Financial Services (Markets In Financial Instruments) Act 2006

Link to law: http://www.gibraltarlaws.gov.gi/articles/2006-32o.pdf
Published: 2007-11-01

Subscribe to a Global-Regulation Premium Membership Today!

Key Benefits:

Subscribe Now
I ASSENT Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32


FINANCIAL SERVICES (MARKETS IN FINANCIAL
INSTRUMENTS) ACT 2006

Principal Act

Act. No. 2006-32 Commencement 1.11.2007
Assent 14.12.2006




Amending
enactments
Relevant current
provisions
Commencement
date

LN. 2010/007 ss. 2(1) & (3), 10(5) to (9), 10A & 10B
15.1.2010
2012/173 ss. 2, 6(9), 8(1) & (2), 15(1), 23(5)(b),
25(1), (3) & (3A), 27(4) & (4A),
31(3A), 36(8) & (8)(e), 41(3) & (4),
42(7A), 47, 48(1)(b) & (7), 59(3) &
(4), 54(1A), (4) & (5), 56(a) & (b)




22.11.2012


English sources:
None cited

Transposing:
Directive 85/611/EEC
Directive 92/49/EEC
Directive 93/6/EEC
Directive 93/22/EEC
Directives 98/26/EC
Directive 2000/12/EC
Directive 2002/83/EC
Directive 2002/87/EC
Directive 2003/6/EC
Directive 2003/41/EC
Directive 2003/71/EC
Directive 2004/39/EC
Directive 2004/109/EC
Directive 2005/60/EC
Directive 2005/68/EC
Directive 2006/48/EC
Directive 2006/49/EC
Directive 2007/44/EC
Directive 2009/65/EC
Directive 2010/78/EU


EU Legislation/International Agreements involved:

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

ARRANGEMENT OF SECTIONS

Section
PART I
PRELIMINARY AND INTERPRETATION

1. Title and commencement.
2. Interpretation.
3. Scope.
4. Exemptions.

PART II
AUTHORISATION AND OPERATING CONDITIONS FOR
INVESTMENT FIRMS
Conditions and procedures for authorisation

5. Establishment of register.
6. Authorisations.
7. Procedures for granting and refusing requests for authorisation.
8. Withdrawal of authorisations.
9. Persons who effectively direct the business.
10. Shareholders and members with qualifying holdings.
10A. Assessment period.
10B. Assessment.
11. Membership of an authorised Investor Compensation Scheme.
12. Initial capital endowment.
13. Organisational requirements.
14. Trading process and finalisation of transactions in an MTF.
15. Relations with third countries.

Operating conditions for investment firms

General provisions

16. Regular review of conditions for initial authorisation.
17. General obligation in respect of on-going supervision.
18. Conflicts of interest.

Provisions to ensure investor protection

19. Conduct of business obligations when providing investment services
to clients.
20. Provision of services through the medium of another investment firm.
21. Obligation to execute orders on terms most favourable to the client.
22. Client order handling rules.
23. Obligations of investment firms when appointing tied agents.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
24. Transactions executed with eligible counterparties.

Market transparency and integrity

25. Obligation to uphold integrity of markets, report transactions and
maintain records.
26. Monitoring of compliance with the rules of the MTF and with other
legal obligations.
27. Obligation for investment firms to make public firm quotes.
28. Post-trade disclosure by investment firms.
29. Pre-trade transparency requirements for MTFs.
30. Post-trade transparency requirements for MTFs.

Rights of investment firms

31. Freedom to provide investment services and activities.
32. Establishment of a branch.
33. Access to regulated markets.
34. Access to central counterparty, clearing and settlement facilities and
right to designate settlement system.
35. Provisions regarding central counterparty, clearing and settlement
arrangements in respect of MTFs.

PART III
REGULATED MARKETS

36. Authorisations and applicable law.
37. Requirements for the management of the regulated market.
38. Requirements relating to persons exercising significant influence over
the management of the regulated market.
39. Organisational requirements.
40. Admission of financial instruments to trading.
41. Suspension and removal of instruments from trading.
42. Access to the regulated market.
43. Monitoring of compliance with the rules of the regulated market and
with other legal obligations.
44. Pre-trade transparency requirements for regulated markets.
45. Post-trade transparency requirements for regulated markets.
46. Provisions regarding central counterparty and clearing and settlement
arrangements.
47. List of regulated markets.

PART IV
COMPETENT AUTHORITY
Designation, Powers and Redress Procedures

48. Designation of competent authority.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
49. Powers of competent authority.
50. Administrative sanctions.
51. Right of appeal.
52. Professional secrecy.
53. Relations with auditors.

Cooperation with other competent authorities

54. Obligation to cooperate.
55. Cooperation in supervisory activities, on-the-spot verifications or in
investigations.
56. Exchange of information.
57. Refusal to cooperate.
58. Inter-authority consultation prior to authorisation.
59. Powers of competent authority in its capacity of host.
60. Precautionary measures.
60A. Cooperation and exchange of information with ESMA.
60B. Exchange of information with third countries.

Alternative dispute resolution

60C. Alternative dispute resolution.
60D. Binding mediation.


PART V
FINAL PROVISIONS

61. Transitional provisions.
62. Regulations.
63. Codes of practice.
64. Repeals.

SCHEDULE 1
LIST OF SERVICES AND ACTIVITIES AND FINANCIAL
INSTRUMENTS

SCHEDULE 2
PROFESSIONAL CLIENTS FOR THE PURPOSE OF THIS ACT
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
AN ACT TO TRANSPOSE INTO THE LAW OF GIBRALTAR
DIRECTIVE 2004/39/EC OF THE EUROPEAN PARLIAMENT AND OF
THE COUNCIL OF 21 APRIL 2004 ON MARKETS IN FINANCIAL
INSTRUMENTS AMENDING COUNCIL DIRECTIVES 85/611/EEC
AND 93/6/EEC AND DIRECTIVE 2000/12/EC OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL AND REPEALING COUNCIL
DIRECTIVE 93/22/EEC, AND MATTERS CONNECTED THERETO.



PART I
PRELIMINARY AND INTERPRETATION

Title and commencement.

1.(1) This Act may be cited as the Financial Services (Markets in Financial
Instruments) Act 2006.

(2) This Act comes into force on the 1 st November 2007.

(3) Without prejudice to the generality of subsection (2), notices made
under that subsection may make provision for the Act to come into force as
it affects tied agents at a date different to that affecting other purposes.

(4) Without prejudice to the generality of subsection (2), notices made
under that subsection may, in accordance with section 61, make such
provision in respect of transitional provisions as the Minister may deem
appropriate.

Interpretation.

2.(1) In this Act, and unless the context otherwise requires

“ancillary service” means any of the services listed in Section B of
Schedule 1;

“branch” means a place of business other than the head office which is a
part of an investment firm, which has no legal personality and which
provides investment services or activities and which may also
perform ancillary services for which the investment firm has been
authorised; all the places of business set up by an investment firm
with headquarters in another Member State shall be regarded as a
single branch;

“client” means any natural or legal person to whom an investment firm
provides investment or ancillary services;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
“competent authority” means, in relation to Gibraltar, such person as the
Minister designates by notice in the Gazette pursuant to the
provisions of section 48;

“control” shall be construed in accordance with the provisions of the
Companies (Consolidated Accounts) Act 1999;

“close links” means a situation in which two or more natural or legal
persons are linked by

(a) participation, which means the ownership, direct or by way of
control, of 20% or more of the voting rights or capital of an
undertaking;

(b) control, which means the relationship between a parent
undertaking and a subsidiary or a similar relationship between
any natural or legal person and an undertaking, any subsidiary
undertaking of a subsidiary undertaking also being considered a
subsidiary of the parent undertaking which is at the head of
those undertakings,

however, a situation in which two or more natural or legal persons
are permanently linked to one and the same person by a control
relationship shall also be regarded as constituting a close link
between such persons;

“credit institutions” shall be construed in accordance with the provisions
of the Financial Services (Banking) Act;

“dealing on own account” means trading against proprietary capital
resulting in the conclusion of transactions in one or more financial
instruments;

“directive” means Directive 2004/39/EC of the European Parliament and
of the Council of 21 April 2004 on markets in financial instruments
amending Council Directives 85/611/EEC and 93/6/EEC and
Directive 2000/12/EC of the European Parliament and of the
Council and repealing Council Directive 93/22/EEC, as the same
may be amended from time to time;

“ESMA” means the European Securities and Markets Authority
established by the ESMA Regulation;

“ESMA Regulation” means Regulation (EU) No 1095/2010 of the
European Parliament and of the Council of 24 November 2010
establishing a European Supervisory Authority (European Securities
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
and Markets Authority), amending Decision No 716/2009/EC and
repealing Commission Decision 2009/77/EC;

“execution of orders on behalf of clients” means acting to conclude
agreements to buy or sell one or more financial instruments on
behalf of clients;

“financial instrument” means those instruments specified in Section C of
Schedule 1;

“home Member State” means

(a) in the case of investment firms:

(i) if the investment firm is a natural person, the Member
State in which its head office is situated;

(ii) if the investment firm is a legal person, the Member State
in which its registered office is situated;

(iii) if the investment firm has, under its national law, no
registered office, the Member State in which its head
office is situated;

(b) in the case of a regulated market, the Member State in which
the regulated market is registered or, if under the law of that
Member State it has no registered office, the Member State in
which the head office of the regulated market is situated;

“host Member State” means the Member State, other than the home
Member State, in which an investment firm has a branch or
performs services or activities or the Member State in which a
regulated market provides appropriate arrangements so as to
facilitate access to trading on its system by remote members or
participants established in that same Member State;

“investment firm” means any legal person whose regular occupation or
business is the provision of one or more investment services to third
parties or the performance of one or more investment activities on a
professional basis. The Minister may, by regulations, provide that
“investment firm” includes the following

(a) undertakings which are not legal persons, provided that

(i) their legal status ensures a level of protection for third
parties’ interests equivalent to that afforded by legal
persons; and
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(ii) they are subject to equivalent prudential supervision
appropriate to their legal form;

(b) any individual whose professional services involve the holding
of third parties’ funds or transferable securities where the
competent authority is satisfied that he complies with the
following conditions

(i) the ownership rights of third parties in instruments and
funds are safeguarded, especially in the event of the
insolvency of the individual, seizure, set-off or any other
action by creditors of the individual;

(ii) the individual is subject to rules designed to monitor his
solvency and that of its proprietors;

(iii) the individual´s annual accounts are audited by one or
more persons empowered, under Gibraltar law, to audit
accounts;

(iv) where the individual is a sole practitioner and has made
provision for the protection of investors in the event of
the firm’s cessation of business following his death, his
incapacity or any other such event;

“investment services and activities” means any of the services and
activities listed in Section A of Schedule 1 relating to any of the
instruments listed in Section C of Schedule 1;

“investment advice” means the provision of personal recommendations to
a client, either upon its request or at the initiative of the investment
firm, in respect of one or more transactions relating to financial
instruments;

“limit order” means an order to buy or sell a financial instrument at its
specified price limit or better and for a specified size;

“market maker” means a person who holds himself out on the financial
markets on a continuous basis as being willing to deal on own
account by buying and selling financial instruments against his
proprietary capital at prices defined by him;

“market operator” means a person or persons who manages or operates
the business of a regulated market: the market operator may be the
regulated market itself;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
“Minister” means the Minister with responsibility for financial services;

“money-market instruments” means those classes of instruments which
are normally dealt in on the money market, such as treasury bills,
certificates of deposit and commercial papers and excluding
instruments of payment;

“multilateral trading facility (“MTF”)” means a multilateral system,
operated by an investment firm or a market operator, which brings
together multiple third-party buying and selling interests in financial
instruments - in the system and in accordance with non-
discretionary rules - in a way that results in a contract in accordance
with the provisions of Part II;

“parent undertaking” shall be construed in accordance with the provisions
of the Companies (Consolidated Accounts) Act 1999;

“portfolio management” means managing portfolios in accordance with
mandates given by clients on a discretionary client-by-client basis
where such portfolios include one or more financial instruments;

“professional client” means a client meeting the criteria laid down in
Schedule 2;

“qualifying holding” means any direct or indirect holding in an investment
firm which represents 10 % or more of the capital or of the voting
rights, as set out in Articles 9 and 10 of Directive 2004/109/EC 1 ,
taking into account the conditions regarding aggregation thereof
laid down in Article 12(4) and (5) of that Directive, or which makes
it possible to exercise a significant influence over the management
of the investment firm in which that holding subsists;

“regulated market” means a multilateral system operated or managed by a
market operator, which brings together or facilitates the bringing
together of multiple third-party buying and selling interests in
financial instruments - in the system and in accordance with its non-
discretionary rules - in a way that results in a contract, in respect of
the financial instruments admitted to trading under its rules and/or
systems, and which is authorised and functions regularly and in
accordance with the provisions of Part III;

“retail client” means a client who is not a professional client;

1 Directive 2004/19/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of
transparency requirements in relation to information about issuers whose securities are admitted to trading on a
regulated market (OJ L 390, 31.12.2004, p. 38).
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
“subsidiary”, including any subsidiary of a subsidiary undertaking of an
ultimate parent undertaking shall be construed in accordance with
the provisions of the Companies (Consolidated Accounts) Act
1999;

“systematic internaliser” means an investment firm which, on an
organised, frequent and systematic basis, deals on own account by
executing client orders outside a regulated market or an MTF;

“tied agent” means a natural or legal person who, under the full and
unconditional responsibility of only one investment firm on whose
behalf he acts, promotes investment or ancillary services to clients
or prospective clients, receives and transmits instructions or orders
from the client in respect of investment services or financial
instruments, places financial instruments or provides advice to
clients or prospective clients in respect of those financial
instruments or services;

“transferable securities” means those classes of securities which are
negotiable on the capital market, with the exception of instruments
of payment, such as

(a) shares in companies and other securities equivalent to shares in
companies, partnerships or other entities, and depositary
receipts in respect of shares;

(b) bonds or other forms of securitised debt, including depositary
receipts in respect of such securities;

(c) any other securities giving the right to acquire or sell any such
transferable securities or giving rise to a cash settlement
determined by reference to transferable securities, currencies,
interest rates or yields, commodities or other indices or
measures;

“UCITS management company” means any company, the regular business
of which is the management of UCITS in the form of unit
trusts/common funds and/or of investment companies (collective
portfolio management of UCITS); this includes the following
functions–
(a) investment management.

