Consultation Paper - Corporate Governance Policy for Corporate Service Provider Business Act 2012 (June 2015)

Summary

This is a June 2015 consultation paper in which the Bermuda Monetary Authority sets out a proposed Corporate Governance Policy for entities licensed under the Corporate Service Provider Business Act 2012. It comprises nine principles with accompanying guidance covering board practices, senior management, risk management and reporting, and invites industry comment before finalisation.

• Overarching principle: Every licensee should have an effective corporate governance framework appropriate to its size, complexity, structure and risk profile.
• Board practices: Institutions should be governed by an effective board, with size and composition matching the scale of the business, qualified and trained directors, performance evaluation, and management of conflicts of interest.
• Senior management: Senior management should ensure operations align with board-approved strategy and risk appetite; at least two individuals must effectively direct the business (except limited-scope sole traders).
• Risk management: The board is responsible for risk oversight, setting risk appetite, maintaining a risk register or formal risk function, and reviewing risk management, business continuity and internal control frameworks at least annually.
• Remuneration: Remuneration arrangements should be consistent with sound risk management and long-term business interests.
• Reporting: The board must ensure timely internal reporting, compliance with statutory and regulatory reporting duties, and adequate disclosure to shareholders and other stakeholders.

The proposed Policy applies proportionally, recognising differences between small owner-managed licensees and larger, more complex institutions, and extends with adaptation to unincorporated licence holders (partnerships, sole traders) and Bermuda-licensed subsidiaries of foreign parents. The Authority invited comments from industry and interested parties by 3 July 2015; as a consultation paper, the Policy was not yet in final binding form at the time of this document.

Key obligations

• Licensees under the CSP Business Act 2012 are required, as a statutory minimum licensing criterion, to implement corporate governance policies and procedures
• In the case of a company, partnership or unincorporated association, at least two individuals must effectively direct the business and each must participate in decisions on significant business matters (sole traders with limited scope may be an exception)
• The board must establish, implement, document and maintain an effective conflicts of interest policy for itself, management and staff
• The board should assess the effectiveness of the institution's risk management framework, business continuity/contingency plans, and internal control framework at least annually
• Directors must act honestly and in good faith in the institution's best interests and exercise the care, diligence and skill of a reasonably prudent person
• The board must ensure all applicable statutory disclosure and regulatory reporting requirements are met
• Industry and interested parties were invited to submit comments on the proposed Policy to policy@bma.bm by 3rd July 2015

Applies to

entities licensed under the Corporate Service Provider Business Act 2012, corporate service providers (including unlimited licence holders), partnerships and individuals licensed as corporate service providers, Bermuda-licensed subsidiaries of group entities

Deadlines

• 3rd July, 2015: Deadline for industry and interested parties to submit comments on the proposed Corporate Governance Policy to policy@bma.bm