Financial Services (Collective Investment Schemes) Act 2011 (Gibraltar)

Financial Services (Collective Investment Schemes) Act 2011

Published: 2005-08-05

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Financial Services (Collective Investment Schemes)

2005-48

FINANCIAL SERVICES (COLLECTIVE INVESTMENT

SCHEMES) ACT 2011

Principal Act

Act. No. 2005-48 Commencement See below

Assent 2.8.2005

Commencement

LN. 2005/112 sections 1, 2 and 3; Part VI, as it applies to

experienced investor funds; sections 49,

50, 51, 52 and 55(1) (b) (2), (3) and (4);

and section 57, as it applies to the EIF

Regulations.

5.8.2005

2006/015 sections 4 - 5; Parts II, III, IV, V and VI;

sections 53 - 54; section 55(1)(a), section

55(1)(c), and section 55(5); sections 56 - 58;

and schedule 1 and schedule 2.

9.3.2006

Amending

enactments

Relevant current

provisions

Commencement

date

Act. 2006-34 28(4) 1.11.2007

LN. 2011/191 Long title, 2(1), 3A, 5, 6(3) 7 (4), 11(1)

& (2), 12(1) & (2)(a), 13(1)(b),

15(4)(a) & (5), 16(1)(a) & (2)(a),

18(1)(b), (4)(b), (5) & (6),22(1)(a), 28,

33(1)(a)(i), 35, 36, 38, 43(1)(g), 50,

53, 54, 57 & Sch.1

13.10.2011

2012/221 ss. 2A & 2B 13.12.2012

English sources:

None cited

EU Legislation/International Agreements involved:

Directive 85/611/EEC

Directive 93/6/EEC

Directive 93/22/EEC

Directive 2000/12/EC

Directive 2004/39/EC

Directive 2007/16/EC

Directive 2009/65/EC

Financial Services (Collective Investment Schemes)

2005-48

ARRANGEMENT OF SECTIONS

PART I

PRELIMINARY AND INTERPRETATION

1. Title and commencement.

2. Interpretation.

2A. Meaning of “transferable securities”.

2B. Liquid financial assets with respect to financial derivative

Instruments.

3. Meaning of “collective investment scheme”.

3A. Meaning of “UCITS” for purposes of Act.

4. Meaning of open-ended investment company.

PART II

PROHIBITIONS AND RESTRICTIONS

5. Authorisation of UCITS: General Provisions.

6. Restrictions on promotion of collective investment schemes

7. Meaning of “restricted activity”

8. Prohibition on carrying on restricted activity without authorisation

9. Exemptions from sections 6 and 8.

10. Control over use of names

PART III

AUTHORISED SCHEMES

11. Authorisation of collective investment schemes.

12. Application for authorisation of collective investment schemes.

13. Authorisation of collective investment schemes: supplementary.

14. Determination of application for authorisation.

15. Imposition of conditions.

16. Constitution of an authorised collective investment scheme.

17. Scheme property of authorised open-ended investment company to

be entrusted to depositary.

18. Managers, trustees and depositaries of authorised schemes.

19. Directors of an authorised open-ended investment company.

20. Participants rights with respect to redemption and repurchase.

21. Alteration of authorised schemes.

22. Changes in manager, depositary, trustee or director.

23. Approval of proposal under section 21 and 22.

24. Exclusion clauses.

25. Provision for authorised schemes in CIS Regulations.

Financial Services (Collective Investment Schemes)

2005-48

PART IV

AUTHORISATION TO UNDERTAKE RESTRICTED ACTIVITIES

26. Application for authorisation to undertake a restricted activity.

27. Granting of authorisation to undertake restricted activity.

28. Authorisation of Gibraltar UCITS management company.

29. Determination of application for authorisation.

30. Imposition of conditions.

31. Financial resources to be maintained by authorised person.

32. Approved persons.

33. Enforcement action may be taken against persons authorised under

section 28.

PART V

RECOGNISED COLLECTIVE INVESTMENT SCHEMES

34. Recognised schemes.

RECOGNISED EEA UCITS SCHEMES

35. Recognition of EEA UCITS Schemes.

36. Repealed.

37. Voluntary cessation of recognition.

38. Deemed authorisation of operator, trustee or depositary of

recognised UCITS scheme.

RECOGNISED FOREIGN SCHEMES

39. Application for recognition as a foreign scheme.

40. Recognition of foreign scheme.

41. Determination of application for recognition.

GENERAL

42. Provision for recognised schemes in CIS Regulations.

PART VI

ENFORCEMENT ACTION - COLLECTIVE INVESTMENT

SCHEMES

43. Grounds for taking enforcement action.

44. Revocation and suspension of authorisation or recognition.

45. Protection order.

46. Directions.

47. Appointment of examiner.

48. Public statements.

Financial Services (Collective Investment Schemes)

2005-48

PART VII

GENERAL

49. Applications.

50. Appeals against decisions of Authority.

51. Offences.

52. Experienced Investor Fund Regulations.

53. Collective Investment Scheme Regulations.

54. Regulations made under the Financial Services (Investment and

Fiduciary Services) Act.

55. Codes of Practice and Guidance Notes.

56. Approval of forms by Authority.

57. Application of Financial Services (Investment and Fiduciary

Services) Act and Financial Services (Markets in Financial

Instruments) Act 2006.

58. Repeals and consequential amendments.

SCHEDULE 1

Persons exempted from sections 6 and 7.

SCHEDULE 2

Repeals and Consequential Amendments.

Financial Services (Collective Investment Schemes)

2005-48

AN ACT TO REGULATE THE PROMOTION, ESTABLISHMENT AND

OPERATION OF COLLECTIVE INVESTMENT SCHEMES AND TO

TRANSPOSE IN PART INTO THE LAW OF GIBRALTAR DIRECTIVE

2009/65/EC OF THE EUROPEAN PARLIAMENT AND OF THE

COUNCIL OF 13 JULY 2009 ON THE COORDINATION OF LAWS,

REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING

TO UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN

TRANSFERABLE SECURITIES (UCITS), AS AMENDED FROM TIME

TO TIME.

PART I

PRELIMINARY AND INTERPRETATION

Title and commencement.

1.(1) This Act may be cited as the Financial Services (Collective

Investment Schemes) Act 2011.

(2) The provisions of this Act shall come into operation on such day as the

Minister may by notice in the Gazette appoint, and different days may be

appointed for different purposes.

Interpretation.

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

“approved form” means a form approved by the Authority in accordance

with section 56;

“authorised open-ended investment company” means an authorised

scheme that is an open-ended investment company;

“authorised person” means a person authorised under section 27, an

authorised open-ended investment company or a person deemed

under a provision of this Act or the CIS Regulations to be an

authorised person;

“authorised scheme” means a common fund or an open-ended investment

company in respect of which an authorisation issued under section

13 is in force;

“authorised UCITS scheme” means an authorised scheme that is a

UCITS scheme;

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“authorised common fund” means an authorised scheme that is a

common fund;

“Authority” means such person or persons or body as the Minister may,

by Order, appoint to exercise the powers, discretions and functions

conferred on the Authority under this Act*;

“CIS Regulations” means the Financial Services (Collective Investment

Schemes) Regulations 2011 made under section 53;

“collective investment scheme” has the meaning specified in section 3;

“common fund” shall be interpreted in accordance with section 3A(2);

“common fund” means a collective investment scheme under which the

property subject to the scheme is held on trust for the participants;

“depositary” shall be interpreted in accordance with regulation 2 of the

CIS Regulations;

“EEA” means the territories to which the EEA Agreement applies;

“EEA Agreement” means the Agreement on the European Economic

Area signed at Oporto on 2 nd

May 1992 as it has effect for the time

being;

“EEA State” means a State which is a contracting party to the EEA

Agreement and any reference to EEA State shall, except where

otherwise specified, be construed as including Gibraltar;

“EEA UCITS management company” shall be interpreted in accordance

with regulation 13 of the CIS Regulations;

“EIF Regulations” means the Experienced Investor Fund Regulations

made under section 52;

“experienced investor fund” and “experienced investor” have the

meanings specified in the EIF Regulations;

“Gibraltar UCITS management company” means an authorised person

that is authorised to be the operator of a UCITS scheme, whether or

not it is also authorised to be the operator of one or more non-

UCITS collective investment schemes;

* The Commissioner, as defined in the Financial Services Commission Ordinance 1989, is appointed

as the Authority see LN. 2005/183.

