislation. The Financial Services Commission (FSC) and the fund’s industry have been gearing up for AIFMD for years.

Gibraltar-based investment firms that comply with AIFMD have access to an EU-wide marketing passport that permits promotion and marketing across the EU. This provides Gibraltar AIFMs with access to a market of in excess of 500 million people.

Gibraltar also has the fastest AIFMD fund product to market with its experienced investor fund (EIF) regime whereby an AIFM can start marketing an EIF from the launch so long as within 10 business days it submits all relevant documentation to the FSC. The EIF is extremely flexible with no restrictions on asset type, diversification, investment or borrowing. With unrivalled speed to market and flexibility, the EIF is one of the most popular fund vehicles in the EU. Although AIFMD implementation requirements are similar across the EU, it is expected that the cost of implementation may vary from one EU jurisdiction to another. Running costs are low for Gibraltar AIFMs compared to operations based in other EU jurisdictions which are already seeing costs increase as a result of AIFMD implementation.

GIBRALTAR HAS THE FASTEST AIFMD FUND PRODUCT TO MARKET WITH ITS EXPERIENCED INVESTOR FUND (EIF) REGIME WHEREBY AN AIFM CAN START MARKETING AN EIF FROM THE LAUNCH

”

In addition to this, Gibraltar is also soon to launch a small AIFM regime which will bridge the regulatory gap between small AIFMs and fully in scope AIFMs. Gibraltar’s small AIFM regime will provide a platform for managers to enter into the EU regulatory environment without the burden of the full AIFMD scope requirements.

The small AIFM regime will provide further depth and support to an already strong Gibraltar AIFMD offering.

One year on, Gibraltar has the legislation, rules, regulations and products in place in order to meet the requirements of AIFMD. If you are the one of many AIFMs that are struggling with AIFMD implementation, look no further than Gibraltar. Q

GATEWAY TO THE EUROPEAN UNION SINGLE MARKET Gibraltar Finance is the growing success story in Europe for investment funds and investment managers. It offers robust fund legislation, a favourable fiscal regime, an EU framework, efficient regulation, the flexibility of a small jurisdiction and quality infrastructure.

Experienced Investor Funds (EIF) An EIF is an authorised collective investment scheme exclusively for investment by experienced investors and is designed to invest in a wide range of traditional or alternative asset classes.

As an EU domicile, Gibraltar Finance provides investors ZLWKbGLUHFW DFFHVV WR WKH VLQJOH PDUNHW LQ ILQDQFLDO VHUYLFHV thereby enabling passporting throughout the member states of the EU. Gibraltar also presents both political and economic VWDELOLW\ WRJHWKHU ZLWK D SURIHVVLRQDO ZRUNIRUFH WUDLQHG WR international standards and full employment rights for EU/EEA and Swiss citizens.

Asset Management :LWK D TXLFN DQG HIILFLHQW UHJXODWRU\ SURFHVV $VVHW Management firms can establish themselves as a firm under WKH )LQDQFLDO 6HUYLFHV 0DUNHWV LQ )LQDQFLDO ,QVWUXPHQWV $FW 2006, or the Financial Services (Alternative Investment Fund 0DQDJHUV 5HJXODWLRQV 7KH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHUV 'LUHFWLYH $,)0' ZDV WUDQVSRVHG LQWR *LEUDOWDU ODZ RQ -XO\ DQG LQYHVWPHQW PDQDJHPHQW ILUPV ZKLFK IDOO ZLWKLQ WKH 'LUHFWLYHèV UHTXLUHPHQWV FDQ PDUNHW DFURVV (8bPHPEHU VWDWHV

For more information visit the Gibraltar Finance website:

www.gibraltarfinance.gi

One of the attractions of Gibraltar as a fund domicile is that no regulatory approval is required before an EIF can begin to raise capital and commence its investment activities. An EIF may be launched based on a legal opinion that confirms that the EIF has met all legal and structural requirements for its operations, and provided that the fund’s documentation is submitted to the UHJXODWRU IRU UHJLVWUDWLRQ ZLWKLQ EXVLQHVV GD\V RI LWV ODXQFK

G I B R A LTA R 2 0 1 5

A ONE OF A KIND OPPORTUNITY

MOE COHEN, CEO OF NEXUS FUND ADMINISTRATION, TALKS TO HFMWEEK ABOUT WHAT MAKES GIBRALTAR UNIQUE AS AN EU-COMPLIANT JURISDICTION

Moe Cohen FCA is a founder of Benady Cohen & Co, Chartered Accountants, as well as the CEO for Nexus Fund Administration Services.

He is also a member of the executive board of GFIA and Finance Centre Council. Cohen advised the Government on the initial establishment of regulated funds in Gibraltar in 2004.