(b) administration as follows
(i) legal and fund management accounting services;

(ii) customer inquiries;
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(iii) valuation and pricing (including tax returns);

(iv) regulatory compliance monitoring;

(v) maintenance of unit-holder register;

(vi) distribution of income;

(vii) unit issues and redemptions;

(viii) contract settlements (including certificate dispatch);

(ix) record keeping;
(c) marketing;

“UCITS” shall be construed in accordance with the provisions of the
Financial Services (Collective Investment Schemes) Act 2004.

(2) Any term used in this Act but not defined shall be construed in
accordance with the provisions of the Directive.

(3) This Act applies to EEA States as it applies to Member States.

Scope.

3.(1) This Act shall apply to investment firms and regulated markets.

(2) The following provisions shall also apply to credit institutions when
providing one or more investment services or performing investment
activities

(a) sections 4(2), 11, 13 and 14;

(b) sections 16 to 30, save for section 32(2);

(c) sections 31 to35 save for section 31(2) to (5), section 32(3) to
(8)(a), (8)(d) and (9);

(d) sections 48 to 51, 55, 59 and 61; and

(e) section 61(1).

(3) Sections 19, 21 and 22 are not applicable to transactions concluded
under the rules governing an MTF between its members or participants or
between the MTF and its members or participants in relation to the use of the
MTF. Notwithstanding the foregoing, the members of or participants in the
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
MTF shall comply with the obligations provided for in sections 19, 21 and 22
with respect to their clients when, acting on behalf of their clients, they
execute their orders through the systems of an MTF.

Exemptions.

4.(1) This Act shall not apply to

(a) insurance undertakings, assurance undertakings or undertakings
carrying on the reinsurance and retrocession activities;

(b) persons which provide investment services exclusively for their
parent undertakings, for their subsidiaries or for other
subsidiaries of their parent undertakings;

(c) persons providing an investment service where that service is
provided in an incidental manner in the course of a professional
activity and that activity is regulated by legal or regulatory
provisions or a code of ethics governing the profession which
do not exclude the provision of that service;

(d) persons who do not provide any investment services or
activities other than dealing on own account unless they are
market makers or deal on own account outside a regulated
market or an MTF on an organised, frequent and systematic
basis by providing a system accessible to third parties in order
to engage in dealings with them;

(e) persons which provide investment services consisting
exclusively in the administration of employee-participation
schemes;

(f) persons which provide investment services which only involve
both administration of employee-participation schemes and the
provision of investment services exclusively for their parent
undertakings, for their subsidiaries or for other subsidiaries of
their parent undertakings;

(g) collective investment undertakings and pension funds whether
coordinated at Community level or not and the depositaries and
managers of such undertakings;

(h) persons dealing on own account in financial instruments, or
providing investment services in commodity derivatives or
derivative contracts included in Schedule 1, Section C 10 to the
clients of their main business, provided this is an ancillary
activity to their main business, when considered on a group
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
basis, and that main business is not the provision of investment
services within the meaning of this Act or banking services
under the Financial Services (Banking) Act;

(i) persons providing investment advice in the course of providing
another professional activity not covered by this Act provided
that the provision of such advice is not specifically remunerated;

(j) persons whose main business consists of dealing on own
account in commodities or commodity derivatives. This
exception shall not apply where the persons that deal on own
account in commodities or commodity derivatives are part of a
group the main business of which is the provision of other
investment services within the meaning of this Act or banking
services under the Financial Services (Banking) Act;

(k) firms which provide investment services or perform investment
activities consisting exclusively in dealing on own account on
markets in financial futures or options or other derivatives and
on cash markets for the sole purpose of hedging positions on
derivatives markets or which deal for the accounts of other
members of those markets or make prices for them and which
are guaranteed by clearing members of the same markets, where
responsibility for ensuring the performance of contracts entered
into by such firms is assumed by clearing members of the same
markets.

(2) The rights conferred by this Act shall not extend to the provision of
services as counterparty in transactions carried out by public bodies dealing
with public debt, by the Gibraltar Savings Bank or by members of the
European System of Central Banks performing their tasks as provided for by
the Treaty and the Statute of the European System of Central Banks and of
the European Central Bank or performing equivalent functions under
national provisions.

(3) This Act shall not apply to any person for which Gibraltar is the home
Member State which

(a) is not allowed to hold clients' funds or securities and which for
that reason is not allowed at any time to place themselves in
debit with their clients; and

(b) is not allowed to provide any investment service except the
reception and transmission of orders in transferable securities
and units in collective investment undertakings and the
provision of investment advice in relation to such financial
instruments; and
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(c) in the course of providing that service, are allowed to transmit
orders only to

(i) investment firms authorised according to law;

(ii) credit institutions authorised according to law;

(iii) branches of investment firms or of credit institutions
which are authorised in a third country and which are
subject to and comply with prudential rules considered by
the competent authority to be at least as stringent as
those in force in Gibraltar;

(iv) collective investment undertakings authorised under the
law of a Member State to market units to the public and
to the managers of such undertakings;

(v) investment companies with fixed capital, the securities of
which are listed or dealt in on a regulated market in a
Member State;

provided that the activities of those persons are otherwise regulated pursuant
to Gibraltar law.

(4) Persons excluded from the scope of this Act according to subsection
(3) cannot benefit from the freedom to provide services or activities or to
establish branches as provided for in sections 31 and 32 respectively.

(5) In this section, insurance undertakings, assurance undertakings and
undertakings carrying on the reinsurance and retrocession activities shall be
construed in accordance with the provisions of the Insurance Companies
Act.


PART II
AUTHORISATION AND OPERATING CONDITIONS FOR
INVESTMENT FIRMS

Conditions and procedures for authorisation

Establishment of register.

5.(1) There shall be a register of all investment firms.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(2) The register established under subsection (1) shall be publicly
accessible and shall contain information on the services or activities for
which the investment firm is authorised.

(3) The register established under subsection (1) shall be maintained by the
competent authority in such form as the competent authority may require and
shall be updated on a regular basis.

Authorisations.

6.(1) The performance of investment services or activities as a regular
occupation or business on a professional basis shall be subject to prior
authorisation by the competent authority in accordance with the provisions
of this Act.

(2) Notwithstanding subsection (1), a market operator may operate an
MTF without authorisation, provided the competent authority verifies
compliance with the provisions of this Act, excluding sections 11 and 15.

(3) The competent authority shall only authorise investment firms
complying with the following provisions

(a) the investment firm which is a legal person have its head office
in the same Member State as its registered office; or

(b) where the investment firm is not a legal person or the
investment firm is a legal person but under its national law has
no registered office, it has its head office in the Member State in
which it actually carries on its business.

(4) The Minister may, by regulations, authorise the competent authority to
delegate administrative, preparatory or ancillary tasks related to the granting
of an authorisation in cases where investment firms are excluded from the
provisions of this Act in accordance with section 4(3) and (4) and with the
conditions laid down in section 48(2) to (6).

(5) Authorisations–

(a) may cover one or more of the ancillary services set out in
Section B of Schedule1; and

(b) shall in no case be granted solely for the provision of ancillary
services.

(6) The competent authority shall ensure that the notification of
authorisation specifies the investment services or activities which the
investment firm is authorised to provide.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(7) Where an investment firm seeks authority to extend its business to
additional investment services or activities or ancillary services not foreseen
at the time of initial authorisation, it shall submit to the competent authority a
request for an extension of its authorisation.

(8) Pursuant to the provisions of the directive, the authorisation shall be
valid for the entire Community and shall allow an investment firm to provide
the services or perform the activities, for which it has been authorised,
throughout the European Union, either through the establishment of a branch
or the free provision of services.

(9) The Minister shall ensure that an authorisation issued under this Act
is notified to ESMA.

Procedures for granting and refusing requests for authorisation.

7.(1) The competent authority shall not grant authorisation unless and until
such time as it is fully satisfied that the applicant complies with all the
requirements of this Act.

(2) Applications for an authorisation shall be in such form as the competent
authority may require.

(3) Notwithstanding the generality of subsection (2), applications shall
contain all information required by the competent authority including a
business plan setting out, inter alia, the types of business envisaged and the
organisational structure necessary to enable the competent authority to
satisfy itself that the investment firm has established, at the time of initial
authorisation, all the necessary arrangements to meet its obligations under
the provisions of this Act.

(4) An applicant shall be informed, within six months of the submission of
a complete application, whether or not an authorisation has been granted.

Withdrawal of authorisations.

8.(1) The competent authority may withdraw an authorisation issued to an
investment firm where the investment firm

(a) does not make use of the authorisation within 12 months,
expressly renounces the authorisation or has provided no
investment services or performed no investment activity for the
preceding six months;

(b) has obtained the authorisation by making false statements or by
any other irregular means;
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(c) no longer meets the conditions under which authorisation was
granted;

(d) has seriously and systematically infringed the provisions
adopted pursuant to this Act governing the operating conditions
for investment firms; or

(e) falls within any of the cases where national law, in respect of
matters outside the scope of this Act, provides for withdrawal.

(2) The Minister shall ensure that ESMA is notified of every
authorisation withdrawn pursuant to this section.

Persons who effectively direct the business.

9.(1) An authorisation under this Act shall be granted, or, if granted, shall
remain valid only where the competent authority is satisfied that the persons
who effectively direct the business of an investment firm are of sufficiently
good repute and sufficiently experienced as to ensure the sound and prudent
management of the investment firm.

(2) Where the market operator that seeks an authorisation to operate an
MTF and the persons that effectively direct the business of the MTF are the
same as those that effectively direct the business of the regulated market,
those persons shall be deemed to comply with the requirements laid down in
subsection (1).

(3) Investment firms shall notify the competent authority of any changes to
their management, along with all information needed to assess whether the
new staff appointed to manage the firms are of sufficiently good repute and
sufficiently experienced. The competent authority shall refuse an
authorisation where there are objective and demonstrable grounds for
believing that proposed changes to the management of a firm pose a threat to
its sound and prudent management.

(4) An authorisation under this Act shall only be granted where the
management of an investment firm is undertaken by at least two persons
meeting the requirements laid down in this section.

(5) Notwithstanding subsection (4), the Minister may, by regulations,
empower the competent authority to grant an authorisation to investment
firms consisting of a natural person or to investment firms that are legal
persons managed by a single natural person where it is satisfied that
alternative arrangements are in place which ensure sound and prudent
management.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
Shareholders and members with qualifying holdings.

10.(1) The competent authority shall not authorise the performance of
investment services or activities by an investment firm until it has been
informed of the identities of the shareholders or members, whether direct or
indirect, natural or legal, that have qualifying holdings and the amounts of
those holdings.

(2) The competent authority shall refuse an authorisation where, taking
into account the need to ensure the sound and prudent management of an
investment firm, he is not satisfied of the suitability of the shareholders or
members that have qualifying holdings.

(3) Where close links exist between an investment firm and other natural or
legal persons, the competent authority shall grant an authorisation only
where, in the opinion of the competent authority, those links do not prevent
the effective exercise of the supervisory functions of the competent
authority.

(4) The competent authority shall refuse an authorisation where the laws,
regulations or administrative provisions of a third country governing one or
more natural or legal persons with which the applicant undertaking has close
links, or difficulties involved in their enforcement, prevent the effective
exercise of its supervisory functions.

(5) Any natural or legal person or such persons acting in concert
(hereinafter referred to as the proposed acquirer), who have taken a decision
either to acquire, directly or indirectly, a qualifying holding in an investment
firm or to further increase, directly or indirectly, such a qualifying holding in
an investment firm as a result of which the proportion of the voting rights or
of the capital held would reach or exceed 20%, 30% or 50% or so that the
investment firm would become its subsidiary (hereinafter referred to as the
proposed acquisition), shall first notify in writing the competent authority of
their intention and the investment firm in which they are seeking to acquire
or increase a qualifying holding, indicating the size of the intended holding
and other relevant information, as referred to in section 10B(4).

(6) Any natural or legal person who has taken a decision to dispose,
directly or indirectly, of a qualifying holding in an investment firm shall first
notify in writing the competent authority, indicating the size of the intended
holding. Such a person shall likewise notify the competent authority if he has
taken a decision to reduce his qualifying holding so that the proportion of the
voting rights or of the capital held would fall below 20%, 30% or 50% or so
that the investment firm would cease to be his subsidiary.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(7) The competent authority need not apply the 30% threshold where, in
accordance with Article 9(3)(a) of Directive 2004/109/EC, it applies a
threshold of one-third.

(8) In determining whether the criteria for a qualifying holding referred
to in this section are fulfilled, the competent authority shall not take into
account voting rights or shares which investment firms or credit institutions
may hold as a result of providing the underwriting of financial instruments
and/or placing of financial instruments on a firm commitment basis included
under point 6 of Section A of Schedule 1, provided that those rights are, on
the one hand, not exercised or otherwise used to intervene in the
management of the issuer and, on the other, disposed of within one year of
acquisition.

(9) The competent authority shall work in full consultation with any
appropriate home State regulator when carrying out the assessment provided
for in section 10B(1) (hereinafter referred to as the assessment) if the
proposed acquirer is one of the following

(a) a credit institution, assurance undertaking, insurance
undertaking, reinsurance undertaking, investment firm or
UCITS management company authorised in a Member State or
in a sector other than that in which the acquisition is proposed;

(b) the parent undertaking of a credit institution, assurance
undertaking, insurance undertaking, reinsurance undertaking,
investment firm or UCITS management company authorised in
a Member State or in a sector other than that in which the
acquisition is proposed; or

(c) a natural or legal person controlling a credit institution,
assurance undertaking, insurance undertaking, reinsurance
undertaking, investment firm or UCITS management company
authorised in a Member State or in a sector other than that in
which the acquisition is proposed.

(9A) The competent authority shall, without undue delay, provide any
appropriate home State regulator with any information which is essential or
relevant for the assessment. In this regard, the competent authority shall
communicate with any appropriate home State regulator upon request all
relevant information and shall communicate on its own initiative all essential
information. A decision by the competent authority assessing the notification
shall indicate any views or reservations expressed by the home State
regulator of the proposed acquirer.