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2005-48

“management agreement” means an agreement for the management of

funds constituting the whole or part of a collective investment

scheme;

“management company” means a company, the regular business of which

is the management of UCITS in the form of common funds or of

investment companies (collective portfolio management of

UCITS);

“manager” has the meaning specified in the CIS Regulations;

“Minister” means the Minister responsible for financial services;

“Non-UCITS” means a collective investment scheme which is not a

UCITS;

“open-ended investment company” has the meaning specified in section

“operator”

(a) in relation to a common fund with a separate trustee, means the

manager of the scheme;

(b) in relation to an open-ended investment company which is a

UCITS scheme, the person appointed to manage the scheme;

and

(e) in relation to any other open-ended investment company, the

company itself;

“participant” means a person who participates in a collective investment

scheme, and includes a shareholder in a collective investment

scheme that is constituted as a corporate body;

“public interest” means the public interest of Gibraltar as determined by

the Minister;

“prescribed” means prescribed by the CIS Regulations or, in relation to

an expert investor fund, by the EIF Regulations;

“private scheme” means a collective investment scheme having the

characteristics of a private scheme prescribed by the CIS

Regulations;

“recognised foreign scheme” means a collective investment scheme

recognised under section 40;

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“recognised scheme” means a recognised foreign scheme or a recognised

UCITS scheme;

“recognised UCITS scheme” means a UCITS scheme recognised under

section 35;

“restricted activity” has the meaning specified in section 7;

“transferable securities” means–

(a) shares in companies and other securities equivalent to shares in

companies (shares);

(b) bonds and other forms of securitised debt (debt securities);

any such transferable securities by subscription or exchange;

“trustee”, in relation to a common fund, means the person holding the

property subject to the scheme on behalf of the participants;

“UCITS” means a collective investment scheme to which this Act applies

pursuant to section 3A;

“UCITS Directive” and “Directive” means Directive 2009/65/EC of the

European Parliament and of the Council of 13 July 2009 on the

coordination of laws, regulations and administrative provisions

relating to undertakings for collective investment in transferable

securities (UCITS), as amended from time to time;

“UCITS scheme” means a scheme which, in accordance with the UCITS

Directive, is an undertaking for collective investment in

transferable securities subject to that Directive;

“unitholder” means

(a) in relation to a unit which is represented by a bearer certificate,

the person who holds that certificate; or

(b) in any other case, the person whose name is entered on the

“units” means the rights or interests, however described, of the

participants in a collective investment scheme.

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(2) For the purposes of the interpretation of “management company” in

subsection (1), the regular business of a “management company” includes

the functions referred to in Schedule 3 of the CIS Regulations.

(3) For the purposes of the interpretation of “transferable securities” in

subsection (1), “transferable securities” excludes the techniques and

instruments referred to in regulation 48 of the CIS Regulations.

Meaning of “transferable securities”.

2A.(1) The reference to transferable securities in section 2(1) shall be

understood as a reference to financial instruments which fulfill the following

criteria−

(a) the potential loss which the UCITS may incur with respect to

holding those instruments is limited to the amount paid for

them;

(b) their liquidity does not compromise the ability of the UCITS to

comply with regulation 99 of the Financial Services (Collective

Investment Schemes) Regulations 2011;

follows−

(i) in the form of accurate, reliable and regular prices which

are either market prices or prices made available by

valuation systems independent from issuers, in the case

of securities admitted to or dealt in on a regulated market

as referred to in regulation 47(1)(a) to (d) of the

Financial Services (Collective Investment Schemes)

Regulations 2011;

(ii) in the form of a valuation on a periodic basis which is

derived from information from the issuer of the security

or from competent investment research, in the case of

other securities as referred to in regulation 47(2) and (3)

of the Financial Services (Collective Investment

Schemes) Regulations 2011;

(d) appropriate information is available for the financial instrument

as follows−

(i) in the form of regular, accurate and comprehensive

information to the market on the security or, where

relevant, on the portfolio of the security, in the case of

securities admitted to or traded on a regulated market as

Financial Services (Collective Investment Schemes)

2005-48

referred to in regulation 47(1)(a) to (d) of the Financial

Services (Collective Investment Schemes) Regulations

2011;

(ii) in the form of regular and accurate information to the

UCITS on the security or, where relevant, on the

portfolio of the security, in the case of other securities as

referred to in regulation 47(2) and (3) of the Financial

Services (Collective Investment Schemes) Regulations

2011;

(e) the financial instruments are negotiable;

(f) the acquisition of the financial instruments is consistent with

the investment objectives or the investment policy, or both, of

the UCITS pursuant to the Financial Services (Collective

Investment Schemes) Act 2011 and the Financial Services

(Collective Investment Schemes) Regulations 2011; and

(g) the risks associated with the financial instruments are

adequately captured by the risk management process of the

UCITS.

(2) For the purposes of paragraphs (b) and (e) of subsection (1), and unless

there is information available to the UCITS that would lead to a different

determination, financial instruments which are admitted or traded on a

regulated market in accordance with regulation 47(1)(a), (b) or (c) of the

Financial Services (Collective Investment Schemes) Regulations 2011 shall

be presumed not to compromise the ability of the UCITS to comply with

regulation 99 of the Financial Services (Collective Investment Schemes)

Regulations 2011 and shall also be presumed to be negotiable.

(3) The reference to transferable securities in section 2(1) shall be taken to

include the following−

(a) units in closed end funds constituted as investment companies

or as unit trusts and fulfilling the following criteria−

(i) they fulfil the criteria set out in subsections (1) and (2);

(ii) they are subject to corporate governance mechanisms

applied to companies;

(iii) where asset management activity is carried out by

another entity on behalf of the closed end fund, that

entity is itself regulated for the purpose of investor

protection;

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(b) units in closed end funds constituted under the law of contract

which fulfill the following criteria−

(i) the closed end funds fulfil the criteria set out in

subsections (1) and (2);

(ii) the closed end funds are subject to corporate governance

mechanisms equivalent to those applied to bodies

corporate under the Companies Act;

(iii) the closed end funds are managed by an entity which is

subject to regulation under Gibraltar law for the purpose

of investor protection;

(i) the financial instruments fulfil the criteria set out in

subsections (1) and (2);

(ii) the financial instruments are backed by, or linked to the

performance of, other assets, which may differ from

those referred to in regulation 47(1) of the Financial

Services (Collective Investment Schemes) Regulations

2011.

(4) Where a financial instrument covered by subsection (3)(c) contains an

embeded derivative component, the requirements of regulation 48 of the

Financial Services (Collective Investment Schemes) Regulations 2011, shall

apply to that component.

Liquid financial assets with respect to financial derivative Instruments.

2B.(1) The reference in section 3A to liquid financial assets shall be

understood, with respect to financial derivative instruments, as a reference

to financial derivative instruments which fulfil the following criteria−

(a) their underlyings consist of one or more of the following−

(i) assets as listed in regulation 47(1) of the Financial

Services (Collective Investment Schemes) Regulations

2011 including financial instruments having one or

several characteristics of those assets;

(ii) interest rates;

(iii) foreign exchange rates or currencies;

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2005-48

(iv) financial indices;

(b) in the case of OTC derivatives, they comply with the

conditions set out in regulation 47(1)(g)(ii) and (iii) of the

Financial Services (Collective Investment Schemes)

Regulations 2011.

(2) Financial derivative instruments as referred to in regulation 47(1)(g) of

the Financial Services (Collective Investment Schemes) Regulations

2011shall be taken to include instruments which fulfil the following

criteria−

(a) they allow the transfer of the credit risk of an asset as referred

to in subsection (1)(a) of this section independently from the

other risks associated with that asset;

(b) they do not result in the delivery or in the transfer, including in

the form of cash, of assets other than those referred to in

regulation 47(1) and (2) of the Financial Services (Collective

Investment Schemes) Regulations 2011;

regulation 47(1)(g)(ii) and (iii) of the Financial Services

(Collective Investment Schemes) Regulations 2011 and in

subsections (3) and (4) of this section;

(d) their risks are adequately captured by the risk management

process of the UCITS, and by its internal control mechanisms

in the case of risks of asymmetry of information between the

UCITS and the counterparty to the credit derivative resulting

from potential access of the counterparty to non-public

information on firms the assets of which are used as

underlyings by credit derivatives.

(3) For the purposes of regulation 47(1)(g)(iii) of the Financial Services

(Collective Investment Schemes) Regulations 2011, the reference to fair

value shall be understood as a reference to the amount for which an asset

could be exchanged, or a liability settled, between knowledgeable, willing

parties in an arm’s length transaction.

