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Financial Services Act 2021

Contents

Schedule 6: Gibraltar-based persons carrying on regulated activities in the UK

  1. This Schedule inserts a new Schedule 2A into FSMA.

Part 1: Interpretation

  1. Paragraph 1 defines a Gibraltar-based person as a person with a head office and, if it has one, a registered office in Gibraltar. It also provides that a person for the purposes of Schedule 2A can be an individual, body corporate, partnership or unincorporated association.
  2. Paragraph 2 defines ‘UK regulator’ as the PRA or the FCA. It also defines ‘the Gibraltar regulator’ as the GFSC, while sub-paragraph (2) confers a power on HM Treasury to amend by regulations the definition of the Gibraltar regulator to reflect changes in the law of Gibraltar.
  3. Paragraph 3 defines "approved activity" under Schedule 2A as a regulated activity approved under regulations made by HM Treasury under paragraph 4. It also defines "corresponding activity" and "branch". Sub-paragraph (3) confers a power on HM Treasury to specify by regulations other categories of place as part of the definition of ‘branch’.
  4. Paragraph 4 provides that, when the powers of the FCA and the PRA under Schedule 2A can be exercised to advance their objectives, the regulators may use their powers in relation to one person to protect another person even if there is no relationship between the two persons.

Part 2: Approved activities

  1. The GAR will be based on the concept of "approved activity" whereby Gibraltar-based persons will only be able to carry on a regulated activity under Schedule 2A if the activity is approved by HM Treasury. This Part is fundamental to the GAR in defining an approved activity and defining the circumstances in which HM Treasury may approve an activity for market access. Paragraph 5, sub-paragraph (1) confers a power on HM Treasury to designate by regulations a regulated activity as an "approved activity" under the new Schedule 2A, thus enabling a Gibraltar-based person to carry on this activity in the UK.
  2. Sub-paragraph (2) of paragraph 5 clarifies the scope of the delegated power and provides that, when approving a regulated activity, HM Treasury may approve a regulated activity only to the extent that it is carried on by types of persons specified in the regulations or subject to other limitations. Sub-paragraph (3) recognises that, when making regulations, HM Treasury may take account of any matter it considers relevant, subject to the restrictions included in subsequent paragraphs in respect of objectives (paragraph 7), alignment of law and practice (paragraph 8), cooperation (paragraph 9), and the consultation requirement in paragraph 10.
  3. The GAR will enable Gibraltar-based persons to carry on an approved activity only if and to the extent that, among other things, the person has permission from the Gibraltar regulator to carry on the corresponding activity in Gibraltar (paragraph 13(1)(c)). As a consequence, paragraph 6 requires HM Treasury to show how each approved activity in the new Schedule 2A matches a corresponding activity regulated in Gibraltarian law. The purpose of designating corresponding activities in Gibraltar is to ensure that Gibraltar-based persons carrying on a particular activity in the UK also meet similar requirements in their domestic jurisdiction. Sub-paragraphs (2) and (3) of paragraph 6 make similar provision to sub-paragraph (2) and (3) of paragraph 5. Sub-paragraph (2) clarifies the scope of the delegated power. Sub-paragraph (3) gives HM Treasury discretion in deciding what to take into account when designating corresponding activities subject to the restrictions in paragraphs 7 and 8 and the consultation requirement in paragraph 10.
  4. Paragraph 7 imposes a restriction on HM Treasury whereby it may not approve a regulated activity under paragraph 5 or a corresponding activity under paragraph 6, unless it is satisfied that doing so is compatible with certain objectives. Sub-paragraph (2) defines the concepts of consumers, financial crime, public funds and relevant markets, which are all relevant to the list of objectives.
  5. Before an activity is approved or identified as a corresponding activity, paragraph 8 places a restriction on HM Treasury that it should be satisfied that the relevant law and practice of Gibraltar in respect of that activity is sufficiently aligned with that of the UK, whilst also taking into account the objectives under paragraph 7. Sub-paragraph (2) offers a definition of the relevant law and practice. Sub-paragraph (3) provides that alignment is to include the effect of law and practice as well as the alignment of the text of law and of the documents relating to practice.
  6. Paragraph 9 places a restriction on the discretion of HM Treasury to approve activities under paragraph 5, providing that HM Treasury should be satisfied that there is or will be in the future adequate cooperation between the relevant UK and Gibraltar entities. Sub-paragraphs (2) and (3) define what is meant for UK and Gibraltar entities. Sub-paragraph (4) provides a list of criteria that HM Treasury must have regard to in assessing whether adequate cooperation for the purposes of Schedule 2A to FSMA exists. These criteria encompass formal and informal arrangement for cooperation among UK and Gibraltar entities, including for the provision and verification of information to be provided by Gibraltar entities to UK entities, as well as a catch-all provision that HM Treasury have regard to any other matter that they consider relevant.
  7. Paragraph 10 places a duty on HM Treasury to consult the FCA and the PRA (if PRA-regulated activities are involved) and the government of Gibraltar before designating a regulated activity as an approved activity under paragraph 5 and identifying the corresponding activity under paragraph 6.
  8. Paragraph 11 clarifies that HM Treasury may withdraw the approval of a regulated activity under paragraph 5 even if it is satisfied that the approval continues to be compatible with the conditions of the objectives in paragraph 7, alignment in paragraph 8, and cooperation in paragraph 9. Similarly, sub-paragraph (2) clarifies that HM Treasury may revoke a corresponding activity (whether by amending or revoking regulations made under paragraph 6) even if it is satisfied that the identification of a corresponding activity continues to be compatible with the objectives in paragraph 7 and the alignment condition in paragraph 8 continues to be met.

