Consultation Paper on Securing Enhanced Protection for Investors: Revised Code of Conduct for Investment Providers (2010-03-31)

Summary

This is a Bermuda Monetary Authority consultation paper proposing a revised General Business Conduct and Practice Code of Conduct for investment providers licensed under the Investment Business Act 2003. It sets out the Authority's proposed changes and invites industry feedback before finalising the Code; it does not itself impose binding requirements.

• Professional Conduct Standards: New heading consolidating and expanding the former Responsible Conduct section, setting clearer expectations for ethical and professional dealing.
• Client Relationships: Expanded requirements for investment providers to create client Risk Profiles, conduct Risk Profiling, and provide enhanced disclosures on performance, fees, track records, valuation methods and benchmarks.
• Portfolio Management: Adds a requirement for a written Investment Policy Statement (IPS) to be provided before client monies are invested, covering asset allocation, risk tolerance and liquidity needs, plus guidance on diversification and fair allocation of scarce investments.
• Conflicts of Interest: New standalone section requiring identification and disclosure of conflicts, including front running, research fairness and use of material non-public information, and prohibiting undisclosed transactions involving a material interest.
• Templates: Introduces sample disclosure templates - a Terms of Business Document, Risk Profile letter, Risk Disclosure Statement and Asset Allocation model - to standardise information given to clients.

The Authority is seeking written comments on these proposals using the Summary of Consultation Comments form, to be sent to Betty Dale at the BMA, and intends to publish the final revised Code shortly after the consultation closes.

Key obligations

• Interested parties wishing to comment must submit feedback using the Summary of Consultation Comments form to Betty Dale (bdale@bma.bm or BMA House, 43 Victoria Street, Hamilton HM12) by the stated deadline.
• Once adopted, investment providers would be required to prepare a written Investment Policy Statement before investing client monies, create and maintain client Risk Profiles, and provide enhanced disclosures on fees, performance, benchmarks and conflicts of interest.

Applies to

investment providers (holders of investment business licences under section 17 of the Investment Business Act 2003), holders of licences issued under section 87(2) of the Investment Business Act 2003, pension providers

Deadlines

• 30 April 2010: Deadline for interested parties to submit comments on the consultation paper.
• 30 June 2010: Date by which the Authority intends to publish the final version of the revised Code.