(4) For the purposes of regulation 47(1)(g)(iii) of the Financial Services

(Collective Investment Schemes) Regulations 2011, the reference to reliable

and verifiable valuation shall be understood as a reference to a valuation, by

the UCITS, corresponding to the fair value as referred to in subsection (3) of

this section, which does not rely only on market quotations by the

counterparty and which fulfils the following criteria−

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(a) the basis for the valuation is either a reliable up-to-date market

value of the instrument, or, if such a value is not available, a

pricing model using an adequate recognised methodology;

(b) verification of the valuation is carried out by one of the

following−

(i) an appropriate third party which is independent from the

counterparty of the OTC-derivative, at an adequate

frequency and in such a way that the UCITS is able to

check it;

(ii) a unit within the UCITS which is independent from the

department in charge of managing the assets and which

is adequately equipped for such purpose.

(5) The reference in section 3A and regulation 47(1)(g) of the Financial

Services (Collective Investment Schemes) Regulations 2011 to liquid

financial assets shall be understood as excluding derivatives on

commodities.

Meaning of “collective investment scheme”.

3.(1) In this Act, “collective investment scheme” means any arrangement

with respect to property, the purpose or effect of which is to enable persons

taking part in the arrangement, whether by becoming owners of the property

or any part of it or otherwise, to participate in or receive profits or income

arising from the acquisition, holding, management or disposal of the

property or sums paid out of such profits or income.

(2) An arrangement referred to in sub-section (1)

(a) must be such that the participants do not have day to day

control over the management of the property subject to the

arrangement, whether or not they have the right to be consulted

or to give directions; and

(b) must have at least one of the following characteristics

(i) the contributions of the participants and the profits or

income out of which payments are to be made to them

are pooled,

(ii) the property is managed as a whole by or on behalf of the

operator of the scheme.

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(3) Where an arrangement provides for such pooling as is referred to in

sub-section (2)(b)(i) in relation to separate parts of the property, the

arrangement shall not be regarded as constituting a single collective

investment scheme unless the participants are entitled to exchange rights in

one part for rights in another.

(4) The CIS Regulations may provide that an arrangement which would

otherwise fall within the meaning of “collective investment scheme”

specified in subsection (1), is deemed not to constitute a collective

investment scheme for the purposes of this Act or for the purposes of certain

specified provisions of this Act

(a) in specified circumstances; or

(b) if the arrangement falls within a prescribed category of

arrangement.

Meaning of “UCITS” for purposes of Act.

3A.(1) A UCITS is a collective investment scheme–

(a) with the sole object of the collective investment of capital

raised from the public in transferable securities or other liquid

financial assets referred to in regulation 47(1) of the CIS

Regulations and operating on the principle of risk-spreading;

and

(b) with units which are, at the request of holders, repurchased or

redeemed, directly or indirectly, out of those undertakings’

assets,

and for these purposes–

(i) UCITS may consist of several investment compartments

with the Authority’s written consent; and

(ii) action taken by a UCITS to ensure that the stock

exchange value of its units does not significantly vary

from their net asset value is deemed equivalent to a

repurchase or redemption for the purposes of paragraph

(b).

(2) Undertakings falling within the provisions of subsection (1) may be

constituted in accordance with contract law (as common funds managed by

management companies), trust law (as unit trusts), or statute (as investment

companies), and for these purposes–

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(a) “common funds” include unit trusts; and

(b) “units” of UCITS include shares of UCITS.

(3) Open-ended investment companies–

(a) the assets of which are invested through the intermediary of

subsidiary companies; and

(b) mainly other than in transferable securities,

do not fall within the provisions of this section.

(4) A UCITS may not transform itself into a collective investment

undertaking of a type not covered by this section.

(5) Where a UCITS established in another EEA State or units issued by

such UCITS are marketed in Gibraltar–

(a) the Authority may not apply any other legislative or regulatory

provisions thereto in respect of any matter covered by this Act;

and

(b) the provisions of regulations 106 and 107 and 123(2)(b) of the

CIS Regulations apply.

(6) For the purposes of this Act, a UCITS is deemed to be established in

the EEA State in which it is authorised.

Meaning of open-ended investment company.

4.(1) In this Act, “open-ended investment company” means a collective

investment scheme where the following conditions are satisfied

(a) the property subject to the scheme belongs beneficially to, and

is managed by or on behalf of, a body corporate having as its

purpose the investment of its funds with the aim of

(i) spreading investment risk; and

(ii) giving its members the benefit of the results of the

management of those funds by or on behalf of that body

corporate; and

(b) in relation to the body corporate, a reasonable investor would,

if he were to participate in the scheme

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(i) expect that he would be able to realize, within a period

appearing to him to be reasonable, his investment in the

scheme, represented, at any given time, by the value of

shares in, or securities of, the body corporate held by him

as a participant in the scheme; and

(ii) be satisfied that his investment would be realized on a

basis calculated wholly or mainly by reference to the

value of property in respect of which the scheme makes

arrangements.

(2) In determining whether the conditions specified in subsection (1)(b)

are satisfied, no account is to be taken of any actual or potential redemption

or repurchase of shares or securities under

(a) the relevant provisions of the Companies Act;

(b) the corresponding provisions in force in an EEA State; or

EEA State which may be designated as corresponding

provisions in the CIS Regulations.

PART II

PROHIBITIONS AND RESTRICTIONS

Authorisation of UCITS: General Provisions.

5.(1) It is an offence for a UCITS to carry out any activity to which this

Act applies, unless it has been authorised under this Act or in an EEA State,

as the case may be.

(2) The Authority–

(a) shall authorise a common fund only where it has approved the

application of the management company to manage that

common fund, the fund rules and the choice of depositary;

(b) shall authorise an open-ended investment company only where

it has approved both its instruments of incorporation and the

choice of depositary, and, where relevant, the application of the

designated management company to manage that open-ended

investment company.

(3) Without prejudice to subsection (2)–

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(a) where Gibraltar is not the home State of a management

company but is the UCITS’ home State, the management

company shall apply to the Authority for an authorisation to

manage the UCITS pursuant to regulation 17 of the CIS

Regulations;

(b) an authorisation to manage a UCITS under paragraph (a) shall

not be subject to a requirement that the management company

have its registered office in Gibraltar, that the management

company pursue any activities in Gibraltar or that it delegate

any responsibility to undertakings established in Gibraltar.

(4) The following provisions apply–

(a) the Authority shall not authorise a UCITS under this Act

where–

(i) it has reason to believe that the open-ended investment

company does not comply with the preconditions laid

down in Part IV of the CIS Regulations; or

(ii) the management company designated to manage the

UCITS is not authorised for the management of UCITS

in its home EEA State;

(b) without prejudice to regulation 26(2) of the CIS Regulations, a

management company or, where applicable, an open-ended

investment company, shall be informed, within two months of

the submission of a complete application, whether or not an

authorisation of the UCITS has been granted;

of the depositary designated in relation to that UCITS are not

of sufficiently good repute or are not sufficiently experienced

in relation to the type of UCITS to be managed. To that end,

the names of the directors of the depositary and of every person

succeeding them in office shall be communicated forthwith to

the Authority,

and for these purposes, a “director” means a person who, under the law or

the instruments of incorporation, represents the depositary, or who

effectively determines the policy of the depositary.

(5) The Authority shall not grant an authorisation to a UCITS applying

to be authorised under this Act where the UCITS is legally prevented (for

example, through a provision in the fund rules or instruments of

incorporation) from marketing its units in Gibraltar.

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(6) It is an offence for the management company or the depositary of a

UCITS authorised under this Act to be replaced, or the fund rules or

instruments of incorporation of the open-ended investment company to be

amended, without the prior approval of the Authority.

(7) The Authority shall ensure that–

(a) complete information on the laws, regulations and

administrative provisions which relate to the constitution and

functioning of UCITS are easily accessible at a distance or by

electronic means;

(b) such information is available in the English language and is

provided in a clear and unambiguous manner, and is kept up to

date.

Restrictions on promotion of collective investment schemes.

6.(1) Subject to subsections (3) and (4), a person shall not, whether in or

from within Gibraltar, promote a collective investment scheme unless the

scheme is

(a) an authorised scheme; or

(b) a recognised scheme.

(2) Without limiting subsection (1), a person promotes a collective

investment scheme if he communicates, or causes to be communicated, an

invitation or inducement to any other person, or advises or procures any

other person, to participate in, or to offer to participate in, a collective

investment scheme.

(3) Section 5 and subsection (1) do not apply 

(a) with a respect to an experienced investor fund, provided that

the fund is established and promoted in accordance with, and

as permitted by the EIF Regulations;

(b) to a communication originating, or advice given, outside

Gibraltar unless the communication or advice is capable of

having effect in Gibraltar;

private scheme provided that the scheme is promoted in

accordance with, and as permitted by, the CIS Regulations.