Part 3: Permission to carry on an approved activity

  1. The GAR will introduce a notification process which Gibraltar-based person will be required to follow in order to obtain permission to carry on an approved activity under the GAR. As a result, paragraph 12 provides that a Gibraltar-based person will automatically obtain a Schedule 2A permission to carry on an approved activity in the UK once the Gibraltar regulator notifies the appropriate UK regulator of the person’s intention and the period to consider the notification by the UK regulator has expired. However, sub-paragraph (2) explains that a Gibraltar-based person will not gain permission if the appropriate UK regulator rejects the notification under a circumstance contemplated in paragraph 17 of Part 3 or if the Gibraltar regulator withdraws the notification. Sub-paragraphs (3) and (4) are self-explanatory.
  2. Paragraph 13 sets out the scope of a Schedule 2A permission: a Gibraltar-based person has a Schedule 2A permission to carry on an approved activity only if and to the extent that it is authorised by the Gibraltar regulator to carry on the corresponding activity in Gibraltar. A Schedule 2A permission is also subject to the limitations and restrictions described in sub-paragraph (2) and (3). If market access for an activity is withdrawn by HM Treasury or a permission cancelled by the UK or Gibraltar regulators, transitional arrangements under Part 9 and 10 will restrict what a Gibraltar-based person can do in the UK, for example, by limiting a person to the performance of protected contracts only. Therefore, a permission under the transitional arrangements is subject to the restrictions set out in Parts 9 and 10.
  3. Paragraph 14 sets out the cases in which the FCA or PRA is the appropriate regulator to consider a notification.
  4. Paragraph 15, sub-paragraph (1) sets out the required contents of a notification. Sub-paragraph (2) provides that a notification may relate to more than one approved activity. Sub-paragraph (3) provides that HM Treasury may modify the list of items in sub-paragraph (1) by regulations, although subject to the limitation in sub-paragraph (4). As per sub-paragraph (5), HM Treasury must consult the UK regulators and the government of Gibraltar before modifying the contents of a Schedule 2A notification. Sub-paragraph (6) defines what managing the affairs of a Gibraltar-based person encompasses.
  5. Paragraph 16 sets out the process that the appropriate UK regulator should follow when considering a notification sent by the Gibraltar regulator in relation to market access. A notification must be acknowledged without delay, and the UK regulator has a period of time to consider the notification. Sub-paragraph (2) provides that the period is two months if the Gibraltar-based person wants to operate through a UK branch; 1 month in other cases. A UK regulator may confirm market access by issuing a confirmation notice before the consideration period has come to an end, as per sub-paragraph (3). The confirmation notice will be issued by the UK regulator to the Gibraltar-based person to act as an expedited procedure to obtain a Schedule 2A permission. Sub-paragraphs (4) and (5) are self-explanatory.
  6. Paragraph 17, sub-paragraph (1) prohibits the UK regulators from rejecting a notification, unless they must do so under any of the circumstances set out in paragraph 18 or unless they can do so under paragraphs 19 or 20. Sub-paragraph (2) explains that a notification is rejected when the UK regulator notifies the Gibraltar regulator of this fact. The Gibraltar regulator may send future notices relating to the person and an activity which has previously been turned down.
  7. Paragraph 18 imposes a duty on the UK regulators to reject a notification:
    1. if the notification does not comply with the requirements in paragraph 15;
    2. if the activity has ceased to be approved under Schedule 2A; or
    3. if the Gibraltar-based person does not have permission to carry on the corresponding activity in Gibraltar.
  8. Paragraph 19, sub-paragraph (1) enables the UK regulators to reject a notification if a senior manager of the Gibraltar-based person is prohibited from performing a function by a prohibition order under section 56 or 143S of FSMA or equivalent order under the law of Gibraltar. Sub-paragraph (2) defines the concepts of managing the person’s affairs, prohibition order and senior management function for the purposes of rejecting a notification.
  9. Paragraph 20 enables the UK regulators to reject a notification if the Gibraltar-based person has lost a ‘relevant access right’ to carry on regulated activities at any time and the person poses a serious threat to the interests of consumers or the UK financial system. By extension, sub-paragraph (2) enables the UK regulators to reject a notification if (i) the Gibraltar-based person in question is a member of the same group as a person that has lost a relevant access right, or has close links to a person that has lost relevant market access right at any time and (ii) due to that relationship, the Gibraltar-based person poses a serious threat to the interests of consumers or the UK financial system. Sub-paragraph (3) defines the loss of a relevant access right: this is to be understood as the cancellation of a Part 4A permission (the domestic financial services authorisation), a Schedule 2A permission or authorisation under Schedule 3 (a passporting permission previously available to EEA firms) (other than by virtue of the repeal of Schedule 3). Sub-paragraph (4) places a duty on the UK regulators to consider the reasons why a person lost the relevant access right before rejecting a notification.

