STM said in a stock exchange announcement on 4 May that there were a number of planned and unplanned changes in the management team and compositions of the boards of the London & Colonial Assurance PCC and STM Life Assurance in the second half of 2022. The changes needed regulatory approval from the Gibraltar Financial Services Commission (GFSC).

The GFSC said to STM that the companies “may not be meeting the threshold conditions for regulated individuals under Section 65 of the Financial Services Act”.

STM said that “no action has been taken by the GFSC” and the subsidiaries have been working closely with the Gibraltar regulator to obtain the approvals.

The firm added: “As at today, only the role of managing director for each of the life company subsidiaries is still awaiting regulatory approval, although he is in place and has been acting in an interim capacity for the last eight months. This will remain the case until the GFSC approves the application or otherwise.”

Going forward

STM said the individual has been performing the regulated function while awaiting official regulatory approval from the GFSC as “allowed for in the Financial Services (Insurance Companies) Regulations 2020”.

The board and the directors of the subsidiaries have “remained satisfied throughout this period, that this is the most appropriate course of action, given the circumstances”.

Although Gibraltar legislation “does allow for individuals to perform regulated roles while waiting for GFSC approval”, there “remains a level of uncertainty as to whether the GFSC will approve this application”, the firm said.

“Should the GFSC decide not to approve the application and in the event that no suitable alternative individual is put forward by the subsidiaries then that would have a technical impact with regards to the subsidiaries operating as going concerns, solely from a regulatory perspective.”

The STM board is “confident that this scenario is highly unlikely to materialise as if the individual in question is not approved an alternate candidate will be put forward by the subsidiaries to fill the regulated role”.

STM added: “The board is not aware of any other regulatory matters which would impact the going concern assessment and are confident in the ability of the current boards and management teams of the life company subsidiaries including the individual pending regulatory approval. Furthermore, the board remains confident in the subsidiaries’ ability to continue as a going concern from a business perspective.”

This issue has meant that audited accounts for the life subsidiaries will be delayed until an expected sign off next week. The group’s audited financial statements for the year ended 31 December 2021 were published on 8 June 2022.

Strategic review

Also in the statement, STM said that its strategic review is “progressing well with the external advisers engagement now complete”.

The review covered “both market insights and opportunities as well as operational efficiency levers”.

In addition to providing a series of recommendations, the advisers have also delivered a set of guiding principles for the group.

STM said: “The board are considering the various options and recommendations made by the advisers and expects to update with its conclusions at the time of the results in June 2023.”

The firm expects to announce its results for year ended 31 December 2022 in June 2023.

Board update

Also, Therese Neish’s 12-month contract as interim chief financial officer will come to an end in early October and STM has begun the process to find her replacement.

It added: “A further update on this will be provided in June. Therese will remain on the board to oversee the audit and sign the financial statements and thereafter will resign from the board, expected to be on or around 1 July 2023.

“The process to find another non-executive director to replace Graham Kettleborough continues and a further update on this will be made in due course.”

Gibraltar has seen an increase in the establishment of family offices over the last few years. Patriarchs or matriarchs usually take the step of establishing a family office when they are looking to minimise the administrative burden that comes along with having significant wealth.

A family office allows for the delegation of that administrative headache to a dedicated office set up by the family to manage it. There are additional drivers that weigh into the decision of setting up a family office. The adoption of a set of rules, principles and objectives to be followed by the family with the aim of implementing governance, and the creation of a forum for communication allows for an easy transition from generation to generation.

A family office can be perpetual, outliving the patriarch or matriarch, which means business can continue as usual with minimal interruption when a key family member passes away. It promotes interaction between the family and creates an avenue for the education of the next generations.

Gibraltar has proven to be an attractive choice for families wishing to set up their family offices. A British Overseas Territory perfectly situated in the heart of Europe, it offers many benefits to support smaller or larger family offices and their respective needs.

Having its own parliament, the jurisdiction develops its own laws which are largely based on UK common law. It also has a strong and independent government creating political stability. Gibraltar’s favourable tax system currently has no inheritance tax, no wealth tax, no capital gains tax, no tax on passive income or VAT and only a 12.5% corporation tax.

For high net worth individuals who wish to take up residency in Gibraltar, there are special tax statuses available that add to the overall advantages. These are all key considerations that compel individuals to choose Gibraltar when determining what is the best jurisdiction within which to set up their family wealth management centres.

With the increase in families wishing to establish a family office and statistics showing the global market is projected to reach a value of $26.57bn (£21.51bn, €24.46bn) by the end of 2028 from a value of $17.70bn in the year 2019, it is more important than ever to choose a jurisdiction that can offer the tools, expertise but most importantly, a secure and stable environment.

It is significant to note, just because a family establishes a family office in one jurisdiction, does not mean the whole family need to live there. Equally, the family enterprise that is serviced by the family office may be cross-border in nature. We often see families that live in different parts of the world (or who have cross-border businesses) wanting to establish a family office in Gibraltar.