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(4) The CIS Regulations may provide that section 5 and subsection (1)

does not apply 

(a) of a specified description; or

(b) made or given in specified circumstances.

(5) A person who contravenes subsection (1) commits an offence and is

liable

(a) on summary conviction, to a fine up to level 5 on the standard

scale or to imprisonment for a term not exceeding 6 months or

to both; or

(b) on conviction on indictment, to imprisonment for a term not

exceeding 2 years or to a fine or to both.

Meaning of “restricted activity”.

7.(1) A person carries on a “restricted activity” if he carries on, by way of

business

(a) any of the following activities

(i) establishing, acting as the manager or administrator of, or

otherwise as the operator of, or winding up a collective

investment scheme;

(ii) acting as the trustee of a common fund;

(iii) acting as the depositary or sole director of an open-ended

investment company; or

(b) any activity prescribed in the CIS Regulations as a restricted

activity.

(2) The CIS Regulations may provide that an activity which would

otherwise fall within the meaning of “restricted activity” specified in

subsection (1), is deemed not to constitute a restricted activity for the

purposes of this Act or for the purposes of certain specified provisions of

this Act

(a) in specified circumstances; or

(b) if the activity falls within a prescribed category of activities.

Prohibition on carrying on restricted activity without authorisation.

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8.(1) Subject to section 9, no person shall carry on, or purport to carry on, a

restricted activity unless

(a) the person holds an authorisation granted by the Authority

under this Act with respect to that restricted activity; or

(b) the person is deemed to be authorised by any provision in this

Act or the CIS Regulations with respect to that activity.

(2) The CIS Regulations may specify circumstances in which

(a) EEA UCITS management companies undertaking business or

providing services in Gibraltar are deemed to be authorised

persons; and

(b) Gibraltar UCITS management companies may carry on

business in an EEA State other than Gibraltar.

(3) A person who contravenes subsection (1) commits an offence and is

liable

(a) on summary conviction, to a fine up to level 5 on the standard

scale or to imprisonment for a term not exceeding 6 months or

to both; or

(b) on conviction on indictment, to imprisonment for a term not

exceeding 2 years or to a fine or to both.

Exemptions from sections 6 and 8.

9.(1) Sections 6 and 8 do not apply to a person specified in Schedule 1 to

the extent specified in that Schedule.

(2) The CIS Regulations may add to or delete from the list of persons

exempted from sections 6 and 8 by subsection (1).

Control over use of names.

10.(1) No company shall be incorporated, and no person shall carry on

business in or from within Gibraltar, under a name that contains a restricted

word or phrase, unless

(a) it is an authorised scheme, a recognised scheme or an

experienced investor fund that is using the restricted word or

phrase as permitted by the notice published by the Authority

under subsection (2);

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(b) he is an authorised person who is using the restricted word or

phrase as permitted by the notice published by the Authority

under subsection (2); or

the word or phrase.

(2) For the purposes of subsection (1), the Authority may, by notice

published in the prescribed manner, specify words or phrases as restricted

words or phrases and may specify categories of collective investment

scheme or authorised persons who may use the restricted words or phrases,

the circumstances in which they may be used and conditions attaching to

their use.

PART III

AUTHORISED SCHEMES

Authorisation of collective investment schemes.

11.(1) A collective scheme may be authorised under this Part as

(a) a UCITS scheme; or

(b) a non-UCITS retail scheme.

(2) The provisions of this Part do not apply for the purposes of

subsection (1)(a) to the extent that CIS Regulations make conflicting

provision.

Application for authorisation of collective investment schemes.

12.(1) Application may be made to the Authority in accordance with

subsection (2) for the authorisation as an authorised collective investment

scheme of

(a) a common fund which satisfies, or immediately after

authorisation will satisfy, the requirements specified in section

18(2), (4), (5) and (6); or

(b) an open-ended investment company incorporated under the

Companies Act.

(2) An application under subsection (1) shall be made

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(a) if authorisation is sought in respect of a common fund, by the

manager and trustee, or the proposed manager and trustee, of

the common fund; or

(b) if authorisation is sought in respect of an open-ended

investment company, by the manager and depositary, or the

proposed manager and depositary, of the open-ended

investment company.

Authorisation of collective investment schemes: supplementary.

13.(1) Subject to this section, the Authority may grant an application for the

authorisation of a collective investment scheme if the Authority is satisfied

(a) that the scheme complies with the requirements of this Act and

the CIS Regulations in respect of the application and will, upon

the grant of the authorisation, be in compliance with the

requirements of this Act and the CIS Regulations with respect

to authorised schemes;

(b) in the case of a common fund, the manager and trustee is each

fit and proper to act as manager or trustee, as the case may be;

and

manager, the depositary and each director is fit and proper to

act as manager, depositary or director, as the case may be.

(2) In considering whether to authorise a collective investment scheme

under this section, the Authority shall have regard to the need to protect the

public against financial loss and the reputation of Gibraltar and, to that end,

shall consider

(a) the general nature and specific attributes of the scheme to

which the application relates and whether the purposes of the

scheme are reasonably capable of being successfully carried

into effect;

(b) the manner in which it is proposed to organise the operation of

the scheme to which the application relates, the number of

persons who will be responsible for carrying on each aspect of

the operation of the scheme and the experience of and the

relationship between the persons who will be so responsible;

having regard to the nature of the proposed scheme;

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(d) whether the name of the scheme is undesirable or misleading;

(e) any written representations received from any member of the

public in response to and within three weeks of the

advertisement of the application; and

(f) any other factors which the Authority considers appropriate.

(3) Where the Authority authorises a collective investment scheme as an

authorised scheme, it shall issue a certificate of authorisation to the

applicants which shall

(a) state the date upon which the authorisation takes effect;

(b) state whether the scheme is authorised as a UCITS scheme or a

non-UCITS retail scheme;

fund, state that the scheme is so authorised; and

(d) in the case of an authorised UCITS scheme, state that the

scheme complies with the conditions necessary for it to enjoy

the rights conferred by the UCITS Directive.

(4) An authorised open-ended investment company is authorised to carry

on, so far as it is a regulated activity

(a) the operation of the scheme;

(b) any activity in connection with, or for the purposes of, the

operation of the scheme.

Determination of application for authorisation.

14.(1) The Authority shall determine an application for the authorisation of

a collective investment scheme not later than six months after the date upon

which it receives a complete application that complies with section 12 and

the CIS Regulations.

(2) The Authority may determine an incomplete application if it considers

it appropriate to do so and, if it does, it shall determine the application not

later than twelve months after the date upon which it first receives the

application.

(3) If the Authority refuses an application for authorisation, it shall give

each of the applicants written notice of its refusal and state the reasons for

its decision.

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Imposition of conditions.

15.(1) The Authority may on or at any time after granting authorisation

under section 13, subject the authorisation to such conditions as it considers

necessary for the protection of investors and may, at any time, vary or

revoke any condition so imposed.

(2) Without limiting subsection (1), a condition imposed under this

subsection may

(a) prohibit an authorised scheme, or its manager, depositary,

trustee or any administrator or other person undertaking any

function with respect to the scheme, from

(i) entering into transactions of any specified description or

in specified circumstances or to a specified extent or with

persons of a specified description,

(ii) soliciting participants of a specified description or in a

specified place,

(iii) operating the scheme in a specified manner or otherwise

than in a specified manner,

(iv) disposing of, or otherwise dealing with any, or with any

specified, assets of the scheme in a specified manner or

otherwise than in a specified manner;

(b) require an authorised scheme, or its manager, depositary,

trustee or any administrator or other person undertaking any

function with respect to the scheme, to take all necessary steps

to transfer to the custody of a person approved by the Authority

all, or any specified, property of the scheme.

(3) A prohibition or requirement under sub-section (2) may relate to assets

outside Gibraltar.

(4) Where the Authority imposes a condition under subsection (1), or

varies or revokes a condition, the Authority shall send a written notice

specifying the condition or the variation or revocation of the condition

(a) in the case of a common fund, to the trustee; or

(b) in the case of an open-ended investment company, to the

manager.

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(5) No condition may be imposed pursuant to this section where it

conflicts with a provision of the Directive.

Constitution of an authorised collective investment scheme.

16.(1) The constituting instrument of an authorised collective investment

scheme shall be

(a) in the case of a common fund, a trust deed or binding

agreement, as the case may be. Made between the manager and

the trustee; and

(b) in the case of an open-ended investment company, the

memorandum and articles of association of the company.

(2) The constituting instrument of an authorised collective investment

scheme shall not contain any provision that

(a) conflicts with this Act or the Directive;

(b) prevents the units of the scheme being marketed in Gibraltar;

of units.