Part 4: Variation of permission

  1. Paragraph 21, sub-paragraph (1) provides for the Gibraltar regulator or the UK regulator to be able to vary a Schedule 2A permission, and Part 4 subsequently sets out the process and circumstances where this would be possible. Sub-paragraphs (2) and (3) define what a variation of a Schedule 2A permission is.
  2. Paragraph 22 provides for the Gibraltar regulator to be able to vary a Schedule 2A permission by sending the appropriate UK regulator a notification requesting a variation. The variation becomes effective once the period for consideration of the notification has come to an end, or later, if a later date is specified in the notification. However, sub-paragraph (2) provides that the variation does not take effect if the appropriate UK regulator rejects the notification (as set out in paragraph 26) or the Gibraltar regulator withdraws the notification. Sub-paragraph (3) clarifies that notifications in this paragraph relate to notifications on the variation of a Schedule 2A permission.
  3. Paragraph 23 defines who the appropriate UK regulator to consider a notification under Part 4 is.
  4. Paragraph 24 sets out the contents that a notification relating to a variation of permission must contain.
  5. Paragraph 25 sets out the process that the appropriate UK regulator should follow to consider a notification relating to a variation of a Schedule 2A permission. The consideration period is two months if the Gibraltar-based person wants to operate through a UK branch; 1 month in other cases. Sub-paragraphs (1), (4), (5) are self-explanatory. Sub-paragraph (3) provides that the period for considering the notification ends earlier if the appropriate UK regulator gives a confirmation notice to the person concerned.
  6. Paragraph 26 sets out the circumstances where the UK regulators must or may reject a notification relating to a variation of permission. The UK regulators must reject a notification if the notification does not comply with the requirements in paragraph 2 (sub-paragraph (3)), if the activity has ceased to be approved under this Schedule or if the Gibraltar based person does not have permission to carry on the corresponding activity in Gibraltar (sub-paragraph (4)). The UK regulator may reject a notification for a variation of permission on the same grounds as those set out in paragraphs 19 and 20 in respect of senior managers, loss of access rights and serious threat to the UK (sub-paragraph (5)). Sub-paragraph (6) allows the Gibraltar regulator to submit a further notification in respect of the variation of a Schedule 2A permission if the initial notification of variation is rejected.
  7. Paragraph 27 confers a power on the UK regulators to vary a Schedule 2A permission on their own initiative if one out of a series of "own-initiative conditions" in paragraph 28 is satisfied. The FCA may vary a permission in respect of any person with a Schedule 2A permission, and the PRA may only do so in respect of a PRA-authorised person with a Schedule 2A permission (sub-paragraphs (2) and (3)). However, the PRA may vary the Schedule 2A permission of a person who is not a PRA-authorised person by adding a PRA-regulated activity to the permission and, having added the activity, by subsequently varying the permission in respect of that activity (sub-paragraphs (4) and (5)).
  8. Paragraph 28 sets out the own-initiative conditions that will enable the UK regulators to vary a Schedule 2A permission on their own initiative. Conditions A to D are self-explanatory. Sub-paragraph (6) clarifies references to the FCA’s objectives.
  9. Paragraph 29 sets out the process for a UK regulator to vary a permission on their own initiative. This paragraph explains when a variation of the permission takes effect (sub-paragraphs (1) and (2)); it provides for certain procedural requirements to ensure that a person affected by a decision can express their views and challenge the decision (sub-paragraphs (3) to (11)).
  10. Paragraph 30 provides that a Gibraltar-based person has the right to refer to the Upper Tribunal a decision by the UK regulators to vary its permission of their own initiative.

