Consultation Paper - Corporate Governance Policy (December 2012)

Summary

This is a Bermuda Monetary Authority consultation paper, not a final rule. It sets out a draft Corporate Governance Policy of nine principles and guidance for entities licensed under the Trust (Regulation of Trust Business) Act 2001, the Investment Business Act 2003, and the Investment Funds Act 2006 (fund administrators only, not the funds themselves). The BMA intends to add a dedicated corporate governance licensing criterion to the relevant Acts before finalising the Policy, and is inviting comments on the proposals.

• Overarching principle: Every institution should have a corporate governance framework appropriate to its size, complexity, structure and risk profile.
• Board practices: Institutions should be governed by an effective board with a qualified chairperson, appropriate size and composition, qualified and trained directors, conflict of interest management, and periodic performance evaluation.
• Senior management: Senior management should ensure activities align with board-approved strategy and risk appetite; at least two individuals (or two partners, except for sole traders) must effectively direct the business.
• Risk management and internal controls: The board must set risk appetite, ensure risk policies and a risk register (or a formal risk function for larger institutions), review risk management and internal controls at least annually, and maintain business continuity plans.
• Remuneration and reporting: Remuneration arrangements should align with sound risk management, and the board must ensure adequate internal, statutory/regulatory, and stakeholder reporting.
• Proportionality and scope: The Authority will apply a proportional approach based on size and complexity; the Policy also addresses unincorporated licenceholders and group governance for Bermuda-licensed subsidiaries.

As a consultation document, none of these principles are yet legally binding; they represent proposals that would take effect only once the Policy is finalised and a corresponding licensing criterion is added to the relevant Acts. Licensed institutions and other interested parties were invited to comment by 28 February 2013.

Key obligations

• Licensed institutions and interested parties should submit comments on the proposed Corporate Governance Policy to policy@bma.bm no later than 28 February 2013.

Applies to

trust companies licensed under the Trust (Regulation of Trust Business) Act 2001, entities licensed under the Investment Business Act 2003, fund administrators licensed under the Investment Funds Act 2006

Deadlines

• 28th February 2013: Deadline for licensed institutions and other interested parties to submit comments on the draft Corporate Governance Policy to policy@bma.bm.