14 H F M W E E K . CO M

HFMWeek (HFM): How has Gibraltar fared in 2014 and which of its industries have been most successful?

Moe Cohen (MC): Gibraltar continues to develop in a number of ways. Generally, the fiscal and regulatory incentives continue to attract a number of businesses to the region, as well as non-Gibraltar companies looking to re-domicile or restructure via Gibraltar, in both the regulated and non-regulated space, including private clients and international companies.

Specifically, in terms of funds, Gibraltar has been very busy in the last few months with the adoption of the AIFMD, which has been fully integrated on time, and there are a number of licensees in place already. In the meantime, Gibraltar continues to attract and grow funds. Impor-

tantly, we at Nexus now have an AIFM private equity depositary licence, which is a new development in Gibraltar and crucial for Gibraltar-based AIFM PE funds that need an AIFM depositary.

IN TERMS OF FUNDS, GIBRALTAR HAS BEEN VERY BUSY IN THE LAST FEW MONTHS WITH THE ADOPTION OF THE AIFMD, WHICH HAS BEEN FULLY INTEGRATED

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HFM: What is the relationship like between Gibraltar’s regulators and the businesses domiciled there?

MC: Both the Gibraltar government and its regulator have been working very closely with the industry in order to launch AIFMD successfully, as well as on many other fronts in order to make the industry attractive from an international perspective. This has been proven by the result of having new businesses coming to Gibraltar. The FSC specifically is very proactive in terms of liaising with the

FUND SERVICES

industry in order to ensure that everyone is on the same page; notably that all the reporting requirements from an AIFMD and a technical perspective are being met, making sure the actual suppliers of businesses have been given sufficient time to meet the different requirements and deadlines and, importantly, that they were not under any undue pressure as a result. Being able to plan in advance is the sign of a good regulator, especially when it comes to implementing large pieces of legislation that will affect many funds and service providers.

WITH RESPECT TO FUNDS, ANOTHER USP IS THAT THE EIF IN GIBRALTAR HAS A PARTICULAR CHARACTERISTIC WHICH IS THAT THIS TYPE OF FUND IS VERY QUICK TO MARKET

”

HFM: How does Gibraltar stand out as a jurisdiction compared to its other EU competitors?

MC: Gibraltar has a number of unique selling points (USPs) that makes it stand out. Firstly, as I mentioned Gibraltar has a very efficient, accessible and dynamic regulator. This aids anyone looking to set up in Gibraltar and is not to be taken lightly as there are other jurisdictions out there that have very rigid and inaccessible regulators that make the process of taking product to market very protracted.

With respect to funds, another USP is that the EIF in Gibraltar has a particular characteristic which is that this type of fund is very quick to market. It doesn’t require excessive approval, it is simply licenced through notification. Fund promoters and directors need to work with service providers, administrators and lawyers, and at least two authorised directors in Gibraltar, to get their package ready. Once this is complete they will present it to the FSC and within 10 working days the fund can launch so it doesn’t require any further approval from the FSC. This is vital for time sensitive investment objectives because by the time a fund can be authorised in another part of the world you may lose commercial and business opportunities.

The third USP is that Gibraltar is home to professionals from all over the world, in particular the UK. These highly qualified professionals from global accounting, investment management and law firms give funds based here a very professional environment. In addition, our cost-base is much lower than other jurisdictions which means solution is more cost-effective. The combination of these factors alone make Gibraltar a very attractive option.

It must also be mentioned that a new Gibraltar Stock Exchange (GSX) has been launched which will give funds the ability to be able to be listed in a European recognised

exchange. That can be very attractive from a marketing perspective. Its existence will only add to the overall attractiveness of Gibraltar.

HFM: How does Gibraltar benefit from its unique relationship with the UK? MC: The UK has always been an important source of business for Gibraltar and will continue to be so for many years to come. The natural connection of Gibraltar being a British overseas territory and the proximity and accessibility to London and other major UK cities like Birmingham and Manchester makes Gibraltar very closely connected to mainland UK. From this historic relationship Gibraltar has developed as a common law jurisdiction and its laws are very much akin to the UK’s. For example, in November 2014 Gibraltar implemented the new Companies Act which is in line with the UK’s own act. This enables individuals with knowledge of common law, such as in the UK, to come to Gibraltar and carry out business easily.

There is also a very friendly fiscal relationship which allows for some structured solutions to be setup quickly and efficiently.

HFM: Where is Gibraltar headed as a business jurisdiction in 2015?