(3) The constituting instrument of an authorised collective investment

scheme must include such provisions as are specified in the CIS

Regulations.

Scheme property of authorised open-ended investment company to be

entrusted to depositary.

17.(1) Subject to subsection (2), all the scheme property of an authorised

open-ended investment company must be entrusted for safekeeping to a

depositary appointed for the purpose.

(2) Subsection (1)

(a) does not apply to scheme property exempted from subsection

(1) by the CIS Regulations; and

(b) does not prevent a depositary from

(i) entrusting all or part of the scheme property in its

safekeeping to a third party; or

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(ii) authorising a third party to whom it has entrusted scheme

property to entrust all or part of the property to other

specified persons.

Managers, trustees and depositaries of authorised schemes.

18.(1) An authorised scheme shall have a manager that shall be

(a) a Gibraltar UCITS management company; or

(b) subject to the provisions of the CIS Regulations, an EEA

UCITS management company that has a place of business in

Gibraltar.

(2) The trustee of an authorised common fund shall be independent of the

manager and shall be a person authorised to act in that capacity under this

Act.

(3) An authorised open-ended investment company shall have a depositary

who shall be a person

(a) authorised under section 27 to act in that capacity;

(b) independent of the manager and of the company and its

directors.

(4) The trustee of an authorised common fund and the depositary of an

authorised open-ended investment company shall each

(a) be a body corporate incorporated in Gibraltar or in another

EEA State; and

(b) save where the CIS Regulations otherwise provide, have a

place of business in Gibraltar,

(5) The business and affairs of a manager or trustee of an authorised

common fund and of a depositary of an authorised open-ended investment

company shall be administered in the jurisdiction in which the manager,

trustee or depositary is incorporated.

(6) A common fund shall not be authorised under this Part if

(a) it is a UCITS scheme constituted under the laws of another

EEA State; and

(b) the manager of the scheme is incorporated in that EEA State.

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(7) The head office of an authorised open-ended investment company shall

be situated in Gibraltar.

Directors of an authorised open-ended investment company.

19.(1) An authorised open-ended investment company shall have at least

one director and, if the company has only one director, that director shall be

a person licensed to act as director under section 26.

(2) If an authorised open-ended investment company has more than one

director, the combination of the directors’ expertise must be such as is

appropriate for the purposes of carrying on the business of the company.

Participants rights with respect to redemption and repurchase.

20. An authorised scheme shall meet one or both of the following

requirements

(a) participants are entitled to have their units redeemed, on

request, at a price related to the net value of the scheme

property and determined in accordance with the scheme’s

constituting instrument, the CIS Regulations and any Code of

Practice issued by the Authority and any Guidance issued under

section 55; or

(b) participants are entitled to sell their units on an investment

exchange at a price not significantly different from that

specified in paragraph (a).

Alteration of authorised schemes.

21.(1) The operator of an authorised scheme shall give the Authority

written notice of any proposal to alter the scheme, including a proposal to

amend its constituting instrument, or to change the name of the scheme.

(2) Without limiting subsection (1), in the case of an authorised open-

ended investment company, the following represent alterations in respect of

which notice is required to be given to the Authority

(a) any proposed material alteration to the company’s prospectus;

(b) any proposed reconstruction or amalgamation involving the

company; and

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(3) Any notice given under subsection (1) of a proposal to amend the

constituting instrument of a scheme shall be accompanied by a certificate of

a barrister or solicitor of the Supreme Court of Gibraltar that the change will

not affect the compliance of the constituting instrument with section 16 or

with the CIS Regulations.

Changes in manager, depositary, trustee or director.

22.(1) Written notice of any proposal to replace the manager of a scheme

shall be given to the Authority

(a) in the case of an authorised common fund, by the trustee; and

(b) in the case of an open-ended investment company, by the

depositary.

(2) The manager of an authorised scheme shall give the Authority written

notice of any proposal to replace the trustee or, in the case of an open-ended

investment company, the depositary of the scheme.

(3) The operator of an authorised open-ended investment company shall

give the Authority written notice of any proposal to appoint a director of the

company, whether as a replacement director or as an additional director, or

to decrease the number of the company’s directors.

Approval of proposal under section 21 and 22.

23.(1) Effect shall not be given to a proposal specified in section 21 or 22

unless the Authority has given its written approval to the proposal.

(2) The Authority shall not approve a proposal specified in section 22

unless it is satisfied that, if the change was to be made, the scheme will

continue to comply with those requirements of sections 18 and 19 that are

relevant to it.

Exclusion clauses.

24. Any provision in the constituting instrument of an authorised scheme or

in any prospectus or other document that purports to exempt the manager,

trustee or custodian from liability for any failure to exercise due care and

diligence in the discharge of his functions in respect of the scheme, is void

and of no effect.

Provision for authorised schemes in CIS Regulations.

25.(1) The CIS Regulations may make provision with respect to authorised

schemes, including as to

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(a) applications for, and the form, content, issuance and validity of,

authorisations granted under this Part;

(b) the constitution, management, operation, winding up and

dissolution of authorised schemes;

authorised schemes, including rules incorporating into the

constituting instrument provisions overriding its express terms

and rendering those terms void to the extent of any

inconsistency with any overriding provisions incorporated;

(d) the constitution, powers, duties, rights and liabilities of

operators, managers, directors, trustees and depositaries of

authorised schemes;

(e) the rights and obligations of the participants in an authorised

scheme;

(f) different classes and types of authorised scheme;

(g) the publication of such particulars as regards authorised

schemes as may be prescribed;

(h) restrictions on the names that may be used by authorised

schemes;

(i) the issue and redemption of the units in authorised schemes;

(j) the expenses of authorised schemes and the means of meeting

them;

(k) the appointment, removal, powers and duties of auditors of

authorised schemes;

(l) the restriction or regulation of the investment and borrowing

powers exercisable in relation to authorised schemes;

(m) the keeping of records with respect to the transactions and

financial position of authorised schemes and for the inspection

of those records;

(n) the preparation of periodical reports with respect to authorised

schemes and the provision of those reports to the participants

and to the Authority; and

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(o) the preparation, publication and submission to the Authority of

the particulars of authorised schemes; and

(p) the amendment of authorised schemes.

(2) Regulations made under paragraphs (b) to (e) of subsection (1) are

binding on the manager, directors, trustee, depositary and participants of an

authorised scheme independently of the contents of the constituting

instrument of the scheme and, in the case of the participants, have effect as

if contained in it.

PART IV

AUTHORISATION TO UNDERTAKE RESTRICTED ACTIVITIES

Application for authorisation to undertake a restricted activity.

26.(1) A person may apply to the Authority in the approved form for

authorisation to undertake one or more restricted activities.

(2) An EEA UCITS management company may not apply for

authorisation to undertake an activity which it is entitled to undertake

because it is deemed under this Act or the CIS Regulations to be an

authorised person with respect to that activity.

Granting of authorisation to undertake restricted activity.

27.(1) Subject to this section, the Authority may grant an application for

authorisation to undertake a restricted activity if it is satisfied that the

persons who effectively conduct the business of the applicant are fit and

proper persons, with respect to the restricted activity or activities for which

authorisation is sought.

(2) In considering whether to authorise a person under this section, the

Authority shall have regard to the need to protect the public against financial

loss and to protect the reputation of Gibraltar.

(3) Where the Authority authorises a person under this section, it shall

issue a certificate of authorisation to the person concerned which shall state

the date upon which the authorisation takes effect.

(4) Where the Authority grants authorisation to a person under this

section, that person is an Authorised Person in respect of that activity.

Authorisation of Gibraltar UCITS management company.

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28. A person shall not be authorised as a Gibraltar UCITS management

company unless that person complies with the relevant provisions of the CIS

Regulations.

Determination of application for authorisation.

29.(1) The Authority shall determine an application for the authorisation of

a person under section 26 not later than six months after the date upon

which it receives a complete application that complies with the CIS

Regulations.

(2) If the Authority refuses an application for authorisation, it shall give

each of the applicants written notice of its refusal and state the reasons for

its decision.

Imposition of conditions.

30.(1) The Authority may on or at any time after granting authorisation

under section 27, subject the authorisation to such conditions as it considers

appropriate and may, at any time, vary or revoke any condition so imposed.

(2) Where the Authority imposes a condition under subsection (1), or

varies or revokes a condition, the Authority shall send a written notice

specifying the condition or the variation or revocation of the condition to the

authorised person concerned.

(3) No condition contrary to the provisions of the Directive may be

imposed under this section.

Financial resources to be maintained by authorised person.

31. An authorised person shall at all times ensure that

(a) its capital is maintained in such amount as may be specified in

the CIS Regulations; and

(b) it complies with such other financial resource requirements as

may be specified in the CIS Regulations.