Part 5: Cancellation of permission

  1. Paragraph 31 sets out the process for a Schedule 2A permission to be cancelled either on the initiative of the Gibraltar regulator or on the initiative of the UK regulators.
  2. Paragraph 32 provides for the Gibraltar regulator to request the cancellation of a permission by giving a notification to the appropriate UK regulator. The cancellation comes into force once the consideration period has come to an end, unless as per sub-paragraph (2) the appropriate UK regulator rejects the notification for any of the reasons set out in paragraph 36 or the Gibraltar regulator withdraws the notification on the cancellation. Sub-paragraph (3) is self-explanatory.
  3. Paragraph 33 defines the appropriate UK regulator to consider a cancellation of a permission in each case.
  4. Paragraph 3 sets out the contents that a cancellation notification issued on the Gibraltarian regulator’s initiative must contain.
  5. Paragraph 35 sets out the process and timescale for the appropriate UK regulator to consider a notification relating to a cancellation of permission. The consideration period is the same as set out in paragraph 16(2) for a market access notification. Sub-paragraphs (1) and (4) are self-explanatory. Sub-paragraph (3) provides for the consideration period to end earlier if the UK regulator gives the person concerned a confirmation notice.
  6. Paragraph 36 sets out the limited circumstances where the UK regulators must or can reject a notification. Sub-paragraph (2) provides for a rejection to be communicated in writing to the Gibraltar regulator. Sub-paragraph (3) requires the UK regulators to reject a notification of cancellation issued by the Gibraltar regulator if the notification does not comply with the notification requirements in paragraph 3. Sub-paragraphs (4) and (5) enable the UK regulators to reject a notification of cancellation if it is desirable to do so to advance one or more of their objectives. If a notification is rejected, sub-paragraph (6) allows the Gibraltar regulator to submit a further notification.
  7. Paragraph 37 confers a power on the UK regulators to cancel a Schedule 2A permission if one of the own initiative conditions under paragraph 28 is satisfied. The conditions A to D at paragraph 28 are self-explanatory. Sub-paragraph (3) directs the UK regulators to cancel a person’s Schedule 2A permission if the permission no longer enables a person to carry on an activity and if the UK regulator is satisfied the permission no longer needs to remain in force. Sub-paragraph (4) details which UK regulator should lead in each case.
  8. Paragraph 38 sets out the process that the UK regulator should follow if it proposes or decides to cancel a person’s Schedule 2A permission. The provisions are self-explanatory.
  9. Paragraph 39 provides a Gibraltar-based person with the right to refer to the Upper Tribunal a cancellation of permission decided by the UK regulators of their own initiative.

