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

Summary

This is a Bermuda Monetary Authority consultation paper proposing to expand its statutory mandate under the BMA Act 1969 to create a new, principles based conduct of business regulatory regime. It follows an August 2020 Discussion Paper and sets out six high level principles intended to protect customers of BMA regulated financial institutions, along with how the regime would be scoped and implemented.

• Fair and equitable treatment: Firms must act honestly, fairly and professionally, avoid self dealing, and identify and avoid conflicts of interest with customers.
• Continuing regard for customer interests: Covers codes of conduct/ethics, due care, staff competence and training, product governance, suitability assessments, protections for vulnerable customers, ability to cancel or transfer services, integration of conduct risk into risk management with board oversight, and oversight of outsourced activities.
• Fair, clear communications: Requires adequate and timely disclosure, non-misleading advertising, proper sales practices and training, pre-contract disclosures on benefits, risks, fees and obligations, documented terms of business, periodic statements, closing statements, and notice of material changes.
• Protection of customer assets: Firms must have controls to protect customer deposits, investments and assets against loss, fraud and misuse, and systems to detect and remedy errors or misconduct.
• Complaints handling: Firms must implement a documented, timely and fair complaints and error resolution framework, including a complaints register and publicly accessible complaints information.
• Customer awareness (retail): For retail customers, firms should communicate customer responsibilities and provide access to financial education resources.
• Scope of application: Principles would generally apply to both wholesale and retail customer facing financial service providers, with proportional application for sophisticated/professional customers, and would be embedded via amendments to existing sector codes of practice or new codes where none exist.

As a consultation paper, none of the proposed principles are yet in force. The Authority is inviting feedback from regulated entities and other stakeholders on the proposals before finalising the regime and incorporating it into sector specific codes of practice and conduct.

Key obligations

• Stakeholders wishing to comment on the proposal must send comments to the Authority at conduct@bma.bm no later than 15 February 2021.

Applies to

banks and deposit companies, insurers, trust companies, investment business licensees, investment funds, corporate service providers, money service businesses, digital asset business licensees, fund administration providers

Deadlines

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