Approved persons.

32.(1) The CIS Regulations may specify as a “controlled function” any

function

(a) which is likely to enable the person responsible for its

performance to exercise a significant influence on the conduct

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of an authorised person's affairs, so far as relating to a regulated

activity;

(b) which involves the person performing it in dealing with

customers of an authorised person in a manner substantially

connected with the carrying on of a regulated activity; or

customers of an authorised person in a manner substantially

connected with the carrying on of a regulated activity.

(2) An authorised person must take reasonable care to ensure that no

person performs any function specified in accordance with subsection (1) as

a controlled function, under an arrangement entered into by the authorised

person, or by one of its contractors, in relation to the carrying on by the

authorised person of a regulated activity, unless the Authority approves the

performance by that person of the controlled function to which the

arrangement relates.

(3) For the purposes of subsection (2)

(a) “arrangement” means any kind of arrangement for the

performance of a function of the authorised person which is

entered into by the authorised person or any contractor of his

with another person and includes, in particular, that other

person's appointment to an office, his becoming a partner or his

employment (whether under a contract of service or otherwise);

(b) “customer”, in relation to an authorised person, means a person

who is using, or who is or may be contemplating using, any of

the services provided by the authorised person.

(4) The CIS Regulations may provide generally for the approval of persons

under this section as approved persons, including providing for

(a) applications for, and the form, content, issuance and validity of,

approvals granted under this section;

(b) the criteria for determining whether a person may be approved

under this section; and

approval granted under this section and the procedures to be

followed by the Authority when withdrawing an approval.

Enforcement action may be taken against persons authorised under

section 28.

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33.(1) The Authority may take enforcement action against a person

authorised under section 28 if

(a) it appears to the Authority that the person

(i) is in breach of, or has breached, any provision of this

Act, the CIS Regulations or any regulations made under

the Financial Services (Investment and Fiduciary

Services) Act that are applicable to him;

(ii) has contravened or is in contravention of any Act or

Regulations relating to money laundering or the

combating of the financing of terrorism,

(iii) is carrying on business in a manner detrimental to the

public interest or to the interest of any of its customers or

creditors,

(iv) is or is likely to become insolvent,

(v) has failed to comply with a lawful directive given to it by

the Authority,,

(vi) is in breach of any term or condition imposed by the

Authority under section 30,

(vii) is not a fit and proper person to hold a licence, or

(viii) has provided the Authority with any false, inaccurate or

misleading information, whether on making an

application for authorisation or subsequent to the grant of

the authorisation;

(b) the person, being a body corporate, is compulsorily wound up,

passes a resolution for voluntary winding up or is dissolved;

(d) a receiver has been appointed in respect of the business carried

on by the person or possession has been taken of any of its

property by or on behalf of the holder of a debenture secured by

a registered charge;

(2) If the Authority is entitled to take enforcement action under subsection

(1) it may exercise one or more of the following powers

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(a) revoke the person’s authorisation;

(b) appoint an examiner to conduct an investigation;

to advise him on the proper conduct of his business;

(d) issue a directive.

(3) Sections 44 to 48 apply where the Authority is entitled to take

enforcement action under this section with such modifications as are

necessary.

PART V

RECOGNISED COLLECTIVE INVESTMENT SCHEMES

Recognised schemes.

34. A collective investment scheme may be recognised

(a) as an EEA UCITS scheme under section 35; or

(b) as a foreign scheme under section 40.

Recognition of EEA UCITS Schemes.

35. For the purposes of this section, a collective investment scheme is

constituted in an EEA State if it is a UCITS Scheme which complies with

the requirements of the CIS Regulations for the recognition of such schemes

in Gibraltar.

RECOGNISED EEA UCITS SCHEMES

36. Repealed.

Voluntary cessation of recognition.

37.(1) The operator of a recognised UCITS scheme may give written notice

to the Authority stating that he desires the scheme to cease to be a

recognised UCITS scheme.

(2) On the receipt by the Authority of a notice given under subsection (1)

in respect of a scheme, the scheme ceases to be a recognised UCITS

scheme.

Deemed authorisation of operator, trustee or depositary of recognised

UCITS scheme.

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38. Subject to the provisions of the CIS Regulations, a person who for the

time being is an operator, trustee or depositary of a recognised UCITS

scheme is deemed to be authorised under section 27 to carry on, so far as it

is a restricted activity

(a) any activity appropriate to the capacity in which he acts in

relation to the recognised UCITS scheme; and

(b) any activity in connection with, or for the purposes of, the

scheme.

RECOGNISED FOREIGN SCHEMES

Application for recognition as a foreign scheme.

39.(1) Application to the Authority may be made by the operator of a

foreign collective investment scheme for the scheme to be a recognised

foreign scheme.

(2) For the purposes of subsection (1), a scheme is a foreign collective

investment scheme if

(a) it is managed in a jurisdiction outside Gibraltar; and

(b) it does not satisfy the requirements for recognition as a UCITS

scheme.

Recognition of foreign scheme.

40.(1) Subject to this section, the Authority may grant an application for the

recognition of a foreign collective investment scheme if the Authority is

satisfied that

(a) the scheme complies with the requirements of this Act and the

CIS Regulations in respect of the application and will, upon

being recognised, be in compliance with the requirements of

this Act with respect to recognised foreign schemes;

(b) the scheme is subject to an authorisation and supervisory

regime in the jurisdiction in which it is constituted that, in the

opinion of the Authority, provides to participants in Gibraltar

protection at least equivalent to the protection provided under

this Act for comparable authorised schemes;

between the authorities of the country or territory responsible

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for the authorisation and supervision of the scheme and the

Authority; and

(d) the scheme is being operated and managed in compliance with

the authorisation and supervisory regime to which it is subject.

(2) The Authority may, by notice published in the prescribed manner,

designate jurisdictions

(a) that, in respect of the classes of scheme specified in the notice

have an authorisation and supervisory regime that, in the

opinion of the Authority, provides to participants in Gibraltar

protection at least equivalent to the protection provided under

this Act; and

(b) with respect to which, adequate arrangements exist for co-

operation between the authorities of that jurisdiction

responsible for the authorisation and supervision of the classes

of collective schemes specified in the notice and the Authority.

(3) Subsection (1), paragraphs (b) and (c) are deemed to be satisfied with

respect to a scheme if the scheme is

(a) constituted in a jurisdiction designated under subsection (2);

and

(b) of a class specified in the designation.

Determination of application for recognition.

41.(1) The Authority shall determine an application for the recognition of a

foreign collective investment scheme not later than six months after the date

upon which it receives a complete application that complies with section 39

and the CIS Regulations.

(2) The Authority may determine an incomplete application if it considers

it appropriate to do so and, if it does, it shall determine the application not

later than twelve months after the date upon which it first receives the

application.

(3) If the Authority refuses an application for recognition, it shall give

each of the applicants written notice of its refusal and state the reasons for

its decision.

GENERAL

Provision for recognised schemes in CIS Regulations.

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42.(1) The CIS Regulations may make provision with respect to recognised

schemes, including as to

(a) the submission to the Authority and the publication of such

particulars as regards recognised schemes as may be

prescribed;

(b) the notifications to be provided to the Authority with respect to

recognised schemes, including as to the amendment of the

constituting instruments of a scheme and changes of the

operator, manager, trustee or depositary of a recognised

scheme;

by and with respect to recognised foreign schemes,

PART VI

ENFORCEMENT ACTION - COLLECTIVE INVESTMENT

SCHEMES

Grounds for taking enforcement action.

43.(1) The Authority may take enforcement action under this Part against,

or with respect to, an authorised scheme, a recognised foreign scheme or an

experienced investment fund if, in its opinion

(a) the operator, manager, administrator, trustee, depositary, or

other person undertaking any function with respect to the

scheme or, where the scheme is established as a corporate

body, the scheme or any director of the scheme

(i) has contravened or is in contravention of this Act or any

applicable regulations;

(ii) has contravened or is in contravention of any Act or

applicable Regulations relating to money laundering or

the combating of the financing of terrorism,

(iii) has failed to comply with a direction given to it by the

Authority,

(iv) has provided the Authority with any false, inaccurate or

misleading information, whether on making any

application to the Authority or subsequent to the grant of

any application;

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(b) the scheme is operating, or being operated

(i) in a manner detrimental to the public interest or to the

interest of any of its participants, or potential

participants, or

(ii) in breach of any term or condition of its authorisation or

recognition;

administrator, depositary, or other person undertaking any

function with respect to the scheme is not a fit and proper

person to act as director or undertake that function with respect

to the scheme;

(d) the scheme

(i) is or is likely to become insolvent;

(ii) is compulsorily wound up, passes a resolution for

voluntary winding up or is dissolved; or

(iii) has a receiver appointed in respect of any of its property;

(e) in the case of a recognised collective investment scheme, that

one or more of the requirements for recognition are no longer

satisfied;

(f) in the case of an experienced investor fund, that one or more

requirements for qualification as an experienced investor fund

are no longer satisfied;

(g) any fee or penalty payable by or with respect to the scheme

under this or any other Act or under the CIS Regulations,

Regulations made the Financial Services (Investment and

Fiduciary Services) Act that are applicable to the scheme or the

EIF Regulations has not been paid; or

(h) the Authority is entitled to take enforcement action under a

provision in another enactment.

