Update on Independent Non-Executive Directors Requirements
The Gibraltar Funds and Investment Association (GFIA) represents various sectors within the financial services industry in Gibraltar. As part of our commitment to keeping the industry informed, we wish to highlight recent changes under the Financial Services Act that impact the appointment of independent non-executive directors (iNEDs) within regulated firms.
Key Changes to the Appointment of Independent Non-Executive Directors
Under the new regulatory framework, large investment firms must appoint at least two independent non-executive directors (iNEDs), who must also be approved as regulated individuals (RIs). Additionally, in such firms, the following regulated functions must be carried out by iNEDs:
Chair
Chair of the Risk Committee
Chair of the Audit Committee
It is important to note that the same iNED cannot serve simultaneously as both the Chair and the Chair of the Audit Committee.
For all other regulated firms — including non-large investment firms, fund administrators, and authorised Alternative Investment Fund Managers (AIFMs)—there is still a requirement to appoint at least one iNED. However, this iNED does not need to be approved as a regulated individual.
The above changes do not impose any change to Experienced Investors Funds.
Transitional Provisions
Firms operating before 10 January 2025 that were compliant with Part 8 of the Financial Services Act as it previously applied are allowed to continue doing so, provided they take the necessary steps to align with the new requirements before 1 August 2025.
As such, regulated firms required to appoint iNEDs must inform the Gibraltar Financial Services Commission (GFSC) of their iNED arrangements before 1 August 2025. Firms will need to:
Submit a notification of acquired rights for iNEDs already appointed before 10 January 2025.
Submit an RI Application for iNEDs that are classified as regulated individuals.
Submit a NED Form for iNEDs who are not considered regulated individuals.
For large investment firms that must appoint at least two iNEDs as RIs, any NEDs appointed before 10 January 2025 can be approved via a notification of acquired rights without the need to submit an RI Application or pay the associated application fee.
Criteria for Independence
A iNED may be considered independent if they have no business, family, or other interest or relationship (including recent relationships) that could influence or be reasonably perceived to influence their ability to exercise independent judgment on matters before the board. iNEDs must act in the best interests of the company as a whole, ensuring governance integrity and robust oversight.
Conclusion
These changes reinforce Gibraltar’s commitment to regulatory standards in the financial services sector and align with best practices for corporate governance. GFIA advises all affected firms to review their board structures and ensure compliance within the transitional timeframe.
For further guidance on these regulatory updates, firms are encouraged to engage with the GFSC or reach out to GFIA for industry-specific insights and assistance.