MC: AIFM is certainly an area with great potential. Although 2014 was a year of growth for us, this was despite the fact that the AIFMD’s implementation caused quite a lot of distraction in its setting up. Now that is settled, licences are being issued and the general business world is beginning to implement the Directive, Gibraltar can offer

THE UK HAS ALWAYS BEEN AN IMPORTANT SOURCE OF BUSINESS FOR GIBRALTAR AND WILL CONTINUE TO BE SO FOR MANY YEARS TO COME

”

itself as an excellent jurisdiction for non-European funds to use as a stepping stone into Europe, aided by the existence of GSX as appropriate.

In 2015, Gibraltar is also looking to forge links with the US and the Far East, as well as developing its existing links with more familiar areas such as Switzerland. This will hopefully generate a lot of funds and fund solutions and Gibraltar is very well placed to crystallise those opportunities here on the Rock of Gibraltar. Further, as well as traditional large funds, Gibraltar is also using the EIF as a fund solution for family offices, which are having an increased presence in Gibraltar. Therefore, we have found ourselves becoming an attractive option both to larger funds and also more niche businesses such as family offices. Q H F M W E E K . C O M 15

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EVERY WEEK YOU WILL RECEIVE Ô More exclusive stories than any other hedge fund publication Ô All the latest searches and investment news Ô Exclusive data on launches and performance Ô Investment strategy analysis Ô Topical comment from leading industry figures Ô Exclusive research surveys Ô Regulatory developments Ô People on the move As a subscriber, you will also receive full registration to www.hfmweek.com, where you can access: Ô Daily updated performance data Ô Exclusive research Ô Daily news alerts Ô Industry events information Ô Service directory listings and much more...

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STO C K E XC H A N G E

G I B R A LTA R 2 0 1 5

STOCK EXCHANGE LAUNCHES IN GIBRALTAR NICK COWAN, MANAGING DIRECTOR, MARCUS WOHLRAB, MARKETING DIRECTOR, AND PHILIP YOUNG, FINANCE DIRECTOR, OF THE GIBRALTAR STOCK EXCHANGE, TALK TO HFMWEEK ABOUT THE EXCHANGE’S RECENT LAUNCH

Nick Cowan, managing director, has over 30 years’ investment industry experience in developed and emerging markets including five years as the global head of equities for ING Barings serving as a member of executive committee.

Responsible for 2,500 employees in 43 countries, including 40 stock exchange memberships, as well as numerous restructurings, turnarounds, acquisitions and divestments.

HFMWeek (HFM): Gibraltar opened its first stock exchange on 10 November 2014. What will the introduction of the Gibraltar Stock Exchange (GSX) mean for the jurisdiction?

Nick Cowan (NC): Gibraltar was the last EU jurisdiction without an exchange, which has been a key factor in Gibraltar lagging behind its peers in terms of capital markets evolution. This was something that we needed to address.

When Marcus Wohlrab (GSX co-founder) and I first set about applying for the exchange licence, we needed to understand a number of things: what type of exchange was the jurisdiction looking for? What was the risk appetite and what type of exchange would be acceptable to the regulator? What types of assets and products would be appropriate to the jurisdiction? What was the knowledge base and what were the areas of strength in terms of assets in Gibraltar? Additionally, we needed to look at other factors such as what was happening in the regulatory picture globally and within the EU. The process commenced in 2012 and we engaged at the earliest opportunity with the key stakeholders including the government, the regulator and the Gibraltar-based service providers who would be our target member firms. What became apparent quite quickly was that there was an extremely strong infrastructure supporting the investment funds business in Gibraltar, but that without an exchange they had struggled to develop the business to where it should be in terms of its standing within the global community and also within the EU. With the regulatory changes and the alternative investment fund manager directive (AIFMD), there was clearly an opportunity here for the jurisdiction to raise its game.

Gibraltar’s transition into the leading EU finance centre it is today evolved over a period of many years. The offshore or ‘brass-plate’ mind-set has long gone with the focus being on regulation and reputation. Therefore, the exchange was structured to minimise risk while complementing the existing strengths of the jurisdiction, leading us to open initially as a technical listing exchange for openended funds.

When fund managers look at the criteria in helping them choose a jurisdiction, the following are important considerations: a flexible and accessible regulator; the jurisdiction’s approach to the AIFMD; the ease with which one can redomicile funds to the jurisdiction; a pro-business government; speed-to-market, pricing; the passporting benefits that come with being a member of the EU; but just as important as all that, is the presence of a stock exchange.

In summary, we anticipate GSX will be the catalyst that elevates Gibraltar to be a realistic alternative to other jurisdictions – somewhere attractive for collective investment schemes to domicile and list. Not having an exchange has been to Gibraltar’s detriment, and now we hope it will be a slightly bigger drawing pin on the map.

HFM: What is the significance of the timing?

Philip Young: Post-crisis, the regulatory environment has changed dramatically, and the AIFMD has catapulted Gibraltar to one of only four EU jurisdictions that has a competitive and fiscally attractive offering in terms of funds domiciling.

