A Bill entitled Investment Business Amendment Act 2012

Summary

This is a draft Bill that would amend Bermuda's Investment Business Act 2003 to significantly expand the Bermuda Monetary Authority's supervisory and disciplinary toolkit. It replaces several criminal offence provisions with a civil penalty regime, introduces prohibition orders and public censure powers, broadens investigation powers, and creates a formal warning notice and decision notice process for enforcement actions. As a Bill it is not yet law; it would take effect only once passed and brought into operation by ministerial notice in the Gazette.

• Civil penalties: Introduces a new power (section 52A) for the Authority to impose civil penalties of up to $500,000 per breach for failure to comply with any requirement or prohibition under the Act, replacing some existing criminal fines (e.g. sections 43 and 44 penalties become weekly civil penalties of up to $5,000).
• Prohibition orders: Adds new sections 55A to 55E allowing the Authority to prohibit individuals it considers not fit and proper from performing functions in relation to regulated or exempt activities; breach of a prohibition order is a criminal offence with fines up to $200,000 or imprisonment.
• Notices regime: Requires the Authority to use warning notices and decision notices (new sections 56 and 57) before taking disciplinary action such as imposing civil penalties, publishing decisions, or making prohibition orders.
• Investigation powers: Introduces new section 49A giving the Authority broader powers to investigate suspected contraventions, including of former licensed investment providers and persons connected with them, and to recover investigation costs from the investment provider under investigation.
• Appeal tribunal changes: Amends the grounds and procedure for appeals to the Investment Business Appeal Tribunal to cover civil penalties, prohibition orders, and refusals to vary or revoke such orders, and updates the Investment Business Appeal Tribunal Regulations 2004 accordingly.
• Statement of principles: Widens section 9 to require the Authority to issue a statement of principles covering its exercise of powers to impose civil penalties, publicly censure, make prohibition orders, and publish decisions.

The Bill also makes consequential amendments to the Minimum Criteria for Licensing (Schedule I) and to the Investment Business Appeal Tribunal Regulations 2004 (Schedule II) to align terminology and procedure with the new notices and penalty regime. Commencement is left to the Minister, who may appoint different days for different provisions by notice in the Gazette.

Key obligations

• Under the proposed regime, investment providers would be liable to a civil penalty of up to $500,000 for each failure to comply with a requirement or contravention of a prohibition under the Act, unless they can show they took all reasonable steps and exercised due diligence.
• Investment providers would be liable to a civil penalty of up to $5,000 per week (or part week) for continuing failure to comply with requirements under sections 43 and 44 (e.g. failure to deliver required certificates or comply with imposed requirements).
• Investment providers would be required to ensure that no individual subject to a prohibition order performs the prohibited function in relation to their regulated activities.
• Persons under investigation (or connected persons such as controllers, officers, employees, agents, bankers, auditors, accountants, or attorneys of an investment provider) would be required to produce specified documents and answer questions relevant to an Authority investigation when given notice under section 50.
• An investment provider under investigation would be required to pay the Authority's investigation costs and expenses unless the Authority directs otherwise.
• Any person subject to a prohibition order would be required to comply with its terms or face criminal penalties of up to $200,000 or four years' imprisonment on indictment.

Applies to

investment providers, licensed persons under the Investment Business Act 2003, exempted persons, individuals performing functions in relation to regulated activities, controllers, officers, employees, agents, bankers, auditors, accountants, barristers and attorneys of investment providers

Related documents

• This document amends Investment Business Act 2003
• This document amends Investment Business Appeal Tribunal Regulations 2004