(2) In this section and in sections 45, 46, 47 and 48, the protection of the

reputation of Gibraltar as a financial services centre is in the “public

interest”.

Revocation and suspension of authorisation or recognition.

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44.(1) The Authority may by notice in writing revoke an authorisation

granted under Part III or a recognition granted under Part V if

(a) in the opinion of the Authority

(i) in the case of an authorised scheme, a recognised foreign

scheme or an experienced investor fund, it is entitled to

take enforcement action against or with respect to the

scheme under section 43;

(ii) in the case of an authorised scheme or an authorised

experienced investor fund, the scheme has not

commenced operation within six months of the date of

its authorisation, or has ceased to operate as a collective

investment scheme for a period exceeding twelve

months; or

(iii) in the case of a recognised foreign scheme, it is not in the

interests of the participants or potential participants that

the scheme should continue to be recognised; or

(b) application is made in the approved form for the authorisation

or recognition to be revoked.

(2) The Authority may by notice in writing suspend an authorisation

granted under Part III or a recognition granted under Part V on any of the

grounds set out in subsection (1)(a)

(a) for such period as may be specified in the notice;

(b) until the occurrence of an event specified in the notice; or

(3) Before revoking an authorisation or recognition under subsection (1)(a)

or suspending an authorisation or recognition under subsection (2), the

Authority shall give separate written notices to the collective investment

scheme and the manger, administrator, trustee or depositary of the scheme,

stating

(a) the grounds upon which it intends to suspend or revoke the

authorisation or recognition; and

(b) that unless, by written notice filed with the Authority, good

reason is shown why the authorisation or recognition should

not be revoked, the authorisation or recognition will be revoked

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or suspended with effect from a date specified in the notice that

shall be not be less than 28 days after the date of the notice.

(4) The Authority shall not revoke an authorisation with respect to a

scheme that is a company unless it is satisfied that such steps as are

necessary and appropriate to secure its winding up have been taken.

Protection order.

45.(1) The Authority may apply to the Court for a protection order with

respect to a collective investment scheme if

(a) in the case of an authorised scheme, a recognised foreign

scheme, a qualifying experienced investment fund or an

authorised experienced investment fund, the Authority is

entitled to take enforcement action against or with respect to

the scheme under section 43; or

(b) in the case of any collective investment scheme, the Authority

considers that it is desirable for a protection order to be made

to protect the interests of participants or potential participants

of the scheme or to protect the public interest.

(2) On an application made under subsection (1), the Court may make

such order as it considers necessary to protect or preserve the business or

property of the collective investment scheme, or the interests of its

participants, or potential participants, or the public including

(a) an order preventing any person from transferring, disposing of

or otherwise dealing with any scheme property in his custody

or control;

(b) an order removing any director of the scheme or the operator,

manager, administrator, depositary, or any other person

undertaking any function with respect to the scheme and

replacing him with a person nominated by the Authority; and

the collective investment scheme.

(3) Without limiting subsection (2)(c), an order made under that

subsection shall specify the powers of an administrator which may include

the powers of an authorised person or of a liquidator under the Companies

Act and may

(a) require an administrator to provide security to the satisfaction

of the Court;

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(b) fix and provide for the remuneration of the administrator;

the Court for the purposes of giving information or producing

records concerning the scheme.

(4) An order made under subsection (2)(b) shall make provision for

reports to be submitted by the administrator to the Court and to the

Authority.

(5) The Court may on its own motion or on the application of the

Authority or, where appointed, the administrator

(a) rescind or vary an order made under this section;

(b) give directions to the administrator concerning the exercise of

his powers;

(d) terminate the appointment of the administrator.

(6) An application under subsection (1) may be made

(a) on an ex parte basis or upon such notice as the Court may

require; and

(b) before the Authority has given notice of intention to revoke an

authorisation or recognition.

Directions.

46.(1) The Authority may issue a direction in writing under this section to,

or with respect to, an authorised scheme, a recognised foreign scheme or an

authorised or qualifying experienced investor fund, if

(a) it is entitled to take enforcement action against or with respect

to the scheme under section 43; or

(b) it considers that it is desirable for a direction to be issued to

protect the interests of participants or potential participants of

the scheme or to protect the public interest.

(2) A direction issued under this section may

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(a) impose a prohibition, restriction or limitation on a collective

investment scheme, including a prohibition on the issue or

redemption, or on both the issue and redemption, of units under

the scheme;

(b) require that any manager, administrator, depositary, director,

key employee or person having functions in relation to a

scheme be removed and replaced by another person acceptable

to the Authority;

that a director of the company present a petition to the Court

for the winding up of the company or require that its affairs be

wound up otherwise than by the Court;

(d) require that such other action is taken with respect to the

scheme as the Authority considers may be necessary to protect

the scheme property, or to protect participants or potential

participants of the scheme, including that the scheme be wound

up.

(3) A direction under this section takes effect from the date of the

direction or such later date as may be specified in the direction.

(4) The revocation of an authorisation or recognition under section 44

does not affect any direction issued under this section that is then in force.

(5) A direction may be issued under this section in relation to a collective

investment scheme, the authorisation or recognition of which has been

revoked, if a direction was already in force at the time of the revocation of

the authorisation or recognition.

(6) The Authority may, at any time, revoke or vary a direction issued

under this section.

Appointment of examiner.

47.(1) The Authority may appoint one or more competent persons as

examiners to conduct an investigation on its behalf into the affairs of, or of

any director, the operator, manager, administrator, trustee, depositary or

other functionary of,

(a) an authorised scheme or a qualifying or authorised experienced

investor fund;

(b) a recognised UCITS scheme or a recognised foreign scheme, so

far as relating to activities carried on in Gibraltar;

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(d) any collective investment scheme operating in or from within

Gibraltar,

on any one or more of the grounds specified in subsection (2).

(2) The grounds referred to in subsection (1) are that

(a) in the case of an authorised scheme, a recognised foreign

scheme, a qualifying experienced investment fund or an

authorised experienced investment fund, the Authority is

entitled to take enforcement action with respect to the scheme

under section 43;

(b) in the case of an authorised scheme, a recognised foreign

scheme or an authorised experienced investment fund, the

Authority has suspended or revoked the scheme’s authorisation

or recognition; or

private scheme, the Authority considers that it is desirable for

an investigation to be conducted to protect the interests of

participants or potential participants of the scheme or to protect

the public interest.

(3) An examiner appointed under subsection (1) may, if he considers it

necessary for the purposes of his investigation, also investigate the business

of any person who is, or at any relevant time has been a manager,

administrator, depositary, trustee, director or other functionary of the

scheme.

(4) In this section, “functionary” means a person undertaking any function

with respect to a collective investment scheme.

Public statements.

48.(1) Where the Authority is entitled to take enforcement action under

section 43 with respect to a scheme, the Authority may issue a public

statement in such manner as it considers fit setting out the reasons for the

enforcement action and the enforcement action that it intends to take, or has

taken with respect to the scheme.

(2) Where it considers it in the public interest to do so, the Authority may

issue a public statement in such manner as it considers fit relating to a

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person who is promoting or operating a collective investment scheme

contrary to this Act.

(3) Where a public statement is to be issued under this section in relation

to a scheme, the Authority shall give the scheme seven days written notice

of its intention to issue the public statement and the reasons for the issue of

the statement.

(4) If, on the application of the Authority, the Court is satisfied that it is in

the public interest or in the interests of any of the participants or creditors of

a scheme that subsection (3) should not have effect or that the period

referred to in that subsection should be reduced, it may so order.

(5) An application under subsection (4) may be made on an ex parte basis

or upon such notice as the Court may require.

PART VII

GENERAL

Applications.

49.(1) An application under this Act shall be made to the Authority in

writing and shall

(a) contain such information, and be in such form, as may be

prescribed;

(b) be accompanied by such documentation as may be prescribed;

and

(2) At any time before determining an application received under this Act,

the Authority may require an applicant to provide the Authority with such

other documentation and information as the Authority may reasonably

require for the purpose of determining the application.