(10) At least once a year at a time to be appointed by the competent
authority by notice in the Gazette, investment firms shall inform the
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
competent authority of the names of shareholders and members possessing
qualifying holdings and the sizes of such holdings.

(11) Where, in the opinion of the competent authority, the influence
exercised by any person to which subsection (2) applies is likely to be
prejudicial to the sound and prudent management of an investment firm, the
competent authority shall take such measures as he may deem appropriate to
prevent such circumstances from continuing such as

(a) applications for judicial orders;

(b) the imposition of sanctions against directors and those
responsible for management; or

(c) the suspension of the exercise of the voting rights attaching to
the shares held by the shareholders or members in question.

(12) The provisions of subsection (11) shall apply equally in respect of
persons who fail to comply with the obligation to provide prior information
in relation to the acquisition or increase of a qualifying holding. Where a
holding is acquired despite the opposition of the competent authority, the
competent authority shall, regardless of any other sanctions to be adopted,
provide either for exercise of the corresponding voting rights to be
suspended, for the nullity of the votes cast or for the possibility of their
annulment.

(13) The Minister may, by regulations, make such provision as he deems
appropriate in order to facilitate the operation of subsection (11).

Assessment period.

10A.(1) The competent authority

(a) shall, promptly and in any event within two working days
following receipt of the notification required under section
10(5), as well as following the possible subsequent receipt of
the information referred to in subsection (2) below,
acknowledge receipt thereof in writing to the proposed
acquirer;

(b) shall have a maximum of sixty working days as from the date of
the written acknowledgement of receipt of the notification and
all documents required to be attached to the notification on the
basis of the list referred to in section 10B(4) (hereinafter
referred to as the assessment period), to carry out the
assessment;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(c) shall inform the proposed acquirer of the date of the expiry of
the assessment period at the time of acknowledging receipt.

(2) The following provisions apply

(a) the competent authority may, during the assessment period, if
necessary, and no later than on the 50th working day of the
assessment period, request any further information that is
necessary to complete the assessment. Such request shall be
made in writing and shall specify the additional information
needed; and

(b) for the period between the date of request for information by
the competent authority and the receipt of a response thereto by
the proposed acquirer, the assessment period shall be
interrupted. The interruption shall not exceed 20 working days.
Any further requests by the competent authority for completion
or clarification of the information shall be at its discretion but
may not result in an interruption of the assessment period.

(3) The competent authority may extend the interruption referred to in
subsection (2) (b) up to 30 working days if the proposed acquirer is

(a) situated or regulated outside the EEA; or

(b) a natural or legal person not subject to prudential supervision.

(4) Where the competent authority, upon completion of the assessment,
decides to oppose the proposed acquisition, it shall, within two working
days, and not exceeding the assessment period, serve on the proposed
acquirer a written notice of objection which shall include the reasons for that
decision. Subject to the laws of Gibraltar, an appropriate statement of the
reasons for the decision may be made accessible to the public at the request
of the proposed acquirer. This shall not prevent the Minister from allowing
the competent authority to make such disclosure in the absence of a request
by the proposed acquirer.

(5) Where the competent authority does not oppose the proposed
acquisition within the assessment period in writing, it shall be deemed to be
approved.

(6) The competent authority may fix a maximum period for concluding
the proposed acquisition and extend it where appropriate.

Assessment.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
10B.(1) In assessing the notification provided for in section 10(5), and the
information referred to in section 10A(2), the competent authority shall, in
order to ensure the sound and prudent management of the investment firm in
which an acquisition is proposed, and having regard to the likely influence of
the proposed acquirer on the investment firm, appraise the suitability of the
proposed acquirer and the financial soundness of the proposed acquisition
against all of the following criteria

(a) the reputation of the proposed acquirer;

(b) the reputation and experience of any person who will direct the
business of the investment firm as a result of the proposed
acquisition;

(c) the financial soundness of the proposed acquirer, in particular in
relation to the type of business pursued and envisaged in the
investment firm in which the acquisition is proposed;

(d) whether the investment firm will be able to comply and continue
to comply with the prudential requirements based on this Act
and, where applicable, other financial services legislation, in
particular, whether the group of which it will become a part has
a structure that makes it possible to exercise effective
supervision, effectively exchange information among the
competent authorities and determine the allocation of
responsibilities among the competent authorities;

(e) whether there are reasonable grounds to suspect that, in
connection with the proposed acquisition, money laundering or
terrorist financing is being or has been committed or attempted,
or that the proposed acquisition could increase the risk thereof.

(2) The competent authority may oppose the proposed acquisition only if
there are reasonable grounds for doing so on the basis of the criteria set out
in subsection (1) or if the information provided by the proposed acquirer is
incomplete.

(3) The competent authority shall neither impose any prior conditions in
respect of the level of holding that must be acquired nor examine the
proposed acquisition in terms of the economic needs of the market.

(4) The competent authority shall make publicly available a list specifying
the information that is necessary to carry out the assessment and that must be
provided to it at the time of notification referred to in section 10(5). The
information required shall be proportionate and adapted to the nature of the
proposed acquirer and the proposed acquisition. The competent authority
shall not require information that is not relevant for a prudential assessment.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(5) Where two or more proposals to acquire or increase qualifying
holdings in the same investment firm have been notified to the competent
authority, the latter shall treat the proposed acquirers in a non-discriminatory
manner.

Membership of an authorised Investor Compensation Scheme.

11. The competent authority shall take all necessary steps, including those
set out in section 10(11), to ensure that an entity seeking an authorisation as
an investment firm meets its obligations under the Financial Services
(Investor Compensation Scheme) Act 2002.

Initial capital endowment.

12. The competent authority shall not grant an authorisation unless the
applicant investment firm has sufficient initial capital according to law,
having regard to the nature of the investment service or activity in question.

Organisational requirements.

13.(1) The competent authority shall take all necessary steps, including
those set out in section 10(11), to ensure that investment firms comply with
the organisational requirements set out in subsections (2) to (8).

(2) Investment firms shall establish adequate policies and procedures
sufficient to ensure compliance of the firm including its managers, employees
and tied agents with its obligations under the provisions of this Act as well as
appropriate rules governing personal transactions by such persons.

(3) Investment firms shall maintain and operate effective organisational and
administrative arrangements with a view to taking all reasonable steps
designed to prevent conflicts of interest as defined in section 18 from
adversely affecting the interests of its clients.

(4) Investment firms shall take reasonable steps to ensure continuity and
regularity in the performance of investment services and activities. To this
end investment firms shall employ appropriate and proportionate systems,
resources and procedures.

(5) Investment firms

(a) shall ensure, when relying on a third party for the performance
of operational functions which are critical for the provision of
continuous and satisfactory service to clients and the
performance of investment activities on a continuous and
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
satisfactory basis, that they take reasonable steps to avoid
undue additional operational risk;

(b) shall not outsource important operational functions in such a
way as to impair materially the quality of its internal control and
the ability of the supervisor to monitor the firm's compliance
with all obligations; and

(c) shall have sound administrative and accounting procedures,
internal control mechanisms, effective procedures for risk
assessment, and effective control and safeguard arrangements
for information processing systems.

(6) Investment firms shall arrange for records to be kept of all services and
transactions undertaken by it which shall be sufficient to enable the
competent authority to monitor compliance with the requirements under this
Act, and in particular to ascertain that the investment firm has complied with
all obligations with respect to clients or potential clients.

(7) Investment firms shall, when holding financial instruments belonging to
clients, make adequate arrangements so as to safeguard clients' ownership
rights, especially in the event of the investment firm's insolvency, and to
prevent the use of a client's instruments on own account except with the
client's express consent.

(8) Investment firms shall, when holding funds belonging to clients, make
adequate arrangements to safeguard the clients' rights and, except in the case
of credit institutions, prevent the use of client funds for its own account.

(9) In the case of branches of investment firms, the competent authority
shall, without prejudice to the possibility of the competent authority of the
home Member State of the investment firm to have direct access to those
records, enforce the obligation laid down in subsection (6) with regard to
transactions undertaken in Gibraltar by the branch.

Trading process and finalisation of transactions in an MTF.

14.(1) The competent authority shall take all necessary steps, including
those set out in section 10(11), to ensure that investment firms comply with
the provisions of this section.

(2) The competent authority shall ensure that investment firms or market
operators operating an MTF shall, in addition to meeting the requirements
laid down in section 13, establish transparent and non-discretionary rules and
procedures for fair and orderly trading and establish objective criteria for the
efficient execution of orders.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(3) The competent authority shall ensure that investment firms or market
operators operating an MTF establish transparent rules regarding the criteria
for determining the financial instruments that can be traded under its systems,
including, where applicable, providing or giving access to sufficient
information enabling users to form an investment judgement, taking into
account both the nature of the users and the types of instruments traded.

(4) The competent authority shall ensure that investment firms or market
operators operating an MTF establish and maintain transparent rules, based
on objective criteria, governing access to its facility. These rules shall comply
with the conditions established in section 42(3).

(5) The competent authority shall ensure that investment firms or market
operators operating an MTF clearly inform its users of their respective
responsibilities for the settlement of the transactions executed in that facility.
The competent authority shall require that investment firms or market
operators operating an MTF have put in place the necessary arrangements to
facilitate the efficient settlement of the transactions concluded under the
systems of the MTF.

(6) Where a transferable security, which has been admitted to trading on a
regulated market, is also traded on an MTF without the consent of the issuer,
the competent authority shall ensure that the issuer is not subject to any
obligation relating to initial, ongoing or ad hoc financial disclosure with
regard to that MTF.
(7) The competent authority shall ensure that any investment firm or
market operator operating an MTF comply immediately with any instruction
from its home competent authority pursuant to regulations made under
section 49(1) and (2) to suspend or remove a financial instrument from
trading.

Relations with third countries.

15.(1) The Minister shall ensure the European Commission and ESMA is
informed of any general difficulties which investment firms encounter in
establishing themselves or providing investment services or performing
investment activities in any third country.

(2) The Minister shall ensure the European Commission is informed at its
request

(a) of any application for the authorisation of any firm which is the
direct or indirect subsidiary of a parent undertaking governed
by the law of the third country referred to in subsection (1);
and;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(b) whenever the competent authority is informed in accordance
with the provisions of this Act that such a parent undertaking
proposes to acquire a holding in an investment firm authorised
in accordance with the provisions of this Act, in consequence of
which the latter would become its subsidiary.

(3) The competent authority shall afford the Minister such assistance as the
Minister may require to enable him to comply with his obligations under this
section.

Operating conditions for investment firms

General provisions

Regular review of conditions for initial authorisation.

16.(1) The competent authority shall make it a condition for the grant of an
authorisation that an investment firm authorised in accordance with the
provisions of this Act comply at all times with the conditions for initial
authorisation established in this Part.

(2). The Minister shall require the competent authority to establish the
appropriate methods to monitor that investment firms comply with their
obligation under subsection (1), including requiring investment firms to
notify the competent authority of any material changes to the conditions for
the initial authorisation.

(3) In the case of investment firms which provide only investment advice,
the Minister may, by regulations, enable the competent authority to delegate
administrative, preparatory or ancillary tasks related to the review of the
conditions for initial authorisation, in accordance with section 48(2) to (6).

General obligation in respect of on-going supervision.

17.(1) The competent authority shall monitor the activities of investment
firms so as to assess compliance with the operating conditions provided for
in this Act.

(2) The Minister may, by regulations, make such provision as he may deem
appropriate to enable the competent authority to obtain the information
needed to assess the compliance of investment firms with those obligations.
Without prejudice to the generality of the foregoing, regulations may provide
for such offences and penalties therefor as the Minister may deem
appropriate.

(3) Where an investment firm only provides investment advice, the
Minister may make regulations enabling the competent authority to delegate
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
administrative, preparatory or ancillary tasks related to the regular
monitoring of operational requirements, in accordance with section 48(2) to
(6).

Conflicts of interest.

18.(1) The competent authority shall make it a condition for the grant of an
authorisation that investment firms take all reasonable steps to identify
conflicts of interest between themselves, including their managers, employees
and tied agents, or any person directly or indirectly linked to them by control
and their clients or between one client and another that arise in the course of
providing any investment and ancillary services, or combinations thereof.

(2) Where, in the opinion of the competent authority, organisational or
administrative arrangements made by the investment firm in accordance with
the provisions of this Act to manage conflicts of interest are not sufficient to
ensure, with reasonable confidence, that risks of damage to client interests
will be prevented, the competent authority shall require the investment firm
to clearly disclose the general nature or sources of conflicts of interest to the
client before undertaking business on his behalf.

Provisions to ensure investor protection

Conduct of business obligations when providing investment services to
clients.

19.(1) The competent authority shall make it a condition for the grant of an
authorisation that, when providing investment services or, where
appropriate, ancillary services to clients, an investment firm act honestly,
fairly and professionally in accordance with the best interests of its clients
and comply, in particular, with the principles set out in subsections (2) to (8).

(2) All information, including marketing communications, addressed by the
investment firm to clients or potential clients shall be fair, clear and not
misleading. Marketing communications shall be clearly identifiable as such.

(3) Appropriate information shall be provided by the investment firm in a
comprehensible form to clients or potential clients about

(a) the investment firm and its services;

(b) financial instruments and proposed investment strategies; this
should include appropriate guidance on and warnings of the
risks associated with investments in those instruments or in
respect of particular investment strategies;

(c) execution venues; and
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(d) costs and associated charges,

in order that clients are reasonably able to understand the nature and risks of
the investment service and of the specific type of financial instrument being
offered and, consequently, to take investment decisions on an informed basis.
This information may be provided by the investment firm in a standardised
format.

(4) When providing investment advice or portfolio management services,
the investment firm shall first obtain the necessary information regarding the
client's or potential client's knowledge and experience in the investment field
relevant to the specific type of product or service, his financial situation and
his investment objectives so as to enable the firm to recommend to the client
or potential client the investment services and financial instruments that may
be suitable for him.

(5)

(a) Subject to subsection (6), when providing investment services
other than those referred to in subsection (4), investment firms
shall ask the client or potential client to provide information
regarding his knowledge and experience in the investment field
relevant to the specific type of product or service offered or
demanded so as to enable the investment firm to assess whether
the investment service or product envisaged is appropriate for
the client.

(b) Where the investment firm considers, on the basis of the
information received, that the product or service is not
appropriate to the client or potential client, the investment firm
shall warn the client or potential client of the fact. This warning
may be provided in a standardised format.

