Standard Bearers Though most of the main players in Gibraltar’s financial services sector accept that regulation is necessary and that our Financial Services Commission (FSC) makes a better and more reasonable fist of it that many — if not all — of its peers, the grumbles that we risk becoming over-regulated remain. And, certainly, the growing plethora of EU regulations and directives - along with the increasingly complex requirements in the spheres of KYC and compliance — lend some weight to the argument. All of which, at times, place Financial Services Commissioner Marcus Killick between a rock and a hard place. He, nevertheless seems to thrive on it. And though he doesn’t need a financial hack to take up the cudgels on his behalf, I find myself pointing out to the grumblers that as part of the Killick ethic the Commissioner and his team impose on themselves as high a standard — or even higher standards — than they expect from the companies they licence. Historically regulators thump the drum about “accountability” and, more recently, the new buzz-word “transparency” but they do not always practice what they preach. Even Killick admits this. The Commissioner is hot on “transparency”… and “accountability”… and also on “trust”. “Trust and transparency are the two qualities essential to the efficient operation of Gibraltar’s financial sector,” Killick wrote recently. And he stresses that if the FSC expects this from the firms it regulates it must also live up to them itself. In the process Gibraltar’s FSC has become the first regulator in the world to carry out and publish on its website a “line by line analysis” in assessing itself against the UK’s Combined Code on Corporate Governance — which is actually designed for corporate companies… and not regulators.And it also shapes the Commission’s commitment “to take note of, and take action on” some of the recommendations contained in the Pratt report on his review of the FSC released earlier this year. “To some extent the founding ordinance of 1989 has been overtaken by events and there are at least four other ordinances — relating to disclosures and so on — which affect the FSC but are verging on being out of date,” Killick told me recently. “We are looking to requesting the Government to consider up-dating and possibly consolidating aspects of the legislation that affect the FSC.” “But in order for Government to consider the merits of our requests we need to explain clearly what we are requesting and why…for part of the good relationship we enjoy with the Government is based on their rightful expectation that we explain to them what we consider to be the objectives and implications of our requests.” Returning to the Commission’s relationship with those it regulates, Killick points out that “Trust is what develops over time, when a group of people share an understanding that the rules for behaviour governing their system or society work well and improve things for everyone. With trust, less effort is expended in keeping tabs on others, so systems can run more efficiently. With trust, people can develop confidence that others will, in fact, do what they say they will do. Over time, as trust builds, so does the credibility of those who are trustworthy. “Trust underpins any successful regulatory structure. Whether it is trust of the regulator, trust of the regulatory system or, indeed trust by the regulator of those it regulates.” And he argues that “many regulators have fallen into the trap of adopting a confrontational approach with the industry they regulate. This has, in turn, created a fear-based rather than risk-based approach to compliance. The culture has become one of mutual mistrust and a lack of mutual respect.” Over the past two years the Commission has changed its culture and the way it operates and has “consciously gone out to work with the industry in improving regulation.” “By working to create an environment where firms feel we are not their opponents or at least an obstacle to be overcome, we have found that the introduction of new regulatory standards has been met with support, not hostility,” Killick wrote recently. “This is not a case of a regulatory ‘soft touch’, indeed there seems to be confusion sometimes between a ‘light touch’ and a ‘soft touch’. All our licence holders are subject to a risk-based off-site and on-site regime. Indeed the recent reviews of us confirmed the quality of our regulatory regime. “Our distinction is in approach. We see part of the role of the regulator as one of stewardship. We have therefore tried to create a relationship based organisation, welcoming feedback on how we can improve our operation. Indeed we have set up an area on our website where comments can be put forward (anonymously if desired) and on which we have committed to publicly respond. Our consultation documents always explain what regulatory objectives we are trying to achieve, so allowing response not merely on our proposals, but the basis on which they are made. “ by Peter Schirmer

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