Consultation Paper - Proposal for a Conduct of Business Regulatory Regime (December 2020)

Summary

This is a consultation paper in which the Bermuda Monetary Authority (BMA) sets out a proposal to create a new conduct of business regulatory regime for financial services firms it licenses. It follows an earlier Discussion Paper and would expand the BMA's statutory mandate under the Bermuda Monetary Authority Act 1969 to oversee how licensees treat their customers, not just their prudential soundness. The paper is a draft proposal open for public comment, not a final rule, and does not itself impose binding requirements yet.

• Statutory mandate change: Proposes amending section 3 of the BMA Act to add an objective of protecting customers through oversight of licensees' conduct of business.
• Six high-level principles: Fair and equitable treatment of customers; continuing regard for customer interests (covering ethics, staff competence, product governance, suitability, vulnerable customers, conduct risk, outsourcing); fair and clear communications (advertising, sales practices, disclosure, terms of business, statements); protection of customer assets; fair and expedient complaints handling; and customer awareness/financial education for retail customers.
• Scope: Principles would apply to financial service providers serving wholesale and retail customers, with proportional application for sophisticated professional customers and stronger protections aimed at retail customers and SMEs.
• Implementation approach: The BMA proposes to embed these principles into existing sector codes of practice/conduct, or create new codes where none exist, and to consult with industry to codify existing practices rather than impose a wholly new framework.

As a consultation document, its immediate effect is procedural: stakeholders are invited to comment on the proposed principles and scope before the BMA finalises the regime. Any actual obligations described (e.g. complaints registers, vulnerability policies, disclosure requirements) are proposed future requirements, not yet in force.

Key obligations

• Submit comments on the consultation paper to conduct@bma.bm no later than 15 February 2021
• If adopted, firms would need to establish a code of conduct or ethics, staff training programmes, product governance and suitability processes, vulnerable customer policies, a conduct risk framework, outsourcing oversight, fair advertising and sales practices, pre-contract disclosures, written terms of business, periodic account statements, a documented complaints handling procedure with a public complaints register, and customer financial education resources

Applies to

Insurance entities (Insurance Act 1978), Banks and deposit companies (Banks and Deposit Companies Act 1999), Trust businesses (Trusts (Regulation of Trust Business) Act 2001), Investment business firms (Investment Business Act 2003), Investment funds (Investment Funds Act 2006), Corporate service providers (Corporate Service Provider Business Act 2012), Money service businesses (Money Service Business Act 2016), Digital asset businesses (Digital Asset Business Act 2018), Fund administration providers (Fund Administration Provider Business Act 2019)

Deadlines

• 15 February 2021: Deadline for stakeholders to submit comments on the Consultation Paper to conduct@bma.bm