(c) Where the client or potential client elects not to provide the
requested information or where he provides insufficient
information regarding his knowledge and experience, the
investment firm shall warn the client or potential client that such
a decision will not allow the firm to determine whether the
service or product envisaged is appropriate for him. This
warning may be provided in a standardised format.

(6) When providing investment services that only consist of execution or
the reception and transmission of client orders with or without ancillary
services, investment firms may provide those services to their clients without
the need to first obtain the information or make the determination provided
for in subsection (5) where all the following conditions are met
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(a) the investment services relate to shares admitted to trading on a
regulated market or in an equivalent third country market,
money market instruments, bonds or other forms of securitised
debt (excluding those bonds or securitised debt that embed a
derivative), UCITS and other non-complex financial
instruments.

For these purposes, a third country market shall be considered
as equivalent to a regulated market where the competent
authority is of the opinion that it complies with equivalent
requirements to those established under Part III;

(b) the service is provided at the initiative of the client or potential
client;

(c) the client or potential client has been clearly informed by the
investment firm that in the provision of this service the
investment firm is not required to assess the suitability of the
instrument or service provided or offered and that therefore he
does not benefit from the corresponding protection of the
relevant conduct of business rules; this warning may be
provided in a standardised format; and

(d) the investment firm complies with its obligations under section
18.

(7) The investment firm shall establish a record that includes the document
or documents agreed between the firm and the client that set out the rights
and obligations of the parties, and the other terms on which the firm will
provide services to the client. The rights and duties of the parties to the
agreement may be incorporated by reference to other documents or legal
texts.

(8) The investment firm shall supply to clients adequate reports on the
service provided. These reports shall include, where applicable, the costs
associated with the transactions and services undertaken on behalf of the
client.

(9) Where an investment service is offered as part of a financial product
which is already subject to other statutory provisions relating to credit
institutions and consumer credit with respect to risk assessment of clients or
information requirements, this service shall not be additionally subject to the
obligations set out in this section.

Provision of services through the medium of another investment firm.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
20.(1) Where an investment firm receives instructions to perform investment
or ancillary services on behalf of a client through the medium of another
investment firm, the firm’s obligations under this Act will be fulfilled where it
relies on client information transmitted by the latter firm. The investment firm
which mediates the instructions will remain responsible for the completeness
and accuracy of the information transmitted.

(2) The investment firm which receives an instruction to undertake services
on behalf of a client in the manner set out in subsection (1) shall in turn be
entitled to rely on any recommendations in respect of the service or
transaction that have been provided to the client by another investment firm
in order to fulfil its obligations under this Act. In this context, the investment
firm mediating the instructions will remain responsible for the
appropriateness for the client of the recommendations or advice provided.

(3) An investment firm receiving client instructions or orders through the
medium of another investment firm shall remain responsible for concluding
the service or transaction, based on any such information or
recommendations, in accordance with the relevant provisions of this Part.

Obligation to execute orders on terms most favourable to the client.

21.(1) The competent authority shall make it a condition for the grant of an
authorisation that investment firms take all reasonable steps to obtain, when
executing orders, the best possible result for their clients taking into account
price, costs, speed, likelihood of execution and settlement, size, nature or
any other consideration relevant to the execution of the order.
Notwithstanding the foregoing, whenever there is a specific instruction from
the client the investment firm shall execute the order following the specific
instruction.

(2) The competent authority shall require investment firms to establish and
implement effective arrangements for complying with subsection (1). In
particular the competent authority shall require investment firms to establish
and implement an order execution policy to allow them to obtain, for their
client orders, the best possible result in accordance with subsection (1).

(3) The order execution policy referred to in subsection (2) shall include, in
respect of each class of instruments, information on the different venues
where the investment firm executes its client orders and the factors affecting
the choice of execution venue. It shall at least include those venues that
enable the investment firm to obtain on a consistent basis the best possible
result for the execution of client orders.

(4) The competent authority shall make it a condition for the grant of an
authorisation that investment firms provide appropriate information to their
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
clients on their order execution policy and that investment firms first obtain
the prior consent of their clients to the execution policy.

(5) Where an order execution policy provides for the possibility that client
orders may be executed outside a regulated market or an MTF, the
competent authority shall make it a condition for the grant of an
authorisation

(a) that the investment firm, in particular, inform its clients about
this possibility; and

(b) that the investment firm first obtain the prior express consent of
their clients before proceeding to execute such orders.

Investment firms may obtain this consent either in the form of a general
agreement or in respect of individual transactions.

(6) The competent authority shall make it a condition for the grant of an
authorisation that investment firms -

(a) monitor the effectiveness of their order execution arrangements
and execution policy in order to identify and, where
appropriate, correct any deficiencies. In particular, investment
firms shall assess, on a regular basis, whether the execution
venues included in the order execution policy provide for the
best possible result for the client or whether they need to make
changes to their execution arrangements;

(b) notify clients of any material changes to their order execution
arrangements or execution policy; and

(c) demonstrate to their clients, at their request, that they have
executed their orders in accordance with the firm's execution
policy.

Client order handling rules.

22.(1) The competent authority shall make it a condition for the grant of an
authorisation that investment firms authorised to execute orders on behalf of
clients implement procedures and arrangements

(a) allowing for the execution of otherwise comparable client
orders in accordance with the time of their reception by the
investment firm; and

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(b) providing for the prompt, fair and expeditious execution of
client orders, relative to other client orders or the trading
interests of the investment firm.

(2) The competent authority shall make it a condition for the grant of an
authorisation that in the case of a client limit order in respect of shares
admitted to trading on a regulated market which are not immediately
executed under prevailing market conditions, investment firms are, unless the
client expressly instructs otherwise, to take measures to facilitate the earliest
possible execution of that order by making public immediately that client
limit order in a manner which is easily accessible to other market
participants.

(3) Investment firms

(a) may comply with the obligation set out in subsection (2) by
transmitting the client limit order to a regulated market and/or
MTF; and

(b) the competent authority may, in its discretion, waive the
obligation set out in subsection (2) to make public a limit order
where the order is large in scale compared with normal market
size as determined under section 44.

Obligations of investment firms when appointing tied agents.

23.(1) The competent authority may, in its discretion, decide to authorise
investment firms to appoint tied agents for the purposes of promoting the
services of the investment firm, soliciting business or receiving orders from
clients or potential clients and transmitting them, placing financial
instruments and providing advice in respect of such financial instruments and
services offered by that investment firm.

(2) Where an investment firm appoints a tied agent pursuant to subsection
(1), the firm remains fully and unconditionally responsible

(a) for any action or omission on the part of a tied agent when
acting on behalf of the firm; and

(b) to ensure that the tied agent discloses the capacity in which he
is acting and the firm which he is representing when contacting
or before dealing with any client or potential client.

(3) The competent authority may authorise, in accordance with the
provisions of this Act, tied agents registered in Gibraltar to handle clients'
money or financial instruments on behalf and under the full responsibility of
the investment firm for which they are acting within Gibraltar or, in the case
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
of a cross-border operation, in the territory of a Member State which allows
a tied agent to handle clients' money.

(4) The investment firm on behalf of which a tied agent is acting shall
remain responsible for monitoring the activities of their tied agents so as to
ensure that they continue to comply with this Act when acting through tied
agents.

(5) Where the competent authority authorises investment firms to appoint
tied agents in accordance with this section

(a) it shall establish a public register, in such form as it may deem
appropriate, wherein will be registered the details of all tied
agents established in Gibraltar; and

(b) investment firms shall appoint only tied agents entered in the
public register in the Member State where they are established.

(6) Where the competent authority has decided, in accordance with
subsection (1), not to allow investment firms to appoint tied agents, those
tied agents shall, where relevant, be registered with the competent authority
of the home Member State of the investment firm on whose behalf it acts.

(7) Where the competent authority has decided, in accordance with
subsection (1), to allow investment firms to appoint tied agents, a tied agent
shall only be admitted to the public register where the competent authority is
satisfied that it is of sufficiently good repute and that he possesses
appropriate general, commercial and professional knowledge so as to be able
to communicate accurately all relevant information regarding the proposed
service to the client or potential client.

(8) The register established under subsection (5) shall be updated by the
competent authority on a regular basis and shall be publicly available for
consultation.

(9) The competent authority shall make it a condition for the grant of an
authorisation that investment firms appointing tied agents take adequate
measures in order to avoid any negative impact that the activities of the tied
agent not covered by the scope of this Act could have on the activities
carried out by the tied agent on behalf of the investment firm.

(10) The competent authority may collaborate with investment firms and
credit institutions, their associations and other entities in registering tied
agents and in monitoring compliance of tied agents with the requirements of
this section. Without prejudice to the generality of the foregoing, an
investment firm, credit institution or their associations and other entities
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
under the supervision of the competent authority may apply to the competent
authority for the registration of tied agents.

Transactions executed with eligible counterparties.

24.(1) Investment firms authorised to execute orders on behalf of clients or
to deal on own account or to receive and transmit orders, may bring about or
enter into transactions with eligible counterparties without being obliged to
comply with the obligations under sections 19, 21 and 22 in respect of those
transactions or in respect of any ancillary service directly related to those
transactions.

(2) Eligible counterparties for the purposes of subsection (1) are
investment firms, credit institutions, insurance companies, UCITS and their
management companies, pension funds and their management companies,
other financial institutions authorised or regulated under Community
legislation or the national law of a Member State, undertakings exempted
from the application of this Act under section 4(1)(k) and (l), national
governments and their corresponding offices including public bodies that deal
with public debt, the Gibraltar Savings Bank, central banks and supranational
organisations.

(3) Classification as an eligible counterparty under subsection (2) shall be
without prejudice to the right of such entities to request, either on a general
form or on a trade-by-trade basis, treatment as clients whose business with
the investment firm is subject to sections 19, 21 and 22.

(4) The competent authority may also recognise as eligible counterparties
for the purposes of subsection (1) other undertakings meeting such pre-
determined proportionate requirements, including quantitative thresholds as
the Minister may prescribe.

(5) In the event of a transaction where the prospective counterparties are
located in different jurisdictions, the investment firm shall defer to the status
of the other undertaking as determined by the law or measures of the
Member State in which that undertaking is established.

(6) An investment firm entering into transactions in accordance with
subsection (1) with such undertakings shall obtain the express confirmation
from the prospective counterparty that it agrees to be treated as an eligible
counterparty, and the competent authority shall allow the investment firm to
obtain this confirmation either in the form of a general agreement or in
respect of each individual transaction.

(7) The competent authority may recognise as eligible counterparties

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(a) third country entities equivalent to those categories of entities
mentioned in subsection (2); and

(b) third country undertakings such as those mentioned in
subsection (2) on the same conditions and subject to the same
requirements as those laid down at subsections (4) and (5).

Market transparency and integrity

Obligation to uphold integrity of markets, report transactions and
maintain records.

25.(1) Without prejudice to the allocation of responsibilities for enforcing
the provisions of the Market Abuse Act 2005, the Minister after having
coordinated with ESMA in accordance with Article 31 of the ESMA
Regulation shall make regulations to ensure that appropriate measures are in
place to enable the competent authority to monitor the activities of
investment firms to ensure that they act honestly, fairly and professionally
and in a manner which promotes the integrity of the market.

(2) Regulations made under subsection (1) may make provision for such
offences and penalties therefore as the Minister may deem appropriate.

(3) It shall be a condition subject to which an authorisation under this Act
is granted that investment firms keep at the disposal of the competent
authority, for at least five years, the relevant data relating to all transactions
in financial instruments carried out, whether on own account or on behalf of
a client. In the case of transactions carried out on behalf of clients, the
records shall contain all the information and details of the identity of the
client, and other information required under the Crime (Money Laundering
and Proceeds) Act 2007 to prevent the use of the financial system for the
purpose of money laundering.

(3A) The competent authority shall allow ESMA access to the information
referred to in subsection (3) where ESMA makes a request in accordance
with the procedure and under the conditions set out in Article 35 of the
ESMA Regulation.

(4) It shall be a condition subject to which an authorisation under this Act
is granted that investment firms which execute transactions in any financial
instruments admitted to trading on a regulated market report details of such
transactions to the competent authority as quickly as possible, and no later
than the close of the following working day. This obligation shall apply
whether or not such transactions were carried out on a regulated market.

(5) The competent authority shall, in accordance with the provisions of this
Act, establish the necessary arrangements in order to ensure that the
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
competent authority of the most relevant market in terms of liquidity for
those financial instruments also receives the information reported under
subsection (4).

(6) Reports under subsection (4) shall, in particular, include details of the
names and numbers of the instruments bought or sold, the quantity, the dates
and times of execution and the transaction prices and means of identifying
the investment firms concerned.

(7) Reports under subsection (4) are to be made to the competent authority
either by the investment firm itself, a third party acting on its behalf or by a
trade-matching or reporting system approved by the competent authority or
by the regulated market or MTF through whose systems the transaction was
completed. In cases where transactions are reported directly to the
competent authority by a regulated market, an MTF, or a trade-matching or
reporting system approved by the competent authority, the obligation on the
investment firm laid down in subsection (4) may be waived by the competent
authority either generally or individually as he sees fit.

(8) When, in accordance with the provisions of this Act, reports provided
for under this section are transmitted to the competent authority in its
capacity as host Member State, it shall transmit this information to the
competent authority of the home Member State of the investment firm,
unless the latter decide that it does not want to receive this information.

Monitoring of compliance with the rules of the MTF and with other
legal obligations.

26. It shall be a condition subject to which an authorisation under this Act is
granted that investment firms and market operators operating an MTF–

(a)

(i) establish and maintain effective arrangements and
procedures, relevant to the MTF, for the regular
monitoring of the compliance by its users with its rules;
and

(ii) monitor the transactions undertaken by their users under
their systems in order to identify breaches of those rules,
disorderly trading conditions or conduct that may involve
market abuse;

(b) report significant breaches of its rules or disorderly trading
conditions or conduct that may involve market abuse to the
competent authority; and

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(c) supply the relevant information without delay to the authority
responsible for the investigation and prosecution of market
abuse and to provide full assistance to the latter in investigating
and prosecuting market abuse occurring on or through its
systems.

Obligation for investment firms to make public firm quotes.