Part 6: Requirements

  1. Paragraph 40 confers a power on the UK regulators to impose, vary or cancel requirements on a Gibraltar-based person at different stages. For example, a UK regulator may impose requirements when a notification under Part 3 or 4 of Schedule 2A is being considered (sub-paragraph (1)(a)), or on the initiative of the Gibraltar regulator or the UK regulator (sub-paragraphs (1)(b) and (c)).
  2. Paragraph 41 clarifies that the UK regulators can impose a requirement in connection with a notification to seek permission to carry on an activity (Part 3 of Schedule 2A) or a notification in respect of a variation of permission (Part 4 of Schedule 2A). Sub-paragraph (2) provides that the FCA and the PRA may impose requirements under this paragraph if satisfied that it is desirable to do so in order to advance one or more of their objectives. Sub-paragraphs (3) and (4) specify which UK regulator has power to impose requirements in different cases. Sub-paragraph (5) prohibits the UK regulators from imposing a requirement under this paragraph after the period for consideration of a notification has expired. The same sub-paragraph also prevents the UK regulator from imposing a requirement which takes effect before the end of the period for considering the notification. Sub-paragraph (6) is self-explanatory.
  3. Paragraph 42, sub-paragraph (1) provides that, if a UK regulator proposes to impose a requirement under paragraph 41, it must give the person concerned a warning notice and give the Gibraltar regulator notice of the proposed requirement. The UK regulator must also consider any representations made by the Gibraltar regulator. Sub-paragraph (2) requires the UK regulator to give the person a decision notice if it decides to impose the proposed requirement.
  4. Paragraph 43 enables a Gibraltar-based person to refer to the Upper Tribunal a decision by the UK regulators in respect of a requirement imposed in connection with Part 3 and 4.
  5. Paragraphs 44-48 set out the arrangements that the UK regulators must follow when they receive a notification from the Gibraltar regulator asking for the imposition, variation or cancellation of a requirement on a Gibraltar-based person with a Schedule 2A permission. Under paragraph 44, if a UK regulator receives from the Gibraltar regulator a notification in relation to a requirement, this requirement will take effect once the consideration period by the UK regulator comes to an end, unless the UK regulator rejects the notification during that period, or the Gibraltar regulator withdraws the notification relating to the requirement. Sub-paragraph (3) is self-explanatory.
  6. Paragraph 45 clarifies which UK regulator is the appropriate regulator to consider a notification in each case.
  7. Paragraph 46 defines the contents that a notification from the Gibraltar regulator asking the UK regulators to impose, cancel or vary a requirement should have.
  8. Paragraph 47 sets out the process that the UK regulator should follow when considering a notification with a requirement requested by the Gibraltar regulator. Sub-paragraphs (1) and (4) are self-explanatory. Sub-paragraph (2) sets a consideration period from the day on which the notification was received. Sub-paragraph (3) provides for the consideration period to end earlier if the UK regulator issues a notice of confirmation to the Gibraltar-based person.
  9. Paragraph 48 prohibits the UK regulator from rejecting a notification from the Gibraltar regulator unless they must do so because the notification does not meet the requirements in paragraph 46 (sub-paragraph (3)) or it is desirable to reject the notification to advance the regulator’s objectives (sub-paragraphs (4) and (5)). Sub-paragraph (2) clarifies that a notification is rejected when the appropriate UK regulator gives written notice of the rejection to the Gibraltar regulator. Sub-paragraph (6) clarifies that a rejection at this stage does not prevent the Gibraltar regulator from sending a further notification in connection to requirements in the future.
  10. Paragraph 49, sub-paragraph (1) provides that the UK regulators may only exercise their power to impose, vary or cancel requirements of their own initiative if one of the own-initiative conditions set out in paragraph 28 is met. Conditions A to D in paragraph 28 are self-explanatory. Sub-paragraph (2) and (3) clarify the persons in relation to which the FCA and the PRA may impose, vary or cancel requirements.
  11. Paragraph 50 sets out the arrangements for the UK regulators to impose or vary requirements on a person of their own initiative. It explains when a requirement takes effect (sub-paragraphs (1) and (2)); and provides for certain procedural requirements to ensure that a person affected by a decision can express their views and challenge the decision (sub-paragraphs (3) to (11)).
  12. Paragraph 51 directs the UK regulators to provide written notice to the Gibraltar-based person if they propose to cancel a requirement, including the date the requirement comes into effect.
  13. Paragraph 52 confers a right on a Gibraltar-based person to refer to the Upper Tribunal the imposition, variation or cancellation of a requirement by the UK regulators under paragraph 49.
  14. Paragraph 53 enables the UK regulator to impose a requirement on a Gibraltar-based person prohibiting or restricting the disposal of any of the person’s assets or a requirement that those assets are transferred to a trustee approved by the UK regulators. Asset requirement restrictions are an important tool to tackle financial crime. If an asset requirement is imposed on a Gibraltar-based person and the UK regulators give notice of this fact to an institution with whom the person keeps an account, sub-paragraphs (2) and (3) protect the institution from contractual liability if it refuses to transfer a payment out of the person’s account in line with the asset restrictions imposed.
  15. If, by contrast, the institution makes the payment, the same provisions will make the institution liable to pay the UK regulator an amount equal to the sum transferred. Sub-paragraph (4) prohibits the release of any assets held by a trustee while the requirement is in force, except with the consent of the UK regulator. Sub-paragraph (5) voids any charges which the Gibraltar-based person creates in respect of its assets. Sub-paragraph (6) defines the circumstances when assets held by a trustee are to be considered as held in accordance with the asset requirement. Sub-paragraph (7) makes releasing assets in contravention of an asset requirement under sub-paragraph (1)(b) an offence under the law of England and Wales, Scotland and Northern Ireland. Sub-paragraph (8) provides that, in this paragraph, references to imposing a requirement also include varying an existing requirement. Sub-paragraph (9) defines the meaning of ‘charge’ for the purposes of this Schedule. Sub-paragraph (10) provides that sub-paragraphs (4) and (6) do not affect the equitable interest of the beneficiary of a trust resulting from an asset requirement under sub-paragraph (1)(b).
  16. Paragraph 54, sub-paragraph (1) gives two examples of the requirements that may be imposed on a Gibraltar-based person under Schedule 2A, namely, requiring the person to take specific action or to refrain from specific actions. Sub-paragraph (2) notes that the requirements may extend to activities which are not approved activities. Sub-paragraph (3) clarifies that a requirement may be imposed on a person due to its relationship with a wider group of financial services firms. Sub-paragraph (4) enables the regulators to set an expiry period for a requirement, and sub-paragraph (5) clarifies that a requirement may take into consideration past conduct.
  17. Paragraph 55, sub-paragraph (1) provides that contravening a requirement imposed by the UK regulators does not a make person guilty of an offence, make a transaction void or allow a right of action for breach of a statutory duty. Sub-paragraphs (2), (3) and (4) set out the circumstances where a private person may take legal action when a requirement is contravened, and they suffer loss as a result. Sub-paragraph (5) provides that the concept of private person may be defined in regulations made by HM Treasury.