At the macro level, two things are happening since the crisis: there is a shift from offshore to onshore in the funds industry due to the EU regulatory environment getting stricter; there is a drive to listing on exchanges.

Post-crisis, investors are demanding more of their managers and a listing offers increased confidence from the investor as the fund has been through a regulatory process providing increased transparency and visibility. A listing on an EU exchange provides visibility to the EU investor audience. These things are increasingly important when investors are looking to allocate their assets, as a listing can provide an extra degree of comfort. Investors wish to know that funds have been through a due diligence process that includes a regulator; in our case, an EU regulator.

In many ways, therefore, the timing has worked out well for Gibraltar as a jurisdiction to launch its first stock exchange. Though it was clear that Gibraltar needed an exchange, the regulatory changes have helped provide the catalyst. If you’re looking to domicile and list your fund,

WITH THE REGULATORY CHANGES AND THE ALTERNATIVE INVESTMENT FUND MANAGER DIRECTIVE (AIFMD), THERE WAS CLEARLY AN OPPORTUNITY HERE FOR THE JURISDICTION TO RAISE ITS GAME

”

Marcus Wohlrab, marketing director, has over 26 years’ investment industry experience working for Paine Webber, UBS, director for Europe and the Middle East for NASDAQ and executive vice president, EASDAQ running the exchange and reporting directly to the board.

H F M W E E K . C O M 17

STO C K E XC H A N G E

G I B R A LTA R 2 0 1 5

you are more likely to go to somewhere that has the infrastructure to support you to provide the single solution.

It would be inefficient to domicile in Gibraltar and list on another stock exchange due to the additional fees. You achieve economies of scale by being in the same jurisdiction so it had to happen in my view. I think the regulatory tailwind is supportive of the strategy that we have. In addition, it’s a strategy that fits with the jurisdiction. It’s very small and very simple, but has an ambition to grow.

HFM: Gibraltar has already witnessed a few attempts to set up a stock exchange. What is different about GSX and why do you believe it will be successful?

NC: I think there are a number of reasons why we are optimistic about our success. We believed that the key issue in building the exchange was to keep it simple, focus on the products where there already existed a knowledge base, and structure a business model that would ensure economic viability in a robust control environment, thus protecting the reputation of Gibraltar itself.

However, I believe our key to future success is the fact that we are based in Gibraltar. Our size brings many advantages. The relationship we have between the government, the service providers and the regulator has created a collective ambition. GSX will be the fastest and lowest cost exchange in the EU when it comes to listing funds. GSX provides the perfect listing complement to our Experienced Investor Fund (EIF) vehicle with its pre-launch approval regime, where an EIF can be launched in 10 working days, making it the fastest time-to-market fund vehicle in the EU. Our marketing confirms a clear demand for a low-cost alternative to other exchanges. A GSX listing can provide a stepping-stone to Europe for offshore AIFs offering increased marketability, visibility and transparency. Our 18 H F M W E E K . CO M

Philip Young, finance director, has over 26 years’ investment industry experience. Young began his career in investment banking before moving to investment management where he spent five years with a start-up hedge fund and, latterly, five years with a principal emerging market private equity firm. Young is a CFA Charterholder.

unique portal also provides the opportunity for managers and investors to connect in a protected environment, providing managers the opportunity to grow assets by listing on GSX. Finally, I think we have a strong management team with over 80 years of experience between the three executives. I was the global head of equities (and before that the global head of equity trading) for one of the world’s largest banks, and operated over 40 exchange seats around the globe. My role was centred on managing risk on a large scale, which I think has provided comfort, and has hopefully built confidence with the regulator. Marcus Wohlrab was a top marketing executive at Nasdaq and Easdaq for many years, while our finance director, Philip Young, has spent a career on the buy-side within hedge funds and private equity as a member of investment committees. In addition, we have a strong board with Marcus Killick (the previous CEO of the Financial Services Commission) as our chairman, Simon Brickles (the ex-CEO of AIM and Plus Markets) as our deputy chairman and Adrian Hogg from Grant Thornton as non-executive director.

HFM: Where are potential markets for you to seek listings from?

Marcus Wohlrab: The first answer is the funds infrastructure in Gibraltar. Some of those funds are quite interested in listing, which probably makes sense. However, we see GSX’s sweet spot as being offshore alternatives, of a certain size, looking for an EU listing, particularly Asian funds. We don’t see listings moving from Ireland and Luxembourg to Gibraltar. That would be fantastic but we’re realistic. That is not our market. We’re looking for the smaller fund manager who might find a listing on Luxembourg perhaps beyond his cost limits. That’s our first push. Q

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