27.(1) It shall be a condition subject to which an authorisation under this
Act is granted that systematic internalisers in shares publish a firm quote in
those shares admitted to trading on a regulated market for which they are
systematic internalisers and for which there is a liquid market, in default of
which systematic internalisers shall disclose quotes to clients on request.

(2) The provisions of this subsection (1) shall be applicable to systematic
internalisers when dealing for sizes up to standard market size. Systematic
internalisers that only deal in sizes above standard market size shall not be
subject to the provisions of this section.

(3) For the purposes of subsection (1)

(a) systematic internalisers may decide the size or sizes at which
they will quote, including a firm bid or offer price or prices for a
size or sizes which could be up to standard market size for the
class of shares to which the share belongs and reflecting the
prevailing market conditions for that share;

(b) shares shall be grouped in classes on the basis of the arithmetic
average value of the orders executed in the market for that
share. The standard market size for each class of shares shall be
a size representative of the arithmetic average value of the
orders executed in the market for the shares included in each
class of shares;

(c) the market for each share shall be comprised of all orders
executed in the European Union in respect of that share
excluding those large in scale compared to normal market size
for that share;

(d) systematic internalisers shall make public their quotes on a
regular and continuous basis during normal trading hours. They
shall be entitled to update their quotes at any time. They shall
also be allowed, under exceptional market conditions, to
withdraw their quotes. The quote shall be made public in a
manner which is easily accessible to other market participants
on a reasonable commercial basis;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(e) systematic internalisers shall, while complying with the
provisions set down in section 21, execute the orders they
receive from their retail clients in relation to the shares for
which they are systematic internalisers at the quoted prices at
the time of reception of the order;

(f) systematic internalisers shall execute the orders they receive
from their professional clients in relation to the shares for which
they are systematic internalisers at the quoted price at the time
of reception of the order. However, they may execute those
orders at a better price in justified cases provided that this price
falls within a public range close to market conditions and
provided that the orders are of a size bigger than the size
customarily undertaken by a retail investor;

(g) systematic internalisers may execute orders they receive from
their professional clients at prices different than their quoted
ones without having to comply with the conditions established
in this subsection, in respect of transactions where execution in
several securities is part of one transaction or in respect of
orders that are subject to conditions other than the current
market price; and

(h) where a systematic internaliser who quotes only one quote or
whose highest quote is lower than the standard market size
receives an order from a client of a size bigger than its
quotation size, but lower than the standard market size, it may
decide to execute that part of the order which exceeds its
quotation size, provided that it is executed at the quoted price,
except where otherwise permitted under the conditions of
paragraphs (f) and (g). Where the systematic internaliser is
quoting in different sizes and receives an order between those
sizes, which it chooses to execute, it shall execute the order at
one of the quoted prices in compliance with the provisions of
this Act, except where otherwise permitted under the conditions
of paragraphs (f) and (g).

(4) Where the most relevant market in terms of liquidity for each share (as
defined in section 25) is in Gibraltar, the competent authority shall determine
at least annually, on the basis of the arithmetic average value of the orders
executed in the market in respect of that share, the class of shares to which it
belongs.

(4A) The competent authority shall ensure that the information referred to
in subsection (4) is made publicly available to all market participants and is
transmitted to ESMA.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(5) It shall be a condition subject to which an authorisation is granted that

(a) investment firms regularly update bid or offer prices published
in accordance with this section and maintain prices which reflect
the prevailing market conditions; and

(b) investment firms comply with the conditions for price
improvement laid down in subsection (3)(f).

(6) For all purposes relating to the operation of this section

(a) the competent authority shall authorise systematic internalisers
to decide, on the basis of their commercial policy and in an
objective and non-discriminatory way, the investors to whom
they give access to their quotes;

(b) to that end the competent authority shall require the systematic
internaliser to set clear standards for governing access to their
quotes;

(c) notwithstanding paragraphs (a) and (b), systematic internalisers
may refuse to enter into or discontinue business relationships
with investors on the basis of commercial considerations such
as the investor credit status, the counterparty risk and the final
settlement of the transaction.

(7) In order to limit the risk of being exposed to multiple transactions from
the same client, the competent authority shall allow systematic internalisers

(a) to limit in a non-discriminatory way the number of transactions
from the same client which they undertake to enter at the
published conditions; and

(b) to limit, in a non-discriminatory way and without prejudice to
subsection 22, the total number of transactions from different
clients at the same time provided that this is allowable only
where the number or volume of orders sought by clients
considerably exceeds the norm.

Post-trade disclosure by investment firms.

28. It shall be a condition subject to which an authorisation under this Act is
granted that–

(a) where investment firms, either on their own account or on
behalf of clients, conclude transactions in shares admitted to
trading on a regulated market outside a regulated market or
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
MTF, it shall make public the volume and price of those
transactions and the time at which they were concluded as close
to real-time as possible, on a reasonable commercial basis, and
in a manner which is easily accessible to other market
participants; and

(b) the information made public in accordance with paragraph (a)
and the time-limits within which it is published comply with the
prescribed requirements. Where the prescribed requirements
provide for deferred reporting for certain categories of
transaction in shares, this possibility shall apply mutatis
mutandis to those transactions when undertaken outside
regulated markets or MTFs.

Pre-trade transparency requirements for MTFs.

29.(1) It shall be a condition subject to which an authorisation under this
Act is granted that investment firms and market operators operating an MTF
make public current bid and offer prices and the depth of trading interests at
these prices which are advertised through their systems in respect of shares
admitted to trading on a regulated market and available to the public, on
reasonable commercial terms and on a continuous basis during normal
trading hours.

(2) The competent authority, may, in its discretion, waive the obligation
for investment firms or market operators operating an MTF to make public
the information referred to in subsection (1)

(a) based on the market model or the type and size of orders in the
cases defined in accordance with regulations made by the
Minister; or

(b) in respect of transactions that are large in scale compared with
normal market size for the share or type of share in question.

Post-trade transparency requirements for MTFs.

30.(1) It shall be a condition subject to which an authorisation under this
Act is granted that

(a) investment firms and market operators operating an MTF make
public the price, volume and time of the transactions executed
under its systems in respect of shares which are admitted to
trading on a regulated market on a reasonable commercial basis,
as close to real-time as possible; and

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(b) MTFs obtain the competent authority's prior approval to
proposed arrangements for deferred trade-publication in
accordance with subsection (3)(b), and shall require that these
arrangements be clearly disclosed to market participants and the
investing public.

(2) Subsection (1) shall not apply to details of trades executed on an MTF
that are made public under the systems of a regulated market.

(3) The competent authority may, in its discretion

(a) authorise investment firms or market operators operating an
MTF to provide for deferred publication of the details of
transactions based on their type or size:

(b) authorise the deferred publication in respect of transactions that
are large in scale compared with the normal market size for that
share or that class of shares.


Rights of investment firms

Freedom to provide investment services and activities.

31.(1) Investment firms authorised and supervised by the competent
authority of another Member State in accordance with its obligations under
the directive, and in respect of credit institutions in accordance with
provisions substantially equivalent to the Financial Services (Banking) Act

(a) may freely perform investment services or activities as well as
ancillary services within Gibraltar, provided that such services
and activities are covered by its authorisation; and

(b) may offer ancillary services only when provided together with
an investment service or activity,

without any additional requirements on such an investment firm or credit
institution in respect of matters covered by this Act.

(2) An authorised investment firm wishing to provide services or activities
within the territory of another Member State for the first time, or which
wishes to change the range of services or activities so provided, shall
communicate the following information to the competent authority

(a) the Member State in which it intends to operate;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(b) a business plan stating in particular the investment services or
activities as well as ancillary services which it intends to
perform and whether it intends to use tied agents in the territory
of the Member States in which it intends to provide services,

in such form as the competent authority may require.

(3) Pursuant to subsection (2), where an investment firm intends to use tied
agents, the competent authority shall, at the request of the competent
authority of the host Member State and within a reasonable time,
communicate to the latter the identity of the tied agents that the investment
firm intends to use in that Member State which the host Member State may
make public.

(3A) The competent authority shall allow ESMA access to the information
referred to in subsection (3) where ESMA makes a request in accordance
with the procedure and under the conditions set out in Article 35 of the
ESMA Regulation.

(4) The competent authority shall, within one month of receiving any
information pursuant to this section by an investment firm, forward it to the
competent authority of the host Member State, following which the
investment firm may then start to provide the investment service or services
concerned in the host Member State.

(5) In the event of a change in any of the particulars communicated in
accordance with this section, an investment firm shall give written notice of
that change to the competent authority at least one month before
implementing the change which the competent authority shall transmit to the
competent authority of the host Member State.

(6) Investment firms and market operators to which sub-section (1) applies
and

(a) operating MTFs in Gibraltar shall, without further legal or
administrative requirement, be free to provide appropriate
arrangements so as to facilitate access to and use of their
systems by remote users or participants established in other
member States;

(b) operating MTFs in other member States shall, without further
legal or administrative requirement, be free to provide
appropriate arrangements so as to facilitate access to and use of
their systems by remote users or participants established in
Gibraltar.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(7) The investment firm or the market operator that operates an MTF
referred to in subsection (6)(a) shall communicate to the competent authority
the fact that it intends to provide such arrangements. The competent
authority shall communicate, within one month, this information to the
competent authority of the host Member State in which the MTF intends to
provide such arrangements.

(8) The competent authority shall, at the request of the competent
authority of the host Member State of an MTF to which subsection (6)(a)
applies and within a reasonable time, communicate the identity of the
members or participants of the MTF established in Gibraltar.

Establishment of a branch.

32.(1) Investment services or activities as well as ancillary services may be
provided within Gibraltar through the establishment of a branch, provided
that–

(a) those services and activities are covered by an authorisation
granted to the investment firm or the credit institution in the
home Member State; and

(b) that ancillary services are only provided together with an
investment service or activity.

(2) Pursuant to subsection (1), no additional requirements shall be imposed
on the organisation and operation of the branch in respect of the matters
covered by this Act save those allowed under this section.

(3) An investment firm wishing to establish a branch within the territory of
another Member State shall first notify the competent authority of the fact
and provide it with the following information

(a) the Member States within the territory of which it plans to
establish a branch;

(b) a business plan setting out, inter alia, the investment services or
activities as well as the ancillary services to be offered and the
organisational structure of the branch and indicating whether
the branch intends to use tied agents; and

(c) the address in the host Member State from which documents
may be obtained;

(d) the names of those responsible for the management of the
branch.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(4) Where an investment firm uses a tied agent established in a Member
State outside Gibraltar, such tied agent shall be assimilated to the branch and
shall be subject to the provisions of this Act relating to branches.

(5) Where subsection (3) applies, unless the competent authority has
reason to doubt the adequacy of the administrative structure or the financial
situation of an investment firm, taking into account the activities envisaged,
it shall, within three months of receiving information under this section,
communicate that information to the competent authority of the host
Member State and inform the investment firm concerned of the fact
accordingly.

(6) Where subsection (3) applies, in addition to the information referred
to above, the competent authority shall communicate details of the
accredited compensation scheme of which the investment firm concerned is a
member to the competent authority of the host Member State. In the event of
a change in the particulars, the competent authority shall inform the
competent authority of the host Member State accordingly.

(7) Where subsection (3) applies and the competent authority, in its
discretion, refuses to communicate the information to the competent
authority of the host Member State, it shall give reasons for its refusal to the
investment firm concerned within three months of receiving all the
information.

(8) Where subsection (1) applies

(a) on receipt of a communication from the competent authority of
the home Member State, or failing such communication from
the latter at the latest after two months from the date of
transmission of the communication by the home competent
authority, the branch may be established and commence
business;

(b) the competent authority shall assume responsibility for ensuring
that the services provided by the branch within Gibraltar
complies with the obligations laid down in sections 19, 21, 22,
25, 27 and 28; and

(c) the competent authority shall have the right to examine branch
arrangements and to request such changes as are strictly needed
to enable the competent authority to enforce the obligations
under sections 19, 21, 22, 25, 27 and 28 with respect to the
services or activities provided by the branch within Gibraltar.

(9) Where an investment firm has established a branch in another member
State, the competent authority, in the exercise of its responsibilities and after
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
informing the competent authority of the host Member State, may carry out
on-site inspections of that branch.

(10) In the event of a change in any of the information communicated in
accordance with this section, the investment firm concerned shall give
written notice of that change to the competent authority at least one month
before implementing the change, which shall be transmitted by the competent
authority to the competent authority of the host Member State.

Access to regulated markets.

33.(1) Investment firms from other Member States which are authorised to
execute client orders or to deal on own account shall have the right of
membership or have access to regulated markets established in Gibraltar by
any of the following arrangements

(a) directly, by setting up a branch;

(b) by becoming remote members of or having remote access to the
regulated market without having to be established in Gibraltar,
where the trading procedures and systems of the market in
question do not require a physical presence for conclusion of
transactions on the market.

(2) Where subsection (1) applies, no additional regulatory or administrative
requirements shall be imposed on investment firms exercising their rights
under that subsection in respect of matters covered by this Act.

Access to central counterparty, clearing and settlement facilities and
right to designate settlement system.

34.(1) The use of central counterparty, clearing and settlement systems shall
not be restricted to the clearing and settlement of transactions in financial
instruments undertaken on a regulated market or MTF in Gibraltar.

(2) Without prejudice to the generality of subsection (1), investment firms
from other Member States shall have the right of access to central
counterparty, clearing and settlement systems in Gibraltar for the purposes of
finalising or arranging the finalisation of transactions in financial instruments
subject to the same non-discriminatory, transparent and objective criteria as
apply to investment firms authorised by the competent authority.

(3) Regulated markets in Gibraltar shall offer all members or participants
the right to designate the system for the settlement of transactions in financial
instruments undertaken on that regulated market, subject to

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(a) such links and arrangements between the designated settlement
system and any other system or facility as are necessary to
ensure the efficient and economic settlement of the transaction
in question existing; and

(b) agreement by the competent authority that technical conditions
for settlement of transactions concluded on the regulated
market through a settlement system other than that designated
by the regulated market are such as to allow the smooth and
orderly functioning of financial markets.

(4) The rights of investment firms under this section shall be without
prejudice to the right of operators of central counterparty, clearing or
securities settlement systems to refuse on legitimate commercial grounds to
make the requested services available.

