Q&A with Hassans partner James Lasry

What was the purpose of setting up the 2005 legislation?
The 2005 regulations were the initial fit-for-purpose funds legislation in Gibraltar. Before that we used legislation from the Companies Act dealing with private companies, but these funds could only be marketed to an identifiable group including less than 50 people. We also had the Financial Services Act 1989 which allowed for the funds to be established on a quasi-retail basis. In practice this worked, but it relied heavily on derogations being granted by the regulator. It was very hard to convince promoters to use this framework. This is why several colleagues and I proposed the EIF Regulations in 2005 with the hope that Gibraltar would become a funds and investment management jurisdiction.

Gibraltar already had a long history of asset management, but the managers were using Caribbean structures for their fund vehicles. We felt that we should give them the opportunity to use a local vehicle. Within a couple of years, the majority of the funds being managed in Gibraltar were Gibraltar funds and our product became noticed abroad as well.

What updates did you make in 2012?
The 2012 updates to the EIF regulations were designed to allow the use of foreign fund administrators in Gibraltar. The fact that the large international funds based in Gibraltar needed internationally known fund administrators had been one of the drawbacks in certain sectors. One Gibraltar based manager that set up the largest European hedge fund in 2010 had to use a foreign vehicle for that very reason. There is now a process by which government and the regulator can approve well-known European fund administrators to administer Gibraltar funds. In fact, three administrators have just been approved.

We also introduced a post-authorisation launch possibility. There is now an option for those funds that wish to go through the regulatory process before they launch their fund. The regulator has 10 business days in which to respond to the fund with any queries, in default of which the fund is automatically authorised. I feel that this update, along with the transposition of the AIFMD into Gibraltar's national law, will make Gibraltar a very competitive and easy-to-use funds jurisdiction within the EU.

What are the advantages with Gibraltar funds?
The advantages of using Gibraltar vehicles are primarily the fact that we are in the EU, and therefore we have access to European passporting and directives such as the AIFMD and the Parent Subsidiary Directive. Our funds regime is a very good balance between flexibility on the one hand and investor protection on the other. We take the view that regulation is a positive part of business, but that it should not slow business down. Therefore one can launch an EIF in Gibraltar before the approval of the regulator on the basis of a legal opinion certifying that the fund is launched in accordance with local law.

Managers who are used to dealing with Caribbean jurisdictions, but have decided to use European vehicles, will be comfortable using Gibraltar. It has common law and is English speaking, and it has the closest regulatory philosophy within the parameters of its European obligations to that of the Caribbean jurisdictions. Finally, the close communication and cooperation between industry and regulator make it significantly easier to do business in Gibraltar than in larger jurisdictions.

What type of investments do your funds make?
The funds invest in all sorts of assets from transferable securities, to real estate, to private equity. I would have thought that Gibraltar would have emerged as a private equity jurisdiction because of its access to the European Parent Subsidiary Directive but, although the largest funds in Gibraltar are indeed private equity/real estate, there are more funds that invest in transferable securities. There is no real reason for this. Some of the private equity funds invest in alternative assets as well. We have one fund that invests in airplanes and leases them. There are art funds and litigation funding funds as well. The equity tickets of these funds range anywhere from €1m to investment programmes of several hundred million euros.

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