Consultation Paper - Proposed Enhancements to Supervisory Powers within the Investment Funds Act 2006 (April 2023)

Summary

This is a Bermuda Monetary Authority (BMA) consultation paper proposing enhancements to its supervisory and enforcement powers under the Investment Funds Act 2006 (IFA). It sets out a draft Investment Funds Amendment Act 2023, along with draft amendments to the Investment Fund Rules and the Investment Fund Offering Document Rules, and invites stakeholder feedback before any changes are finalised.

• New administrative penalties: The draft bill would introduce fines (generally up to $1,000 per month, and up to $10,000 per month for failure to prepare financial reports) for operators of private funds, Professional Class A, Professional Class B and Professional Closed funds, and designated overseas funds who fail to meet filing, notification or financial reporting deadlines.
• New auditor reporting duty: A proposed new section 63A would require an approved auditor of an investment fund to give the Authority immediate written notice of matters such as insolvency or likely insolvency, suspected fraud or misappropriation of assets, significant governance weaknesses, or a decision to modify the audit report.
• Offering document obligations: Operators would be required to operate the fund in accordance with its offering document and, where the offering document is updated, to publish or otherwise make the updated document available to participants and potential participants.
• Extended directions powers: The Authority's power to give directions under section 30 would be broadened to cover funds not currently in breach, where desirable to safeguard participants' interests, and to require operators to take any action the Authority deems necessary to protect participants.
• Other amendments: Numerous consequential amendments across sections 2 through 73A of the IFA, including changes to filing extension periods (up to nine months), terminology changes from 'prospectus' to 'offering document', and a related fee amendment to the Fourth Schedule of the Bermuda Monetary Authority Act 1969 for filing extensions.

As a consultation paper, none of these measures are yet in force; they are proposals for stakeholder comment before the Authority decides whether to proceed. Comments were requested by email to policy@bma.bm.

Key obligations

• Stakeholders wishing to comment on the proposed supervisory powers, draft bill, and rule amendments must submit feedback to policy@bma.bm on or before 19 May 2023.
• (Proposed, not yet in force) Operators of private, Professional Class A, Professional Class B, Professional Closed and designated overseas funds would become liable to monthly penalties for failing to meet filing extension, prospectus/offering document update, or financial reporting deadlines if the draft bill and rules are enacted.
• (Proposed, not yet in force) Approved auditors of investment funds would be required to give immediate written notice to the BMA of insolvency risk, suspected fraud, significant governance weaknesses, or audit report modifications if section 63A is enacted.

Applies to

investment funds, private funds, Professional Class A funds, Professional Class B funds, Professional Closed funds, designated overseas funds, fund operators, approved auditors

Deadlines

• 19 May 2023: Deadline for stakeholders to submit comments and questions on the consultation paper's proposals to policy@bma.bm.

Related documents

• This document amends Investment Fund Rules 2019
• This document amends Investment Funds Act 2006