Provisions regarding central counterparty, clearing and settlement
arrangements in respect of MTFs.

35.(1) Subject to subsection (2), investment firms and market operators
operating an MTF shall be allowed to enter into appropriate arrangements
with a central counterparty or clearing house and a settlement system of
another Member State with a view to providing for the clearing or settlement
of some or all trades concluded by market participants under their systems.

(2) The competent authority may not oppose the use of central
counterparty, clearing houses or settlement systems in another Member State
except where this is demonstrably necessary in order to maintain the orderly
functioning of that MTF and taking into account the conditions for
settlement systems established in section 34.


PART III
REGULATED MARKETS

Authorisations and applicable law.

36.(1) The competent authority

(a) shall only authorise as a regulated market those systems which
comply with the provisions of this Part; and

(b) shall grant an authorisation as a regulated market only where it
is satisfied that both the market operator and the systems of the
regulated market comply with the requirements laid down in
this Part.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(2) Where a regulated market is a legal person managed or operated by a
market operator other than the regulated market itself, the Minister may, by
regulations, establish how the different obligations imposed on the market
operator under this Part are to be allocated between the regulated market
and the market operator.

(3) The competent authority shall issue an authorisation under this Part
only where it is satisfied that the operator of a regulated market has provided
all information, including a business plan setting out, inter alia, the types of
business envisaged and the organisational structure, necessary to enable the
competent authority to satisfy itself that the regulated market has established,
at the time of initial authorisation, all the necessary arrangements to meet its
obligations under the provisions of this Part.

(4) It shall be a condition subject to which an authorisation under this Part
is issued that the operator of the regulated market perform tasks relating to
the organisation and operation of the regulated market under the supervision
of the competent authority.

(5) The competent authority shall maintain under regular review the
compliance of regulated markets with the provisions of this Part and monitor
regulated markets to ensure compliance at all times with the conditions for
initial authorisation established under this Part.

(6) It shall be a condition subject to which an authorisation under this Part
is issued that the market operator remain

(a) responsible for ensuring that the regulated market that he
manages complies with all requirements under this Part; and

(b) entitled to exercise the rights that correspond to the regulated
market that he manages by virtue of this Act.

(7) The law governing the trading conducted under the systems of a
regulated market in Gibraltar shall be the law of Gibraltar.

(8) The competent authority may withdraw the authorisation issued to a
regulated market where it

(a) does not make use of the authorisation within 12 months,
expressly renounces the authorisation or has not operated for
the preceding six months;

(b) has obtained the authorisation by making false statements or by
any other irregular means;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(c) no longer meets the conditions under which authorisation was
granted;

(d) has seriously and systematically infringed the provisions of this
Act; or

(e) falls within any of the cases where regulations made by the
Minister under this section provides for withdrawal;

and where such an authorisation has been withdrawn the competent authority
shall notify ESMA of that fact.

Requirements for the management of the regulated market.

37.(1) Persons who effectively direct the business and the operations of a
regulated market shall be of sufficiently good repute and sufficiently
experienced as to ensure the sound and prudent management and operation
of the regulated market.

(2) The operator of a regulated market shall inform the competent
authority of the identity and any other subsequent changes of persons who
effectively direct the business and the operations of the regulated market.
(3) The competent authority shall refuse to approve proposed changes
where there are objective and demonstrable grounds for believing that they
pose a material threat to the sound and prudent management and operation
of the regulated market.

(4) In the process of authorisation of a regulated market, the person or
persons who effectively direct the business and the operations of a regulated
market authorised as such on the coming into force of this Act shall be
deemed to comply with the requirements laid down in subsection (1).

Requirements relating to persons exercising significant influence over
the management of the regulated market.

38.(1) Persons who are in a position to exercise, directly or indirectly,
significant influence over the management of a regulated market shall be fit
and proper for the purpose.

(2) It shall be a condition subject to which an authorisation under this Part
is issued that the operator of a regulated market

(a) provide the competent authority with, and make public,
information regarding the ownership of the regulated market or
the market operator, and in particular, the identity and scale of
interests of any parties in a position to exercise significant
influence over the management; and
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(b) inform the competent authority of, and make public any transfer
of ownership, which gives rise to a change in the identity of the
persons exercising significant influence over the operation of
the regulated market.

(3) The competent authority shall refuse to approve proposed changes to
the controlling interests of the regulated market or the market operator
where there are objective and demonstrable grounds for believing that they
would pose a threat to the sound and prudent management of the regulated
market.

Organisational requirements.

39. It shall be a condition subject to which an authorisation under this Part is
issued that a regulated market

(a) have arrangements to clearly identify and manage the potential
adverse consequences, for the operation of the regulated market
or for its participants, of any conflict of interest between the
interest of the regulated market, its owners or its operator and
the sound functioning of the regulated market, and in particular
where such conflicts of interest might prove prejudicial to the
accomplishment of any functions delegated to the regulated
market by the competent authority;

(b) be adequately equipped to manage the risks to which it is
exposed, to implement appropriate arrangements and systems to
identify all significant risks to its operation, and to put in place
effective measures to mitigate those risks;

(c) have arrangements for the sound management of the technical
operations of the system, including the establishment of
effective contingency arrangements to cope with risks of
systems disruptions;

(d) have transparent and non-discretionary rules and procedures
that provide for fair and orderly trading and establish objective
criteria for the efficient execution of orders;

(e) have effective arrangements to facilitate the efficient and timely
finalisation of the transactions executed under its systems; and

(f) have available, at the time of authorisation and on an ongoing
basis, sufficient financial resources to facilitate its orderly
functioning, having regard to the nature and extent of the
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
transactions concluded on the market and the range and degree
of the risks to which it is exposed.

Admission of financial instruments to trading.

40.(1) It shall be a condition subject to which an authorisation under this
Part is issued that regulated markets have clear and transparent rules
regarding the admission of financial instruments to trading such as ensures
that any financial instruments admitted are capable of being traded in a fair,
orderly and efficient manner and, in the case of transferable securities, are
freely negotiable.

(2) In the case of derivatives, the rules referred to in subsection (1) shall
ensure in particular that the design of the derivative contract allows for its
orderly pricing as well as for the existence of effective settlement conditions.

(3) In addition to the obligations set out in subsections (1) and (2), it shall
be a condition subject to which an authorisation under this Part is issued
that

(a) the regulated market establish and maintain effective
arrangements to verify that issuers of transferable securities that
are admitted to trading on the regulated market comply with
their statutory obligations in respect of initial, ongoing or ad
hoc disclosure obligations;

(b) the regulated market establishes arrangements which facilitate
its members or participants in obtaining access to information
which has been made public;

(c) the regulated markets have established the necessary
arrangements to review regularly compliance with the admission
requirements of the financial instruments which they admit to
trading.

(4) Without prejudice to other statutory provisions relating to the matter,
where a transferable security has been admitted to trading on a regulated
market, it can subsequently be admitted to trading on other regulated
markets, even without the consent of the issuer, who

(a) shall be informed by the regulated market of the fact that its
securities are traded on that regulated market; and

(b) shall not be subject to any obligation to provide information
required under this section directly to any regulated market
which has admitted the issuer's securities to trading without his
consent.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

Suspension and removal of instruments from trading.

41.(1) Without prejudice to the right of the competent authority to demand
suspension or removal of an instrument from trading, the operator of a
regulated market may suspend or remove from trading a financial instrument
which no longer complies with the rules of the regulated market unless such
a step would be likely to cause significant damage to the investors' interests
or the orderly functioning of the market.

(2) Without prejudice to the right of operators of regulated markets to
inform directly the operators of other regulated markets, the operator of a
regulated market that suspends or removes from trading a financial
instrument shall make public the decision and shall communicate relevant
information to the competent authority who shall inform the competent
authority of the other Member States.

(3) Where the competent authority requests the suspension or removal of
a financial instrument from trading on one or more regulated markets it shall
immediately make public its decision and inform the competent authorities of
the Member States and ESMA.

(4) Where the competent authority is informed by the competent
authority of another Member State that it has requested the suspension or
removal of a financial instrument from trading on one or more regulated
markets in its territory, the competent authority shall request the suspension
or removal of that financial instrument from trading on the regulated markets
and MTFs that operate in Gibraltar save where it is likely to cause significant
damage to the investors’ interests or the orderly functioning of the internal
market.

Access to the regulated market.

42.(1) It shall be a condition subject to which an authorisation under this
Part is issued that a regulated market establish and maintain transparent and
non-discriminatory rules, based on objective criteria, governing access to or
membership of the regulated market.

(2) The rules referred to in subsection (1) shall specify obligations for the
members or participants arising from

(a) the constitution and administration of the regulated market;

(b) transactions on the market;

(c) professional standards imposed on the staff of the investment
firms or credit institutions that are operating on the market;
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(d) the conditions established, for members or participants other
than investment firms and credit institutions, under this section;
and

(e) procedures for the clearing and settlement of transactions
concluded on the regulated market.

(3) Regulated markets may admit as members or participants investment
firms, credit institutions authorised under the Financial Services (Banking)
Act and other persons who

(a) are fit and proper;

(b) have a sufficient level of trading ability and competence;

(c) have, where applicable, adequate organisational arrangements;
and

(d) have sufficient resources for the role they are to perform, taking
into account the different financial arrangements that the
regulated market may have established in order to guarantee the
adequate settlement of transactions.

(4) For the transactions concluded on a regulated market, members and
participants shall not be obliged to apply to each other the obligations laid
down in sections 19, 21 and 22 but shall instead apply the obligations
provided for in sections 19, 21 and 22 with respect to their clients when they,
acting on behalf of their clients, execute their orders on a regulated market.

(5) It shall be a condition subject to which an authorisation under this Part
is issued that rules pursuant to subsection (1) provide for the direct or
remote participation of investment firms and credit institutions.

(6) The competent authority shall, without further legal or administrative
requirements, allow regulated markets from other Member States to provide
appropriate arrangements in Gibraltar so as to facilitate access to and trading
on those markets by remote members or participants established in Gibraltar.

(7) Regulated markets wishing to provide appropriate arrangements in
other Member States so as to facilitate access to and trading on those
markets by remote members or participants established in those Member
States shall communicate to the competent authority the name of the
Member State in which they intend to provide such arrangements. The
competent authority shall communicate, within one month, this information
to the competent authority of the Member State in which the regulated
markets intend to provide such arrangements.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(7A) The competent authority shall allow ESMA access to the information
referred to in subsection (7) where ESMA makes a request in accordance
with the procedure and under the conditions set out in Article 35 of the
ESMA Regulation.

(8) Where subsection (7) applies, the competent authority shall, on the
request of the competent authority of the host Member State and within a
reasonable time, communicate the identity of the members or participants of
the regulated market established in Gibraltar.

(9) It shall be a condition subject to which an authorisation under this Part
is issued that the operator of the regulated market communicate, on a regular
basis, the list of the members and participants of the regulated market to the
competent authority.

Monitoring of compliance with the rules of the regulated market and
with other legal obligations.

43.(1) It shall be a condition subject to which an authorisation under this
Part is issued that regulated markets

(a) establish and maintain effective arrangements and procedures
for the regular monitoring of the compliance by their members
or participants with the market´s internal rules; and

(b) monitor the transactions undertaken by their members or
participants under the market´s systems in order to identify
breaches of the market´s internal rules, disorderly trading
conditions or conduct that may involve market abuse.

(2) It shall be a condition subject to which an authorisation under this Part
is issued that operators of regulated markets

(a) report significant breaches of their internal rules or disorderly
trading conditions or conduct that may involve market abuse to
the competent authority of the regulated market; and

(b) supply the relevant information without delay to the competent
authority and provide full assistance with investigating and
prosecuting market abuse occurring on or through the systems
of the regulated market.

Pre-trade transparency requirements for regulated markets.

44.(1) It shall be a condition subject to which an authorisation under this
Part is issued that regulated markets
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(a) make public on reasonable commercial terms and on a
continuous basis during normal trading hours current bid and
offer prices and the depth of trading interests at those prices
which are advertised through their systems for shares admitted
to trading; and

(b) give access, on reasonable commercial terms and on a non-
discriminatory basis, to the arrangements they employ for
making public the information under the first paragraph to
investment firms which are obliged in law to publish their
quotes in shares.

(2) The competent authority may, in its discretion, waive the obligation for
regulated markets to make public the information referred to in subsection
(1) based on the market model or the type and size of orders in the cases
defined in accordance with regulations made by the Minister.

(3) Without prejudice to the generality of subsection (2), the competent
authority shall be able to waive the obligation in respect of transactions that
are large in scale compared with normal market size for the share or type of
share in question.

Post-trade transparency requirements for regulated markets.

45.(1) It shall be a condition subject to which an authorisation under this
Part is issued that regulated markets

(a) make public on a reasonable commercial basis and as close to
real-time as possible the price, volume and time of the
transactions executed in respect of shares admitted to trading;
and

(b) give access, on reasonable commercial terms and on a non-
discriminatory basis, to the arrangements they employ for
making public the information under paragraph (a) to
investment firms which are obliged in law to publish the details
of their transactions in shares.

(2) The competent authority may, in its discretion, authorise regulated
markets to provide for deferred publication of the details of transactions
based on their type or size. In particular, the competent authority may
authorise the deferred publication in respect of transactions that are large in
scale compared with the normal market size for that share or that class of
shares.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(3) It shall be a condition subject to which an authorisation under this Part
is issued that regulated markets obtain the competent authority's prior
approval of proposed arrangements for deferred trade-publication, and shall
require that these arrangements be clearly disclosed to market participants
and the investing public.

Provisions regarding central counterparty and clearing and settlement
arrangements.

46.(1) The competent authority shall allow regulated markets to enter into
appropriate arrangements with a central counterparty or clearing house and a
settlement system of another Member State with a view to providing for the
clearing or settlement of some or all trades concluded by market participants
under their systems.

(2) The competent authority shall allow the use of central counterparty,
clearing houses or settlement systems in another Member State save where
not doing so is demonstrably necessary in order to maintain the orderly
functioning of that regulated market and taking into account the conditions
for settlement systems established in section 34.

List of regulated markets.

47.(1) The Minister shall draw up a list of those regulated markets which
are either registered in Gibraltar or whose head office is located in Gibraltar.

(2) The Minister shall ensure that the list referred to in subsection (1) is
provided to Member States and to ESMA and any change to that list is also
communicated to Member States and to ESMA.