It is still viable to establish a family office when members of the family are spread across the world, although it may seem overwhelming – choosing Gibraltar has great cost benefits and is relatively straightforward. Implementing a robust family governance framework as part of the family office set-up, helps bridge the distance between family members located in different jurisdictions.

Additionally, by employing a team of specialists in Gibraltar, experts can communicate with members of the family or the nominated family consortium wherever they are and keep a centralised record of family assets.

Thanks to the jurisdictions’ financial services pedigree, Gibraltar also has a readily available pool of professional services required by family offices, including non-executive directors, lawyers, bankers, accountants, and advisers.

Family offices providing investment services that wish to expand these services to other families and become multifamily offices, can seek to be licensed by the Gibraltar Financial Services Commission under its Mifid regime.

In addition to these key services, Gibraltar has established itself as a hub for providing more holistic services to high net worth families. The adoption of family governance arrangements which include the establishment of family councils is becoming increasingly popular.

Family councils are made up of family members or their appointees and serve as an informal body that meets to discuss and decide matters relating to the family’s wealth. These groups are important in educating the next generation in the enterprise, thereby securing the family legacy through generations.

The advice provided to these groups in Gibraltar is helping to ensure that the Rock remains relevant for future generations – securing its place in the global financial system.

Gibraltar continues to be a leading jurisdiction in the space and proves to be a popular choice for ultra-high net worth individuals and their families.

This article was written for International Adviser by Emma Lejeune, partner at law firm Isolas.

The clients allege they received negligent financial advice in 2014 which resulted in over £10m ($12.1m, €11.4m) being transferred from their employer pensions into “inappropriate” and “high-risk” qualifying recognised overseas pension schemes (Qrops).

The 62 investors were not originally given the ability to take legal action against Castle as the Qrops administrator, after a UK high court ruling in 2021 determined that the courts in England and Wales did not have jurisdiction on the matter.

But in October 2022, the investors, represented by High Street Solicitors, appealed the decision and had it overturned in November 2022.

Total losses are still being determined, but the 62 believe the minimum level is currently at £10,215,289.04 – the total sum transferred from defined benefit (DB) schemes into the Qrops. The investors are all from England, Northern Ireland and Scotland.

Castle Trust Management Services, part of the Castle Trust Group, will have until 25 January 2023 to file its defence.

Details

In 2014, the 62 investors were allegedly advised by IFA business Montegue Smythe to transfer, according to High Street Solicitors. But reportedly, the customers were not aware that the company wasn’t authorised by the Financial Conduct Authority (FCA) to provide financial advice on investments, pensions and pension transfers.

High Street Solicitors said once the transfers into the Qrops were made, the investors were allegedly advised to invest in unregulated collective investment schemes.

Sarah Kearney, director at High Street Solicitors, added: “This is an incredibly significant development in this case and we’re delighted that the high court has accepted our appeal and we can now move forward as planned with the case in the courts of England and Wales.

“We’re determined to hold these companies to account on behalf of our 62 claimants who deserve to be compensated for the losses of their pensions that they’d worked hard for many years, as well as the loss of the potential interest that could’ve been made had they been invested into suitable pension schemes.”

International Adviser contacted Castle Trust Group for comment, but the company did not reply in time for publication.

The Swiss bank’s parent company, Latvia-based Citadele Banka, said the move is in line with its plans to focus core activities in the Baltics, whereas Kaleido will look to grow in the Dach region.

The acquisition is expected to close by the end of 2022, subject to regulatory approvals.

Johan Åkerblom, chief executive of Citadele, said: “The sale of Swiss operations is consistent with Citadele’s long-term ambition to become the leading financial services provider in our region. The new owners have a strong commitment and competence to continue supporting the new strategy of Kaleido and to enable them to execute on the growth potential.”

Rolf Bauer, chief executive of Kaleido, added: “Citadele was the perfect partner in the past and was key in the transforming the bank into a wealth management boutique. Now we will enter into the next phase. The new partnership embodies a smart way of combining traditional and new business models in order to reach the next level.”

Christian Bjørløw, chief executive of Trusted Novus Bank (TNB), said: “With the purchase of Kaleido we have a great opportunity to enhance our services to both TNB and Kaleido’s clients with the focus on banking being an enjoyable and out of the ordinary experience.”

Revenue was down roughly £0.4m ($540,000, €475,700) against target after certain new business revenues in its UK Sipp business and Gibraltar life business were slower to materialise than anticipated.

It added that there is uncertainty about whether negotiations on a number of large pieces of business – particularly around the London & Colonial annuity product – would conclude before the end of the year. It has, therefore, decided to exclude them from the revised forecast.

Similarly, Ebitda was £0.1m lower after cost savings following the migrations onto new IT systems for the UK and Gibraltar businesses were slow to appear.

As result, the STM board expects to report revenue of £22.5m, Ebitda of £3.4m and statutory profit of £1.5m for 2021.

Looking to next year, the company is targeting profit before tax of at least £2m – excluding any contribution from the London & Colonial annuity product referenced above.

It is also looking for acquisition opportunities that would give STM Group “more scale to its UK businesses”, the firm said.