The Financial Services (Experienced Investor Funds) Regulations 2005 define an ‘experienced investor’ as either a body corporate, unincorporated association, trust or individual whose net worth is in excess of €1 million – or a participant who invests more than €100,000 in a fund.

The offer document of every experienced investor fund is required to prominently display the following notice:

“The fund has been established in Gibraltar as an ‘experienced fund’. It is suitable only for those who fall within the definition of ‘experienced investor’…

“Requirements which may be deemed necessary for the protection of retail or non-experienced investors do not apply to ‘experienced funds’. By acknowledging this statement you are expressly agreeing that you fall within the definition of ‘experienced investor’ and accept the reduced requirements accordingly.

“You are wholly responsible for ensuring that all aspects of this fund are acceptable to you. Investment in experienced funds may involve special risks that could lead to a loss of all or a substantial portion of such investment. Unless you fully understand and accept the nature of this fund and the potential risks inherent in this fund you should not invest in this fund.”

Attractive funds location

The significant global expansion in funds had exerted considerable pressure on established fund centres. It was therefore thought that Gibraltar would be able to capture a larger slice of this market by enacting specific legislation for the fast-tracking of funds for more sophisticated investors. This has indeed been the case.

High regulatory standards – combined with the flexibility of a small jurisdiction and the availability of a quality infrastructure at low cost – have made Gibraltar an increasingly attractive funds location. Another attraction has been the fact that Gibraltar has major accountancy firms to provide audit and other support services as well as major international banks to provide custody services.

An experienced investor fund can be set up quickly and, for authorisation to trade, the fund administrator only needs to notify the regulator within 14 days of establishment. Notification is accompanied by the fund’s offering documents and an opinion from counsel that the fund complies with the relevant provisions of the principal Act and the EIF Regulations.

An EIF must be administered by a Gibraltar-based professional fund administrator, its directors are required to be pre-approved by the regulator, and it must have a custodian or prime broker. Experienced investor funds must also produce annual audited accounts.

A further attraction is that not also does the EIF legislation provide a fast track to the setting up of Gibraltar funds, but these can be established as protected cell companies under the Protected Cell Companies Act 2001.

Regulation 14(2)(s) of the Financial Services (Experienced Investor Funds) Regulations 2005 stipulates that the offer document of an EIF must contain “in the case of an umbrella fund or a protected cell company, as the case may be, details of the ‘ring-fencing’ of assets within sub-funds”.

The PCC legislation allows funds to be set up so that there is a segregation of assets and liabilities in different cells in an umbrella structure with a number of sub-funds. The latter can be used by separate clients or by a sole client wishing to promote several investment strategies.

The Financial Services (Collective Investment Schemes) Act 2005, and Financial Services (Experienced Investor Funds) Regulations 2005 have given a substantial boost to Gibraltar’s funds industry and positioned Gibraltar among the higher-quality jurisdictions in this area of activity.ns