PART IV
COMPETENT AUTHORITY

Designation, Powers And Redress Procedures

Designation of competent authority.

48.(1) The Minister shall

(a) designate the competent authority which is to carry out each of
the duties provided for under the different provisions of this
Act; and

(b) ensure the European Commission, ESMA and the competent
authorities of other Member States are informed of the identity
of the competent authority responsible for enforcement of each
of those duties, and of any division of those duties.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(2) The competent authority referred to in subsection (1)(a) shall have the
power to delegate tasks to other entities where that is expressly provided for
in this Act.

(3) Any delegation of tasks under subsection (2) may not involve either the
exercise of public authority or the use of discretionary powers of judgement.

(4) The Minister shall require that, prior to a delegation under subsection
(2), the competent authority take all reasonable steps to ensure that the entity
to which tasks are to be delegated has the capacity and resources to
effectively execute all tasks and that the delegation takes place only if a
clearly defined and documented framework for the exercise of any delegated
tasks has been established stating the tasks to be undertaken and the
conditions under which they are to be carried out.

(5) The conditions referred to in subsection (4) shall include a provision
obliging the entity in question to act and be organised in such a manner as
avoids conflict of interest in order that information obtained from carrying
out the delegated tasks is not used unfairly or to prevent competition.

(6) Without prejudice to the foregoing, the final responsibility for
supervising compliance with this Act shall lie with the competent authority
designated in accordance with subsection (1)(a).

(7) The Minister shall ensure that the European Commission, ESMA and
the competent authorities of other Member States are informed of any
arrangements entered into with regard to delegation of tasks, including the
precise conditions regulating such delegation.

Powers of competent authority.

49.(1) The Minister shall make regulations conferring on the competent
authority all supervisory and investigatory powers necessary for the exercise
of its functions.

(2) Regulations made under subsection (1) shall provide for such powers
to be exercised

(a) directly;

(b) in collaboration with other authorities;

(c) under the competent authority’s responsibility in accordance
with the provisions of section 48; or

(d) by application to the competent judicial authorities.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(3) The powers referred to in subsection (1) shall include, at least, the right
to

(a) have access to any document in any form whatsoever and to
receive a copy of it;

(b) demand information from any person and if necessary to
summon and question a person with a view to obtaining
information;

(c) carry out on-site inspections;

(d) require the production and copying of existing telephone and
existing data traffic records;
(e) require the cessation of any practice that is contrary to the of
this Act;

(f) request the freezing or the sequestration of assets;

(g) request temporary prohibition of professional activity;

(h) require authorised investment firms and regulated markets'
auditors to provide information;

(i) adopt any type of measure to ensure that investment firms and
regulated markets continue to comply with legal requirements;

(j) require the suspension of trading in a financial instrument;

(k) require the removal of a financial instrument from trading,
whether on a regulated market or under other trading
arrangements;

(l) refer matters for criminal prosecution; and

(m) allow auditors or experts to carry out verifications or
investigations.

(4) The competent authority shall ensure that any decision it takes pursuant
to this Act is properly reasoned.

Administrative sanctions.

50.(1) The Minister may, by regulations, provide for appropriate effective,
proportionate and dissuasive administrative measures to be taken or
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
administrative or criminal sanctions to be imposed against persons
responsible where any provision of this Act has not been complied with.

(2) The competent authority may disclose to the public any measure or
sanction that will be imposed for infringement of the provisions of this Act,
unless such disclosure would seriously jeopardise the financial markets or
cause disproportionate damage to the parties involved.

(3) The Minister shall provide ESMA annually with aggregated
information about all administrative measures and sanctions imposed by
regulations made under this section.

(4) Where the competent authority has disclosed an administrative
measure or sanction to the public, it shall, contemporaneously, report that
fact to ESMA.

Right of appeal.

51.(1) Any decision taken by the competent authority pursuant to this Act,
or any failure by the competent authority to reach such a decision, shall be
subject to appeal to a judge of the Supreme Court on a point of law.

(2) The Minister shall, by regulations, designate one or more bodies
belonging to the following categories that may, in the interests of consumers,
take action before the courts to ensure that the provisions of this Act are
applied

(a) public bodies or their representatives;

(b) consumer organisations having a legitimate interest in
protecting consumers; and

(c) professional organisations having a legitimate interest in acting
to protect their members.

(3) Regulations made under subsection (2) may make such consequential
provision, including the registration of such bodies and forms of relief
available as the Minister may deem appropriate.

Professional secrecy.
52.(1) Without prejudice to cases covered by criminal law or the other
provisions of this Act
(a) the competent authority, all persons who work or who have
worked for the competent authority or entities to whom tasks
are delegated pursuant to the provisions of this Act, as well as
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
auditors and experts instructed by the competent authority, shall
be bound by the obligation of professional secrecy; and

(b) no confidential information which they may receive in the
course of their duties under this Act may be divulged to any
person or authority whatsoever, save in summary or aggregate
form such that individual investment firms, market operators,
regulated markets or any other person cannot be identified.

(2) Where an investment firm, market operator or regulated market has
been declared bankrupt or is being compulsorily wound up, confidential
information which does not concern third parties may be divulged in civil or
commercial proceedings if necessary for carrying out the proceeding by the
competent authority, all persons who work or who have worked for the
competent authority or entities to whom tasks are delegated pursuant to the
provisions of this Act, as well as auditors and experts instructed by the
competent authority.

(3) The competent authority, or any person other than the competent
authority receiving confidential information pursuant to this Act may use
such information

(a) only in the performance of their duties and for the exercise of
their functions; or

(b) for the purpose for which such information was provided to
them pursuant to the provisions of this Act; or

(c) in the context of administrative or judicial proceedings
specifically related to the exercise of those functions.

However, where the competent authority or other authority, body or person
communicating information consents thereto, the authority receiving the
information may use it for other purposes.

(4) Any confidential information received, exchanged or transmitted
pursuant to this Act shall be subject to the conditions of professional secrecy
laid down in this section.

(5) This section shall not prevent the competent authority from exchanging
or transmitting confidential information in accordance with this Act and with
other statutory provisions applicable to investment firms, credit institutions,
pension funds, UCITS, insurance and reinsurance intermediaries, insurance
undertakings regulated markets or market operators or otherwise with the
consent of the authority or other authority or person that communicated the
information.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(6) This section shall not prevent the competent authority from exchanging
or transmitting confidential information that has not been received from a
competent authority of another Member State.

Relations with auditors.

53.(1) A person registered as an auditor pursuant to the provisions of the
Auditors Approval and Registration Act 1998 shall have a duty

(a) to report promptly to the competent authority any fact or
decision concerning an undertaking of which he has become
aware while carrying out professional auditing or accounting
duties in relation to that undertaking and which is liable to -

(i) constitute a material breach of any conditions governing
an authorisation issued under this Act or which
specifically govern the pursuit of activities of investment
firms;

(ii) affect the continuous functioning of the investment firm;
or

(iii) lead to refusal to certify the accounts or to the expression
of reservations;

(b) to report any such facts and decisions of which the person
becomes aware in relation to an undertaking having close links
with the investment firm within which he is carrying out
professional auditing or accounting duties.

(2) The disclosure in good faith to the competent authority by a person
under subsection (1) shall not constitute a breach of any contractual or legal
restriction on disclosure of information and shall not involve such persons in
any liability of any kind.

Cooperation with other competent authorities

Obligation to cooperate.

54.(1) The competent authority shall cooperate with, and assist the
competent authority of other Member States whenever necessary for the
purpose of carrying out its duties under this Act. In particular, he shall
exchange information and cooperate in any investigation or supervisory
activities.

(1A) In order to facilitate and accelerate cooperation, and more
particularly exchange of information, the Minister shall designate a single
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
competent authority as a contact point for the purposes of this Act, and he
shall ensure that such designation is communicated to the Commission,
ESMA and to the Member States.

(2) The competent authority and host competent authority of a regulated
market shall establish proportionate cooperation arrangements when, taking
into account the situation of the securities markets in the host Member State,
the operations of a regulated market that has established arrangements in the
host Member State have become of substantial importance for the
functioning of the securities markets and the protection of investors in that
host Member State.

(3) The competent authority may cooperate in accordance with this section
even in cases where the conduct under investigation does not constitute an
infringement of this Act.

(4) Where the competent authority has good reason to suspect that acts
contrary to the provisions of this Act carried out by entities not subject to its
supervision, are being or have been carried out on the territory of another
Member State, it shall notify this in as specific a manner as possible to the
competent authority of the other Member State and to ESMA.

(5) Where the competent authority has been notified of a suspected
infringement of this Act by the competent authority of another member
State, it shall take appropriate action and shall inform the notifying
competent authority and ESMA of the outcome of the action and, to the
extent possible, of significant interim developments, any action taken
pursuant to this subsection shall be without prejudice to the competence of
the notifying authority.

Cooperation in supervisory activities, on-the-spot verifications or in
investigations.

55.(1) The competent authority may request the cooperation of the
competent authority of another Member State in a supervisory activity or for
an on-the-spot verification or in an investigation.

(2) In the case of investment firms that are remote members of a regulated
market, the competent authority may choose to address the firms directly, in
which case it shall inform the competent authority of the home Member State
of the remote member accordingly.

(3) Where the competent authority receives a request with respect to a
supervisory activity or for an on-the-spot verification or in an investigation, it
shall, within the framework of its powers

(a) carry out the verifications or investigations itself;
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(b) allow the requesting authority to carry out the verification or
investigation; or

(c) allow auditors or experts to carry out the verification or
investigation.

Exchange of information.

56.(1) The competent authority shall supply the competent authorities of
other member States with the information required for the purposes of
carrying out their duties pursuant to the provisions of the directive.

(2) The competent authority, when exchanging information with other
competent authorities under subsection (1), may indicate at the time of
communication that such information must not be disclosed without its
express agreement, and that such information is exchanged solely for the
purposes for which it has given its agreement.

(3) The competent authority

(a) may transmit any information received under this Act to the
competent authority of other member States;

(b) shall not transmit such information to other bodies or persons
without the express agreement of the competent authority
which disclosed it; and

(c)shall use the information solely for the purposes for which those
authorities give their agreement, except in duly justified
circumstances, in which case the competent auhority shall
immediately inform the authority that sent the
information.

(4) The competent authority and persons receiving confidential information
under this Act may use it only in the course of their duties, in particular
(a) to check that the conditions governing the taking-up of the
business of investment firms are met and to facilitate the
monitoring, on a non-consolidated or consolidated basis, of the
conduct of that business, especially with regard to capital
adequacy requirements, administrative and accounting
procedures and internal-control mechanisms;

(b) to monitor the proper functioning of trading venues;

(c) to impose sanctions;

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(d) in administrative appeals against decisions by the competent
authority;

(e) in judicial proceedings; or

(f) in the extra-judicial mechanism for investors' complaints.

(5) Nothing in this Act

(a) shall prevent the competent authority from transmitting to
ESMA, the European Systemic Risk Board, central banks, the
European System of Central Banks and the European Central
Bank, in their capacity as monetary authorities, and, where
appropriate, to other public authorities responsible for
overseeing payment and settlement systems of confidential
information intended for the lawful performance of their duties;

(b) Deleted

Refusal to cooperate.

57.(1) The competent authority may refuse to act on a request for
cooperation in carrying out an investigation, on-the-spot verification or
supervisory activity or to exchange information pursuant to the provisions of
this Act only where

(a) such an investigation, on-the-spot verification, supervisory
activity or exchange of information might adversely affect the
sovereignty, security or public policy of Gibraltar;

(b) judicial proceedings have already been initiated in respect of the
same actions and the same persons in Gibraltar; or

(c) final judgment has already been delivered in Gibraltar in respect
of the same persons and the same actions.

(2) Where the competent authority refuses to act on a request for
cooperation as set out in subsection (1), it shall notify the requesting
competent authority and ESMA accordingly, providing as detailed
information as possible.

Inter-authority consultation prior to authorisation.

58.(1) The competent authority of any other relevant Member State
involved shall be consulted by the competent authority prior to granting
authorisation to an investment firm which is

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(a) a subsidiary of an investment firm or credit institution
authorised in that Member State; or

(b) a subsidiary of the parent undertaking of an investment firm or
credit institution authorised in that Member State; or

(c) controlled by the same natural or legal persons as control an
investment firm or credit institution authorised in that Member
State.

(2) The competent authority of the Member State responsible for the
supervision of credit institutions or insurance undertakings shall be consulted
by the competent authority prior to granting an authorisation to an
investment firm which is

(a) a subsidiary of a credit institution or insurance undertaking
authorised elsewhere in the European Union;

(b) a subsidiary of the parent undertaking of a credit institution or
insurance undertaking authorised elsewhere in the European
Union; or

(c) controlled by the same person, whether natural or legal, who
controls a credit institution or insurance undertaking authorised
elsewhere in the European Union.

(3) The competent authority shall in particular

(a) consult the relevant competent authority referred to in
subsections (1) and (2) when assessing the suitability of
shareholders or members and the reputation and experience of
persons who effectively direct the business involved in the
management of another entity of the same group; and

(b) exchange all information regarding the suitability of
shareholders or members and the reputation and experience of
persons who effectively direct the business that is of relevance
to the other competent authority involved, for the granting of
an authorisation as well as for the ongoing assessment of
compliance with operating conditions.

Powers of competent authority in its capacity of host.

59.(1) All investment firms with branches in Gibraltar shall, for statistical
purposes, report to the competent authority periodically on the activities of
those branches.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
(2) Branches of investment firms shall provide the competent authority
with all information necessary for the monitoring of their compliance with
standards set pursuant to this Act applying to them for the cases provided for
in section 32.

Precautionary measures.

60.(1) Where the competent authority acting as host has clear and
demonstrable grounds for believing that an investment firm acting within
Gibraltar is acting contrary to the provisions of this Act or that an investment
firm that has a branch within Gibraltar is acting contrary to the provisions of
this Act which does not confer remedial powers on the competent authority
acting as host, it shall refer those findings to the competent authority of the
home Member State.

