Code of Conduct for Fund Administrators

Summary

This is a Code of Conduct issued by the Bermuda Monetary Authority under section 49 of the Investment Funds Act 2006, setting out the duties, standards and procedures expected of licensed fund administrators. Non-compliance is taken into account by the Authority when assessing whether a licensee's business is conducted prudently, and serious or persistent breaches may trigger formal action under section 51 of the Act.

• Scope of functions: Administrators must fully understand and document the scope of services contracted for each fund client, maintain fit for purpose systems and controls (automated where possible), and ensure prospectuses adequately disclose their role to investors.
• Investor communication: Where communication with investors is part of contracted services, it must be timely, accurate and professional, with a complaints record and remediation process maintained.
• Conflicts of interest: Administrators must implement internal rules for identifying and managing conflicts of interest and ensure undisclosed conflicts do not damage investor interests.
• Confidentiality: Arrangements must be in place to protect the confidentiality of fund clients and underlying investors.
• Non compliant funds: Administrators must be alert to signs a fund is not complying with legal or prospectus requirements, consider whether to continue involvement, and determine any reporting obligations.
• Transfers of administrator: Administrators must cooperate to ensure smooth and timely transfer of records when their role is handed to a new administrator.
• Know Your Customer: Administrators must conduct adequate background checks on new fund clients and, where they take on AML/CFT verification functions, maintain written procedures, train staff and monitor compliance at least annually.
• Relations with the Authority: Licensed administrators must disclose their licensed status in advertisements and correspondence using a specified form of words, and must promptly alert the Authority to compliance issues, material business problems (such as litigation), or concerns raised by other regulators.

The Code applies at a high level of generality, recognising that not every provision will be relevant to every administrator depending on the nature and scope of services it provides; administrators must nonetheless comply with all relevant parts.

Key obligations

• Fund administrators must document the nature and scope of administration functions for each fund client and promptly record subsequent changes
• Fund administrators must maintain effective systems, internal controls and adequately skilled, trained and supervised staff
• Where valuation of fund assets is performed, administrators must maintain systems for timely and accurate net asset valuations and ensure independence in pricing decisions
• Administrators must ensure prospectuses or offering documents adequately disclose the nature and scope of their functions
• Where communication with investors is contracted, administrators must maintain arrangements for prompt investigation and remediation of errors and complaints, including a complaints record
• Administrators must implement internal rules and procedures for identifying and managing conflicts of interest
• Administrators must maintain arrangements protecting the confidentiality of fund clients and underlying investors
• Administrators must monitor for indications of fund non-compliance and determine whether they have obligations to report concerns
• Administrators must cooperate to ensure smooth and timely transfer of records when their administrator role is transferred
• Administrators must conduct adequate background checks on new fund clients, controllers and other service providers before agreeing to provide services
• Where administrators undertake AML/CFT verification of underlying investors, they must maintain internal written procedures, train staff, and monitor compliance with those procedures at least annually
• Licensed fund administrators must disclose their licensed status in advertisements and correspondence using the specified wording referencing the Investment Funds Act 2006
• Administrators must promptly alert the Authority to compliance issues, material business problems such as litigation, and concerns raised by other regulators

Applies to

fund administrators licensed under section 43 of the Investment Funds Act 2006

Deadlines

• at least annually: Fund administrators performing AML/CFT verification functions must monitor compliance with their internal written procedures at least annually

Related documents

• This document is made under Investment Funds Act 2006