Part 7: Changes – Duty to notify UK regulators of changes

  1. Paragraph 56, sub-paragraph (1) confers a power on the UK regulators to issue a direction to specify the changes to information that a Gibraltar-based person must notify.
  2. Sub-paragraph (2) provides that the UK regulators can issue a direction only in relation to a change about information in notifications under paragraphs 15 and 24. Under sub-paragraph (3), the change must be notified to the appropriate UK regulator and the Gibraltar regulator
  3. Sub-paragraph (4) provides that a direction under this paragraph may specify the time when a change must be notified. Sub-paragraphs (5) to (10) provide for procedural requirements connected with the issuance of a direction under this paragraph.

Part 8: UK regulators’ directions about information

  1. Paragraph 57 confers a power on the UK regulators to issue a direction to specify the particular information that must be included in notifications for the purposes of paragraphs 12, 22, 32 and 44.
  2. Under sub-paragraph (2), the UK regulators may only specify information that is reasonably necessary for the fulfilment of functions under FSMA and have the power to vary or revoke a previous direction.
  3. Sub-paragraphs (3) to (7) provide for procedural requirements connected with the issuance of a direction under this paragraph.

Part 9: Transition on withdrawal of approval of regulated activity

Transition on withdrawal of approval of regulated activity

  1. Paragraph 58 sets out the transitional arrangements that will apply to Gibraltar-based persons with a Schedule 2A permission in the event that HM Treasury withdraws the approval of a regulated activity.
  2. Sub-paragraph (1) explains that the transitional arrangements will only apply to a Gibraltar-based person who was carrying on an activity immediately before HM Treasury withdraws approval, thus setting out the scope of those to benefit from the arrangements.
  3. Following on from this, sub-paragraph (2) sets out how, once approval has been withdrawn, regulated activities will be treated as approved for a limited period of time of a duration to be specified by HM Treasury if they continue to be carried on by the same Gibraltar-based person. These arrangements will minimise economic disruption and legal risks emerging from the withdrawal of permissions and enable Gibraltar-based persons to seek other permissions or exit the market in an orderly fashion. HM Treasury will have the flexibility to adapt the duration of the temporary arrangements to the types of persons affected. Sub-paragraph (2) also provides that, if the UK regulators impose a restriction under paragraph 60, the regulated activity is treated as approved subject to that restriction.
  4. An activity ceases to be treated as temporarily approved if any of the events detailed at sub-paragraph (4) occur before the expiry of the period specified by HM Treasury, which are:
    1. if the Gibraltar-based person ceases to carry on that activity in the UK;
    2. if the Gibraltar-based person ceases to have permission from the Gibraltar regulator to carry on the corresponding activity in Gibraltar;
    3. if the Gibraltar-based person ceases to have Schedule 2A permission in respect of that activity;
    4. if the Gibraltar-based person is granted Part 4A permission under FSMA, that is, they successfully secure domestic authorisation from the UK regulators; or
    5. if HM Treasury approves again the activity in question under Schedule 2A.
  5. Sub-paragraphs (5) and (6) provide that any limitations applicable to the approved activities before or at the time the approval is withdrawn will also apply to the activities treated as approved under the transitional arrangements. Sub-paragraph (7) clarifies that a Gibraltar-based person does not cease to have permission in relation to an activity under sub-paragraph (4)(b) and (c) while the person is in a transitional arrangement under Part 10.

Transition on Gibraltar activity ceasing to be corresponding activity

  1. Paragraph 59 sets out the transitional arrangements that will apply if HM Treasury decides that the corresponding activity no longer corresponds to the approved activity. Once again, sub-paragraph (1) also explains that the transitional arrangements will only apply to a Gibraltar-based person who was carrying on an activity immediately before access was withdrawn.
  2. Sub-paragraph (2) explains that the transitional arrangements available under Part 9 will treat the Gibraltar activity as corresponding to the approved activity for a temporary period to the extent that the approved activity is carried on by the person in the UK, and subject to any restrictions imposed during the temporary arrangements.
  3. Under sub-paragraph (3), an activity ceases to be treated as temporarily corresponding to an approved activity if any of the events detailed at sub-paragraph (4) occur before the expiry of the period specified by HM Treasury.
  4. Sub-paragraphs (5) and (6) confirm that any limitations applicable to corresponding activities will continue apply once those activities are treated as corresponding to the approved activities under this paragraph for a limited period of time. Sub-paragraph (7) provides that a Gibraltar-based person does not cease to have permission in relation to an activity under sub-paragraph (4)(b) and (c) while the person is in a transitional arrangement in Part 10.

Restricting transitional permission to protected contracts etc.

