Consultation Paper - Proposed Amendments for the Regulation of Investment Exchanges and Clearing Houses

Summary

This BMA consultation paper proposes amendments to Part IV of the Investment Business Act 2003, which governs the recognition and oversight of investment exchanges and clearing houses (collectively Recognised Bodies), plus a number of other clarifying changes to the Act. The paper follows a 2022 modernisation exercise that deliberately left Part IV untouched, and now seeks to align the framework with IOSCO Principles and Financial Market Infrastructure Principles. Stakeholders are invited to comment on the proposals; no changes are yet in force.

• Recognition regime changes: Recognition orders would be replaced by recognition certificates, foreign-domiciled exchanges/clearing houses would be excluded from eligibility, and explicit recognition requirements would be set out in regulations.
• Prudential oversight: New minimum capital and liquid asset standards for Recognised Bodies, with proposed half-yearly reporting to monitor compliance.
• Enforcement powers: The Authority would gain information-gathering, investigation and disciplinary powers over Recognised Bodies, a power to give directions even where a body is compliant, and a right of appeal for affected bodies.
• Governance and control notifications: Proposed duty to notify the Authority of changes of controllers or officers within 14 days, and to give written notice of proposed new or increased control (10 percent or more), with the Authority able to object within 90 days or issue a no-objection.
• Rules, audits and financial reporting: Recognised Bodies would need Authority approval to change their listing/market rules or bye-laws, must appoint auditors under recognised standards with a duty for auditors to report material matters to the Authority, and must file annual audited financial statements within four months of financial year-end.
• Fees and waivers: New application and annual fees for recognition status (amounts to be consulted on separately), and expanded Authority power to waive or modify any rule or requirement for a Recognised Body.
• Other Act amendments: Clarifications to the restriction on carrying on investment business, designation of Non-Resident Persons (NRPs), clarification of auditing/financial statement standards, and a consequential amendment to the Fourth Schedule of the BMA Act 1969.

As a consultation, this document creates no binding obligations yet; it sets out proposed legislative and rule changes and invites industry feedback by a stated deadline before any amendments are finalised and brought into force.

Applies to

investment exchanges, clearing houses, Recognised Bodies, investment providers

Deadlines

• 6 October 2023: Deadline for industry and stakeholders to submit feedback on the consultation proposals to policy@bma.bm