Cross-border financial services provider STM Group announced that the Gibraltar financial regulator has not yet given approval for a managing director to join two of its subsidiaries.
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.”
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.
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.
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.”