(2) Where, despite the measures taken by the competent authority of the
home Member State or because such measures prove inadequate, the
investment firm persists in acting in a manner that is clearly prejudicial to the
interests of investors in Gibraltar or the orderly functioning of markets–

(a) after informing the competent authority of the home Member
State the competent authority shall take all appropriate
measures needed in order to protect investors and the proper
functioning of the markets, which shall include the possibility of
preventing offending investment firms from initiating any
further transactions within Gibraltar, and the competent
authority shall ensure that the European Commission and
ESMA are informed of such measures without delay; and

(b) the competent authority may refer the matter to ESMA for
action pursuant to Article 19 of the ESMA Regulation

(3) Where the competent authority acting as host ascertains that an
investment firm that has a branch within Gibraltar is in breach of this Act, the
competent authority shall require the investment firm concerned to put an
end to its irregular situation.

(4) Where, pursuant to subsection (3), the investment firm concerned fails
to take the necessary steps, the competent authority, shall take such
measures as the Minister may prescribe to ensure that the investment firm
concerned puts an end to its irregular situation. The nature of those measures
shall be communicated to the competent authority of the home Member
State.

(5) Where, despite the measures taken by the competent authority, the
investment firm persists in breaching the provisions of this Act, in such
circumstances–
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(a) after informing the competent authority of the home Member
State the competent authority State shall take all appropriate
measures needed in order to protect investors and the proper
functioning of the markets and shall inform the European
Commission and ESMA of those measures without delay; and

(b) the competent authority may refer the matter to ESMA for
action pursuant to Article 19 of the ESMA Regulation.

(6) Where the competent authority acting as host to a regulated market or
an MTF has clear and demonstrable grounds for believing that such regulated
market or MTF is in breach of the provisions of this Act, it shall refer those
findings to the competent authority of the home Member State of the
regulated market or the MTF.

(7) Where, despite the measures taken by the competent authority of the
home Member State or because such measures prove inadequate, that
regulated market or the MTF persists in acting in a manner that is clearly
prejudicial to the interests of investors in Gibraltar or the orderly functioning
of markets–

(a) after informing the competent authority of the home Member
State the competent authority shall take all appropriate
measures needed in order to protect investors and the proper
functioning of the markets, which shall include the possibility of
preventing that regulated market or the MTF from making their
arrangements available to remote members or participants
established in the host Member State and shall inform the
European Commission and ESMA of those measures without
delay; and

(b) the competent authority may refer the matter to ESMA for
action pursuant to Article 19 of the ESMA Regulation.

(8) Any measures adopted pursuant to this section involving sanctions or
restrictions on the activities of an investment firm or of a regulated market
shall be properly justified and communicated to the investment firm or to the
regulated market concerned.

Cooperation and exchange of information with ESMA.

60A.(1) The competent authority shall-

(a) without delay, provide ESMA with all information necessary to
carry out its duties under the Directive and in accordance with
Article 35 of the ESMA Regulation; and
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(b) cooperate with the ESMA for the purposes of the Directive in
accordance with the ESMA Regulation.

Exchange of information with third countries.

60B.(1) The Government may conclude cooperation agreements providing
for the exchange of information with the competent authorities of third
countries only if the information disclosed is subject to guarantees of
professional secrecy at least equivalent to those required under Article 54 of
the Directive and the exchange of information is intended for the
performance of the tasks of those competent authorities.

(2) Pursuant to subsection (1), the competent authority may transfer
personal data to a third country in accordance with Chapter IV of Directive
95/46/EC.

(3) The Government may also conclude cooperation agreements
providing for the exchange of information with third country authorities,
bodies and natural or legal persons responsible for one or more of the
following–

(a) the supervision of credit institutions, other financial institutions,
insurance undertakings and the supervision of financial markets;

(b) the liquidation and bankruptcy of investment firms and other
similar procedures;

(c) the carrying out of statutory audits of the accounts of
investment firms and other financial institutions, credit
institutions and insurance undertakings, in the performance of
their supervisory functions, or which administer compensation
schemes, in the performance of their functions;

(d) oversight of the bodies involved in the liquidation and
bankruptcy of investment firms and other similar procedures;

(e) oversight of persons charged with carrying out statutory audits
of the accounts of insurance undertakings, credit institutions,
investment firms and other financial institutions.

(4) The cooperation agreements referred to in subsection (3)(c) may be
concluded only where the information disclosed is subject to guarantees of
professional secrecy at least equivalent to those required under Article 54 of
the Directive and the exchange of information is intended for the
performance of the tasks of those authorities or bodies or natural or legal
persons.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(5) Where the information to which this section relates originates in
another Member State or third country, it may not be disclosed without the
express agreement of the competent authorities which have transmitted it
and, where appropriate, solely for the purposes for which those authorities
gave their agreement.

Alternative dispute resolution

Alternative dispute resolution.

60C.(1) The Government shall encourage the setting-up of efficient and
effective complaints and redress procedures for the out-of-court settlement
of consumer disputes concerning the provision of investment and ancillary
services provided by investment firms, using existing bodies where
appropriate, which bodies shall not be prevented from cooperating
effectively in the resolution of cross-border disputes.

(2) The Government may make regulations for the implementation or
regulation of any procedures instituted pursuant to subsection (1).

(3) The competent authority shall notify ESMA of any complaint and
redress procedures referred to in subsection (1) which are available.

Binding mediation.

60D. The competent authority may refer to the European Securities and
Markets Authority situations where a request relating to one of the following
has been rejected or has not been acted upon within a reasonable time–

(a) to carry out a supervisory activity, an on-the-spot verification,
or an investigation, as provided for in section 55; or

(b) to exchange information as provided for in section 56.

PART V
FINAL PROVISIONS

Transitional provisions.

61.(1) Investment firms already authorised in their home Member State to
provide investment services before such date as the Minister may prescribe in
a notice made under section 2(2) shall be deemed to be so authorised for the
purpose of this Act.

(2) A regulated market or a market operator already authorised in its home
Member State before such date as the Minister may prescribe in a notice
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
made under section 2(2) shall be deemed to be so authorised for the
purposes of this Act.

(3) Tied agents already entered in a public register before such date as the
Minister may prescribe in a notice made under section 2(3) shall be deemed
to be so registered for the purposes of this Act.

(4) Information communicated before such date as the Minister may
prescribe for the purposes of Articles 17, 18 or 30 of Directive 93/22/EEC
shall be deemed to have been communicated for the purposes of this Act.

(5) Any existing system falling under the definition of an MTF operated by
a market operator of a regulated market, shall be authorised as an MTF at
the request of the market operator of the regulated market provided it
complies with rules equivalent to those required by this Act for the
authorisation and operation of MTFs, and provided that the request
concerned is made within 18 months of such date as the Minister may
prescribe.

(6) Investment firms established before such date as the Minister may
prescribe shall be authorised to continue considering existing professional
clients as such provided that this categorisation has been granted by the
investment firm on the basis of an adequate assessment of the expertise,
experience and knowledge of the client which gives reasonable assurance, in
light of the nature of the transactions or services envisaged, that the client is
capable of making his own investment decisions and understands the risks
involved. However, such investment firms shall inform their clients about the
conditions established in this Act for the categorisation of clients.

Regulations.

62.(1) The Minister may, by regulations, prescribe anything requiring to be
prescribed and generally do anything requiring to be done pursuant to the
provisions of this Act.

(2) Without prejudice to the generality of subsection (1) the Minister may,
by regulations,

(a) provide for applications for authorisations, fees, forms and
offences as he may deem appropriate in order to make better
provision for the execution of this Act;

(b) amend the Schedules;

(c) make such provision as he deems appropriate in cases where a
condition subject to which an authorisation is granted has been
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
breached, including penalties, withdrawal or suspension of the
authorisation or other sanctions.

Codes of practice.

63.(1) The competent authority shall with the prior consent of the Minister
cause to be published in the form of codes of practice, statements setting out
the criteria and any variation in the criteria from time to time by reference to
which the competent authority proposes to exercise its functions under this
Act, including, in particular, its powers to grant, cancel or suspend
authorisations or to impose conditions of general application on such
authorisations.

(2) The competent authority shall with the prior consent of the Minister
also publish in the form of codes of practice under this section criteria to
facilitate compliance in Gibraltar with the provisions of this Act.

(3) A code of practice published under this section shall be admissible in
evidence in any action commenced in exercise of the rights of appeal under
section 45 of the Financial Services Act 1989, or otherwise in connection
with the operation of this Act.

Repeals.

64. The Financial Services Act 1998 is hereby repealed.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
SCHEDULE 1
Sections 2 and 4

LIST OF SERVICES AND ACTIVITIES AND FINANCIAL
INSTRUMENTS

Section A
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.

Section B
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 or 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 the
provision of investment services;

(5) Investment research and financial analysis or other forms of general
recommendation relating to transactions in financial instruments;
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(6) Services related to underwriting;

(7) Investment services and activities as well as ancillary services of the
type included under Section A or this Section related to the underlying of the
derivatives included under Section C - 5, 6, 7 and 10 - where these are
connected to the provision of investment or ancillary services.

Section C
Financial Instruments

(1) Transferable securities;

(2) Money-market instruments;

(3) Units in collective investment undertakings;

(4) Options, futures, swaps, forward rate agreements and any 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 otherwise
mentioned in C.6 and 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.;

(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 statistics 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
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
any other derivative contracts relating to assets, rights, obligations, indices
and measures not otherwise mentioned in this Section, 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.
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
SCHEDULE 2
Section 2

PROFESSIONAL CLIENTS FOR THE PURPOSE OF THIS ACT

Professional client is a client who possesses the experience, knowledge and
expertise to make its own investment decisions and properly assess the risks
that it incurs. In order to be considered a professional client, the client must
comply with the following criteria:

I. Categories of client who are considered to be professionals.

The following should all be regarded as professionals in all investment
services and activities and financial instruments for the purposes of the Act.

(1) Entities which are required to be authorised or regulated to operate
in the financial markets. The list below should be understood as including all
authorised entities carrying out the characteristic activities of the entities
mentioned: entities authorised by a Member State under a Directive, entities
authorised or regulated by a Member State without reference to a Directive,
and entities authorised or regulated by a non-Member State

(a) Credit institutions;

(b) Investment firms;

(c) Other authorised or regulated financial institutions;

(d) Insurance companies;

(e) Collective investment schemes and management companies of such
schemes;

(f) Pension funds and management companies of such funds;

(g) Commodity and commodity derivatives dealers;

(h) Locals; or

(i) Other institutional investors.

(2) Large undertakings meeting 2 of the following size requirements on a
company basis–

- balance sheet total EUR 20,000,000
- net turnover EUR 40,000,000
- own funds EUR 2,000,000
Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32

(3) National and regional governments, public bodies that manage public
debt, the Gibraltar Savings Bank, Central Banks, international and
supranational institutions such as the World Bank, the IMF, the ECB, the
EIB and other similar international organisations.

(4) Other institutional investors whose main activity is to invest in
financial instruments, including entities dedicated to the securitisation of
assets or other financing transactions.

The entities mentioned above are considered to be professionals. They must
however be allowed to request non-professional treatment and investment
firms may agree to provide a higher level of protection. Where the client of
an investment firm is an undertaking referred to above, the investment firm
must inform it prior to any provision of services that, on the basis of the
information available to the firm, the client is deemed to be a professional
client, and will be treated as such unless the firm and the client agree
otherwise. The firm must also inform the customer that he can request a
variation of the terms of the agreement in order to secure a higher degree of
protection.

It is the responsibility of the client, considered to be a professional client, to
ask for a higher level of protection when it deems it is unable to properly
assess or manage the risks involved.

This higher level of protection will be provided when a client who is
considered to be a professional enters into a written agreement with the
investment firm to the effect that it shall not be treated as a professional for
the purposes of the applicable conduct of business regime. Such agreement
should specify whether this applies to one or more particular services or
transactions, or to one or more types of product or transaction.

II. Clients who may be treated as professionals on request.

II.1. Identification criteria.

Clients other than those mentioned in section I, including public sector
bodies and private individual investors, may also be allowed to waive some
of the protections afforded by the conduct of business rules.

Investment firms should therefore be allowed to treat any of the above clients
as professionals provided the relevant criteria and procedure mentioned
below are fulfilled. These clients should not, however, be presumed to
possess market knowledge and experience comparable to that of the
categories listed in section I.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
Any such waiver of the protection afforded by the standard conduct of
business regime shall be considered valid only if an adequate assessment of
the expertise, experience and knowledge of the client, undertaken by the
investment firm, gives reasonable assurance, in light of the nature of the
transactions or services envisaged, that the client is capable of making his
own investment decisions and understanding the risks involved.

The fitness test applied to managers and directors of entities licensed under
Directives in the financial field could be regarded as an example of the
assessment of expertise and knowledge. In the case of small entities, the
person subject to the above assessment should be the person authorised to
carry out transactions on behalf of the entity.

In the course of the above assessment, as a minimum, two of the following
criteria should be satisfied -

- the client has carried out transactions, in significant size, on the relevant
market at an average frequency of 10 per quarter over the previous four
quarters;

- the size of the client's financial instrument portfolio, defined as including
cash deposits and financial instruments exceeds EUR 500000;

- the client works or has worked in the financial sector for at least one year
in a professional position, which requires knowledge of the transactions or
services envisaged.

II.2. Procedure.

The clients defined above may waive the benefit of the detailed rules of
conduct only where the following procedure is followed -

- they must state in writing to the investment firm that they wish to be
treated as a professional client, either generally or in respect of a particular
investment service or transaction, or type of transaction or product;

- the investment firm must give them a clear written warning of the
protections and investor compensation rights they may lose;

- they must state in writing, in a separate document from the contract, that
they are aware of the consequences of losing such protections.

Before deciding to accept any request for waiver, investment firms must be
required to take all reasonable steps to ensure that the client requesting to be
treated as a professional client meets the relevant requirements stated in
Section II.1 above.

Financial Services (Markets in Financial Instruments)
© Government of Gibraltar (www.gibraltarlaws.gov.gi)
2006-32
However, if clients have already been categorised as professionals under
parameters and procedures similar to those above, it is not intended that their
relationships with investment firms should be affected by any new rules
adopted pursuant to this Schedule.

Firms must implement appropriate written internal policies and procedures to
categorise clients. Professional clients are responsible for keeping the firm
informed about any change, which could affect their current categorisation.
Should the investment firm become aware however that the client no longer
fulfils the initial conditions, which made him eligible for a professional
treatment, the investment firm must take appropriate action.