Fund Administration Provider Business Code of Practice October 2020

Summary

This Code of Practice, issued by the Bermuda Monetary Authority under section 7 of the Fund Administration Provider Business Act 2019, sets out the standards and sound principles expected of licensed fund administration providers in Bermuda. It does not itself create criminal offences, but non-compliance is taken into account by the Authority when assessing whether a licensee is conducting business in a prudent manner, and persistent breaches may lead to formal enforcement action.

• Governance and controls: Boards must review the effectiveness of their internal control framework at least annually, ensure competent management, adequate and trained staff, and clear reporting of control weaknesses.
• Client due diligence: Licensees must have procedures for proper due diligence before onboarding new customers, comply with Bermuda's AML/ATF legislation, verify client identity and source of assets, and conduct background checks on new fund clients and their operators/controllers.
• Investor communication and complaints: Where communication with investors is contracted, providers must ensure it is timely, accurate and professional, and maintain a record of complaints and their handling.
• Non-compliant funds and transfers: Providers must stay alert to funds operating outside legal or offering document requirements and consider reporting obligations; on transfer to a new administrator, records must be handed over as soon as practicable and no later than 30 days after termination of services.
• Record keeping: Records must be kept and preserved in Bermuda, and where law is silent, retained for a minimum of five years from the end of the transaction or business relationship.
• Confidentiality and integrity: Providers must protect client and investor confidentiality, deal fairly with clients, and ensure marketing materials are clear, fair, and disclose governance and complaints information.
• Outsourcing: Boards outsourcing functions must maintain oversight and accountability as if performed internally, ensure agreements do not prohibit the Authority's access to data, and must not outsource roles that would adversely affect prudent operation, supervision, or client protection.
• Risk management: Providers must implement a risk management framework commensurate with their nature, scale and risk profile.
• Advertising: Advertisements must be clear, ethical, comply with laws, and disclose the entity's licensed status, using suggested wording referencing BMA licensing.
• Cooperation with regulators: Providers must cooperate openly with the Authority, ensure outsourced providers understand their role in meeting regulatory obligations, and proactively report significant developments such as staffing changes, control environment issues, criminal proceedings, or licensing criteria concerns.

The Code applies to all holders of fund administration provider business licences under the Act and is applied proportionately according to each provider's nature, scale and complexity.

Key obligations

• Fund administration providers handling investor communications must ensure they are timely, accurate and professional, and maintain records of customer complaints and their handling.
• Providers must transfer records or other relevant information to a new fund administration provider as soon as practicable, and no later than 30 days from termination of the previous provider's services, unless otherwise agreed.
• Licensed undertakings must have procedures for proper client due diligence before acting for any new customer, including identity verification and verification of the source of assets.
• Providers must conduct adequate background checks on new fund clients, including familiarity with operators, controllers, and other service providers.
• Where providers verify underlying investors for AML/ATF purposes, they must maintain internal written procedures and monitor compliance with them at least annually.
• Each prospectus or offering document must adequately disclose the fund administration provider's role and functions to investors.
• The board must review and assess the effectiveness of its internal control framework, and its appropriateness, at least annually, documenting and resolving any material deficiencies in a timely manner.
• Licensed undertakings must keep and preserve appropriate records in Bermuda, retained for a minimum of five years where law is silent on retention periods.
• Providers must ensure independence in pricing/valuation decisions and effective reconciliations where involved in fund asset valuation.
• The board must not outsource a role reasonably expected to adversely affect prudent operation, governance, regulatory supervision, or client protection.
• Providers must ensure advertisements are clear, ethical, lawful, and disclose the entity's status as a BMA-licensed undertaking.
• Providers should proactively alert the Authority to significant developments such as staffing changes, systems/controls issues, involvement in criminal proceedings, or issues affecting continued compliance with licensing criteria.

Applies to

fund administration providers, licensed undertakings

Deadlines

• 30 days from the date of termination of the previous fund administration provider's services: Deadline for transferring records or other relevant information to the new fund administration provider, unless agreed otherwise.
• at least annually: Board must review and assess the effectiveness of its internal control framework.
• at least annually: Providers verifying underlying investors for AML/ATF purposes must monitor compliance with their internal written procedures.
• minimum of five years from the end of the transaction or cessation of the business relationship: Retention period for records where applicable law is silent on record-keeping duration.

Related documents

• This document is made under Fund Administration Provider Business Act 2019