  1. Paragraph 60 allows the UK regulators to restrict the scope of a transitional permission through a "restriction notice" so that a Gibraltar-based person carrying on an activity for which access has been withdraw is confined to the performance of protected contracts and/or the other aims set out in sub-paragraph (2), such as: to reduce the financial risks to beneficiaries of a protected contract, to transfer property, rights or liabilities under to a person authorised to carry on a regulated activity or to comply with requirements imposed by enactments. Sub-paragraph (1) clarifies that the UK regulators may restrict the scope of the transitional arrangements that come into operation by virtue of paragraphs 59 and 60.
  2. Sub-paragraphs (3) to (7) and (9) to (10) of paragraph 60 make provision, including about relevant procedural requirements, connected with the process the UK regulator must follow to restrict transitional arrangements under this paragraph. Sub-paragraph (8) confers a power on HM Treasury to make regulations to specify a period within which restriction notices could not take effect.
  3. Paragraph 61, sub-paragraph (1) confers a power on the UK regulators to issue a direction to specify the contracts which are protected contracts for the purposes of Part 9. Sub-paragraphs (2) to (4) sets out the procedure for the issuance of a direction under this paragraph.
  4. Paragraph 62 provides for a right to refer matters to the Upper Tribunal should the appropriate UK regulator limit a Gibraltar-based person to the performance of a protected contract or one of the other objectives under paragraph 60(2).
  5. Paragraph 63 confers powers on HM Treasury to make regulations in a number of circumstances related to the consideration of UK authorisation with the intent of avoiding a cliff edge for persons moving from the temporary arrangements to a new authorisation. Sub-paragraph (1) gives HM Treasury a power to make regulations which extend the time period set out for the consideration of Part 4A applications from Gibraltar-based person under section 55V(1) and (2) of FSMA. Sub-paragraph (2) allows HM Treasury to make an amendment to section 55V of FSMA in respect of the determination of Part 4A applications. Sub-paragraph (3) allows HM Treasury to extend the period for consideration of applications under section 59 of FSMA. Sub-paragraph (4) clarifies that the powers in this paragraph also enable HM Treasury to make amendments to sections 61 and 63ZA of FSMA in respect of the determination of applications and the variation of senior manager’s approval at request of a relevant authorised person, respectively.

Part 10: Transition on cancellation of UK or Gibraltar permission

  1. Paragraph 64 sets out the transitional arrangements that will apply to a Gibraltar-based person in the event that their individual Schedule 2A permission is varied or cancelled, preventing them from carrying on a specified regulated activity. This section deals with instances where a UK regulator cancels or varies (by removing an activity) a Schedule 2A permission of an individual person, in contrast with a set of circumstances where HM Treasury has withdrawn access for an activity as a whole. Under these transitional arrangements, as set out in sub-paragraph (2), a person is automatically deemed to continue to have a Schedule 2A permission for a limited period of time and for limited purposes only in order to carry on activities in relation to the performance of a protected contract and/or one of the other purposes in sub-paragraph (3). Sub-paragraph (4) provides that, in relation to a person subject to an arrangement under Part 10 as a result of this paragraph, the UK regulators could exercise the power under paragraph 49(1) if satisfied that it is desirable to do so in order to advance one or more of their objectives. Sub-paragraph (5) provides that the regulators’ duty under section 33 of FSMA arises when the transitional arrangement comes to an end. Sub-paragraph (6) to (8) define key terms relevant to this paragraph
  2. Paragraph 65 sets out the transitional arrangements that will apply to a Gibraltar-based person in the event that their permission to carry on a corresponding activity in Gibraltar is cancelled by the Gibraltar regulator or that their permission is varied to remove such an activity. Under the new Schedule 2A, a person wishing to carry on in the UK an approved activity must have a permission to carry on the corresponding activity in Gibraltar. Sub-paragraph (2) provides for that Gibraltar-based person to continue to have a permission from the Gibraltar regulator to perform for a limited period of time any of the activities set out in sub-paragraph (3), including the performance of protected contracts and the transfer of protected contracts to authorised persons. Sub-paragraph (4) makes provision similar to sub-paragraph (4) of paragraph 64. Sub-paragraphs (5)–(7) make provisions similar to sub-paragraphs (6)–(8) of paragraph 64.
  3. Paragraph 66 defines who the appropriate UK regulator is for the purposes of exercising the functions under Part 10.
  4. Paragraph 67, sub-paragraph (1) confers on UK regulators a power to direct that a contract is a ‘protected contract’ under paragraph 64, 65 or both for the purposes of transitional arrangements following the cancellation of a Schedule 2A or Gibraltar permission. Sub-paragraph (2) provides for the UK regulators to be able to give a direction modifying the definition of ‘existing contract’ in paragraph 64 and 65. Sub-paragraphs (3) to (5) provide for procedural requirements connected with a direction under this paragraph.
  5. Paragraph 68 defines the circumstances after which the transitional arrangements come to an end. Under sub-paragraph (1), a transitional arrangement under Part 10 comes to an end when an event listed in sub-paragraph (2) occurs on or on an earlier date (if any) specified by the appropriate UK regulator for this purpose. Sub-paragraph (3) confers on the UK regulators power to extend the date.
  6. Sub-paragraph (4) defines the concept of "the regulated activity" in paragraph 67 as referring to both the Schedule 2A approved activity and the corresponding activity in Gibraltar. Sub-paragraph (5) clarifies the meaning of one of the events – under sub-paragraph (2)(c) – that brings the transitional arrangement under Part 10 to an earlier end.
  7. In the event that the UK regulators propose to set an end date for the transitional arrangements set out in Part 10, paragraph 69 directs the UK regulator to give an initial warning note and, when a decision is made, a subsequent decision notice to the relevant Gibraltar-based person.
  8. Paragraph 70 provides for a Gibraltar-based person to have the right to refer matters to the Upper Tribunal in respect of a decision notice from the UK regulators setting out the duration of the transitional arrangements under Part 10.

