Most investment activity is regulated under the Financial Services (Markets in Financial Instruments) Act (‘MiFI Act’). There are three main types of firms covered in the MiFI Act.
Category 1 – Firms are permitted to deal as principal, agent and arrange deals for investors, give investment advice and hold/control customer money and assets.
Category 2 – Firms are permitted to deal as agent and arrange deals for investors, give investment advice and hold/control customer money and assets.
Category 3 – Firms are only permitted to arrange deals for investors and give investment advice.
The MiFI Act is designed to protect investors and safeguard market integrity by establishing a set of harmonised requirements governing the activities of authorized firms and to promote fair, transparent, efficient and integrated financial markets.
The requirements under the MiFI Act (and underlying regulations) are relatively extensive and cover compliance arrangements, internal systems and controls, outsourcing, record-keeping, conflicts of interest and the safeguarding of client assets or money held by firms.
Investment firms, authorized in Gibraltar, are also required to be members of the Investor Compensation Scheme.
The license issued will specify the category assigned and will set out, within a ‘permitted business schedule’ the scope of services and instruments that the firm is allowed to carry on business in, from the list below.
Investment services and activities – core services
- Reception and transmission of orders in relation to one or more financial instruments
- Execution of orders on behalf of clients
- Dealing on own account
- Portfolio management
- Investment advice
- Underwriting of financial instruments or placing of financial instruments on a firm commitment basis
- Placing of financial instruments without a firm commitment basis
- Operation of Multilateral Trading Facilities.
Ancillary services – non-core services
- Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management
- Granting credits or loans to an investor to allow him to carry out a transaction in one more financial instruments, where the firm granting the credit or loan is involved in the transaction
- Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings
- Foreign exchange services where these are connected to provision of investment services
- Investment advice
- Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments
- Services related to underwriting.
- Transferable securities
- Money-market instruments
- Units in collective investment undertakings
- Options, futures, swaps, forward rate agreements and 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
- 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)
- 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
- Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled 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 recognized clearing houses or are subject to regular margin calls
- Derivative instruments for the transfer of credit risk
- Financial contracts for differences
- 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 statistic 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 any other derivative contracts relating to assets, rights, obligations, indices and measures not mentioned previously, 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 recognized clearing houses or are subject to regular margin calls.
There is a small range of investment activity that is not regulated under the MiFI Act but which may fall to be regulated under a separate piece of legislation – the Financial Services (Investment and Fiduciary Services) Act (“IFS Act”). This primarily relates to investment activity where the instrument concerned is not a financial instrument designated within the MiFI Act.
Under the MiFI Act a firm is also able to request authorization to act as a Multilateral trading facility (“MTF”) and a Regulated Market.
A “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 a way that results in a contract in accordance with the provisions of Part II of the MiFI Act.
A “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 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 authorized and functions regularly and in accordance with the provisions of Part III of the MiFI Act.
If you are interested in applying for an authorization to act as a MTF or a Regulated Market, please contact the Authorization team for further information.
The minimum initial and ongoing capital requirements under the MiFI Act are:
Firms who obtain a license under the IFS Act to carry on an activity with respect to investments are required to hold a minimum initial and ongoing capital of £10,000.
Firms holding multiple licenses may be required to hold the aggregate of the capital required for each license prior to being permitted to conduct the proposed activity, and on an ongoing basis. The level of capital in these cases will be considered by the GFSC on a case by case basis.
Why Valsen Fiduciaries
- We will advise you on the optimal legal structure for your requirements, size, expectations and circumstances. We have extensive knowledge of a wide range of legal structures in all major jurisdictions.
- Valsen will assist to complete every form for each process in the best way we know how (Based on our many years’ experience with various regulators and service providers across the world)
- Valsen will assist in preparation of winning business plans based on our superior understanding of regulator expectations and requirements
- We are very hands on in the post filing period checking with re regulator and service providers and updating you regularly. Any queries raised by the regulators and service providers during processing will be quickly synthesized by us and we shall craft the right responses to move the process forward fast.
- We have a wide network of qualified and experienced lawyers, chartered accountants, chartered financial analysts, wealth managers, FX experts, Investment advisors etc. of international pedigree.
- We have a full in-house compliance support for all compliance requirements with the regulator and service providers
- Through our extensive network, we provide sign up services with major service providers including but not limited to; Liquidity providers, technology providers, custodians, prime brokers, legal advisors, auditors, payment gateway providers among others.