(3) The Authority may require an applicant to verify any information

required to be provided under this Act or the CIS Regulations or the EIF

Regulations in such manner as the Authority may direct.

(4) A person making an application under this Act shall, if the Regulations

so require, advertise the application in accordance with the Regulations.

Appeals against decisions of Authority.

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50.(1) Subject to the provisions of the CIS Regulations, a person

aggrieved

(a) by a decision of the Authority under this Act; or

(b) by the failure of the Authority to deal with an application

within the times specified in this Act,

may appeal to the Supreme Court.

(2) An appeal under subsection (1)(a) shall be instituted with 28 days of

the notification to the appellant of the matter complained of, or in the case

of an appeal under paragraph (b) of that subsection, within 28 days of the

expiration of the period specified.

(3) If by reason of any default on the part of the appellant an appeal under

this section has not been determined by the Court within three months of the

date of the notice of appeal or application by which it was instituted, the

Authority may apply to the Court, by a summons served on the appellant to

show cause why the appeal should not be dismissed for want of prosecution;

and upon the making of such an application the Court may dismiss the

appeal or make such other order as it considers just.

(4) On an appeal under this section the Court may quash or confirm the

decision of the Authority against which the appeal is brought or may

substitute any other decision which the Authority could have made.

(5) Subject to sub-section (6), from the time of the institution of an appeal

under subsection (1) of this section against a decision of the Authority, the

decision shall not operate so as to

(a) require the appellant to do anything which he would not

otherwise have been required to do; or

(b) prohibit the appellant from doing anything which he could

otherwise have done, unless and until the decision is confirmed

by the Court or the appeal is withdrawn or is dismissed for

want of prosecution under sub-section (3).

(6) The Court may, upon the application of the Authority direct that the

provisions of sub-section (5) shall not have effect in any particular case; and

a direction under this sub-section may be given in such terms as the Court

thinks just.

(7) A decision of the Court under this section shall be final as to any

question of fact, but an appeal from such a decision of fact shall lie to the

Court of Appeal on any question of law.

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Offences.

51.(1) A person commits an offence if

(a) for the purposes of or in connection with any application under

this Act; or

(b) in purported compliance with any requirement imposed on him

by or under this Act,

he furnishes information which he knows to be false or misleading in a

material particular or recklessly furnishes information which is false or

misleading in a material particular.

(2) A person guilty of an offence under subsection (1) is liable

(a) on summary conviction, to a fine up to level 5 on the standard

scale or to imprisonment for a term not exceeding 6 months or

to both; or

(b) on conviction on indictment, to imprisonment for a term not

exceeding 2 years or to a fine or to both.

Experienced Investor Fund Regulations.

52.(1) The Minister may make Experienced Investor Fund Regulations

permitting the establishment of experienced investor funds.

(2) The Experienced Investor Fund Regulations may provide for

(a) the circumstances in which an experienced investor fund may

be formed without the prior authorisation of the Authority;

(b) the circumstances in which an experienced investor fund may

be established only with the prior authorisation of the Authority

and applications for such authorisation;

investor funds;

(d) the persons who may act as the depositary of an experienced

investor fund and the custody by such depositaries of the assets

of experienced investor funds;

(e) the custody arrangements for experienced investor funds that

are not required to have a depositary;

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(f) names that may be used by experienced investor funds;

(g) the issuance by experienced investor funds of an offer

document and the information, explanations and other matters

to be contained in the offer document;

(h) the returns to be filed with the Authority by and in respect of,

an experienced investors fund;

(i) the fees payable by and in respect of experienced investor

funds.

(3) The EIF Regulations

(a) may make different provision for different persons,

circumstances or cases; and

(b) may provide for offences and penalties for any prohibition or

contravention or failure to comply with a requirement

prescribed in the Regulations.

Collective Investment Scheme Regulations.

53.(1) The Minister may make Regulations generally for giving effect to

this Act and for giving effect to European Union legislation in any matter

relating to collective investment schemes and specifically in respect of

anything required or permitted to be prescribed by this Act and for giving

effect to European Union legislation in any matter relating to collective

investment schemes.

(2) The CIS Regulations

(a) may make different provision for different persons,

circumstances or cases; and

(b) may provide for offences and penalties for any prohibition or

contravention or failure to comply with a requirement

prescribed in the Regulations.

(3) The CIS Regulations do not apply to an experienced investor fund

except to the extent specified in the EIF Regulations.

Regulations made under the Financial Services (Investment and

Fiduciary Services) Act.

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54. Regulations made under section 53 of the Financial Services

(Investment and Fiduciary Services) Act, including

(a) conduct of business regulations made in accordance with

section 12;

(b) accounting and financial regulations made in accordance with

section 13;

(d) unsolicited calls regulations made in accordance with section

15;

(e) compensation regulations made in accordance with section 54;

(f) cancellation regulations made in accordance with section 55;

(g) fees regulations made in accordance with section 56;

(h) winding up regulations made in accordance with section 57,

apply to collective investment schemes and authorised persons to the extent

provided in those regulations, in the CIS Regulations or in the EIF

Regulations and to the extent that they are not inconsistent with this Act, the

CIS Regulations or the EIF Regulations.

Codes of Practice and Guidance Notes.

55.(1) The Authority may issue Codes of Practice and Guidance Notes with

respect to

(a) the procedures to be followed by authorised persons;

(b) the operation of collective investment schemes;

(2) Guidance issued under subsection (1) may cover the factors that the

Authority will take into account in determining whether a person is fit and

proper for the purposes of this Act.

(3) A Code of Practice or any Guidance issued under subsection (1) may

make different provision in relation to different persons, circumstances or

cases.

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(4) The Authority must publish any Codes of Practice or Guidance issued,

and any amendments thereto, in the prescribed manner.

(5) Without limiting subsection (1) the CIS Regulations may prescribe

matters that shall be, or may be, provided for in Codes of Practice and

Guidance issued under this section.

Approval of forms by Authority.

56.(1) The Authority may, by publication in the prescribed manner, approve

forms to be used where specified in this Act or the CIS Regulations.

(2) Where a form is required to be in “approved form”, it shall

(a) contain the information specified in; and

(b) have attached to it such documents as may be required by,

the form approved by the Authority under subsection (1).

Application of Financial Services (Investment and Fiduciary Services)

Act and Financial Services (Markets in Financial Instruments) Act

2006.

57. The CIS Regulations and the EIF Regulations may specify that

provisions of the Financial Services (Investment and Fiduciary Services)

Act and the Financial Services (Markets in Financial Instruments) Act 2006

apply to collective investment schemes and authorised persons to the extent

provided in those regulations and to the extent that the specified provisions

are not inconsistent with this Act.

Repeals and consequential amendments.

58. The repeals and consequential amendments in Schedule 2 have effect.

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SCHEDULE 1

PERSONS EXEMPTED FROM SECTIONS 6 AND 7

PART I

(a) The Government of Gibraltar;

(b) Deleted.

the exercise of their functions;

(d) The Registrar, Supreme Court when managing funds paid into

court;

(e) The Public Trustee in the exercise of his functions under the

Public Trustee Act;

(f) The Official Receiver;

(g) A person acting in his capacity as manager of any fund

established under the Charities Act, the Trustee Act or the

Administration of Justice Act;

(h) Deleted.

PART II

A person who provides the trading facilities constituting a market which

(a) appears on the list drawn up by a member State pursuant to

Article 16 of the Investment Services Directive; and

(b) operates without any requirement that a person dealing on the

market should have a physical presence in the territory of the

member State from which the trading facilities are provided or

on any trading floor that the market may have, to the extent of

anything done by that person in connection with or for the

purposes of the provision of those trading facilities.

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SCHEDULE 2

REPEALS AND CONSEQUENTIAL AMENDMENTS

Act

Extent of repeal or amendment

Financial Services

Act, 1989 1. In section 2(1), repeal the following definitions

(a) “authorised scheme”;

(b) “collective investment scheme”;

(d) “management agreement”;

(e) “manager”;

(f) “open-ended investment company”;

(g) “operator”;

(h) “participants”;

(i) “public investment company”;

(j) “recognised scheme”;

(k) “trustee”;

(l) “common fund”; and

(m) units”.

2. In section 2

(a) amend the definition of “investor” by deleting

“and includes a participant in a collective

investment scheme”; and

(b) repeal subsections (2), (3) and (4).

3. Repeal Part III (Collective Investment Schemes).

4. In Schedule 2, delete paragraph 5 (Establishing etc.

collective investment schemes).

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