Part 11: Policy statements

  1. Paragraph 71 requires each UK regulator to issue a statement of its policy on its powers in Schedule 2A to vary or cancel a Schedule 2A permission under Parts 4 and 5; to impose, vary or cancel requirements under Part 6 and to give directions under Part 7.
  2. Paragraph 72 makes provision for the procedure for the issuance of policy statements.

Part 12: Consultation etc by UK regulators

  1. Part 12 imposes particular duties on the UK regulators to inform, consult and obtain consent in specific cases connected with the discharge of their functions under Schedule 2A.
  2. Paragraphs 73 to 75 set out the FCA’s duties to the PRA while paragraphs 7 to 76 provide for the PRA’s duties to the FCA. Paragraph 79 requires the UK regulators to inform the Gibraltar regulator in specific cases.

Part 13: Cooperation and assistance

  1. Paragraph 80 places a duty on the UK regulators and the FSCS to cooperate with each other, as well as with HM Treasury and Gibraltar entities under sub-paragraph (1), in order to secure that they and HM Treasury are able to perform their functions under Schedule 2A and section 32A, and to secure that, so far as is reasonably possible, there is cooperation between the UK entities and the Gibraltar entities (sub-paragraph (2)). The steps taken by the UK regulators and the FSCS to cooperate with each other, as well as with HM Treasury and Gibraltar entities may include information sharing agreements (sub-paragraph (5)). Sub-paragraph (3) provides that, to achieve these purposes, the UK regulators and the FSCS should take into consideration any guidance published by HM Treasury, the biannual reports to Parliament laid by HM Treasury, as well as the memoranda and arrangements in paragraph 9(4)(a) to (d). Sub-paragraph (4) places a duty on the UK regulators and the FSCS to agree and maintain memoranda of understanding setting out how they intend to meet their cooperation duties. Sub-paragraph (6) provides that when carrying out functions under Schedule 2A, the FCA and the PRA must, among other things, have regard to any relevant arrangements in force at the time for cooperation between the UK entities or for cooperation between those entities and the Gibraltar entities.
  2. Paragraph 81(1) requires the UK regulators and the FSCS to provide to HM Treasury the recorded arrangements in which they will enter with the Gibraltar entities (unless HM Treasury themselves are part of those arrangements). The UK regulators and the FSCS are also under a duty to publish memoranda of understanding recording cooperation agreements, and reviewing such arrangements on a biannual basis, in correspondence with the bi-annual reporting period in section 32A of FSMA. Sub-paragraph (2) places an obligation upon HM Treasury to publish the memoranda of understanding concluded with the UK regulators, the FSCS, the government of Gibraltar or the GFSC to bring them to the public’s attention and review them at least at the end of each bi-annual reporting period in section 32A of FSMA. Sub-paragraph (3) creates a duty on HM Treasury to lay before Parliament a copy of any memoranda of understanding set out in sub-paragraphs (1) and (2)(a).
  3. Paragraph 82 places a duty on the UK regulators and FSCS to prepare and send to HM Treasury, upon their request, reports relating to matters connected to their functions under Schedule 2A or the biannual review in the new section 32A of FSMA. It is expected that these reports will be used by HM Treasury when deciding whether to expand or withdraw market access for Gibraltar-based persons to UK markets. Sub-paragraph (3) provides that any such requests for reports on the part of HM Treasury must be made in writing and may specify a deadline for the delivery of the reports.

Part 14: Special cases

  1. Paragraph 83 makes provision for special cases in Schedule 2A. Among other things, Schedule 2A provides that a person must have a head office in Gibraltar in order to operate in the UK under the new regime. However, paragraph 83, sub-paragraph (1) provides that individuals authorised to carry on insurance distribution activities in Gibraltar without a head office in Gibraltar will be able to operate in the UK provided they are resident in Gibraltar.
  2. Sub-paragraph (2) of paragraph 83 makes provision in connection to the notification for the purposes of paragraph 12 in relation to an individual authorised to carry on insurance distribution activities. Sub-paragraph (3) confers on HM Treasury power to make regulations to replace the residence requirement in sub-paragraph (1). Sub-paragraph (4) defines ‘insurance distribution activity’.

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