Consultation Paper - Proposed Enhancements to the Corporate Service Provider Business Act 2012 (2024-06)

Summary

This is a Bermuda Monetary Authority consultation paper proposing a wide-ranging set of amendments to the Corporate Service Provider Business Act 2012, prompted by a 2021 GIFCS peer review of Bermuda's trust and corporate service provider (CSP) regime. It applies to licensed Corporate Service Providers and sets out proposed prudential, filing, fee and enforcement changes on which stakeholders are invited to comment by 9 August 2024. As a consultation, none of the proposals are yet in force.

• Scope clarification: Section 2(2) would replace 'For profit' with 'By way of business', and section 9(1)(a)'s carve-out for Bermuda Bar members would be removed, with separate guidance to follow on who falls within CSP licensing scope.
• Prudential requirements: Introduction of liquidity and minimum net asset requirements (proposed $50,000 for unlimited licence holders, $12,000 for limited licence holders), with related reporting to the BMA.
• New financial filings: CSPs holding client money would file annual audited financial statements; CSPs not holding client money would file annual management accounts; all licensees would file quarterly liquidity returns and statutory returns as prescribed.
• Consolidation relief: CSPs owned by a parent that already files consolidated statements, or those already filing audited statements under a banking, investment business or trust licence, would not need to duplicate filings.
• Late fees replacing civil penalties: A $1,000 late fee would apply for overdue mandatory filings (financial filings and Certificates of Compliance), replacing existing civil penalties under section 46.
• Extensions, exemptions and modifications: Proposed fees of $300 for filing extension applications and $635 for exemption or modification applications, non-refundable if declined.
• Winding up and licence revocation: Broadened circumstances in which the Authority may petition the court to wind up a company or dissolve a firm, including unlicensed or surrendered-licence CSPs.
• Annual accounts and auditors: New statutory duty to prepare annual accounts, requirements for appointment of auditors for CSPs holding client money, and a new obligation for auditors to report specified matters directly to the Authority.
• Client money definition: The undefined term 'client funds' would be replaced with 'client money', with a proposed definition to be finalised via separate Client Money Rules consultation.
• Licence surrender: Section 21 would be amended to require all licence surrenders to be gazetted.
• Licensing conditions: Section 11(6) would be revised to allow licences to be granted subject to limitations and additional conditions.

The BMA has invited stakeholder feedback on specific questions, including the operational impact of the new filing and net asset requirements, the proposed client money definition, and the appropriate transition period for compliance. Comments were requested by email to policy@bma.bm on or before 9 August 2024.

Key obligations

• Stakeholders wishing to comment must submit feedback to policy@bma.bm on or before 9 August 2024
• If enacted, CSPs holding client money would be required to submit annual audited financial statements to the BMA
• If enacted, CSPs not holding client money would be required to submit annual management account statements
• If enacted, all CSP licence holders would be required to submit quarterly liquidity returns and statutory returns as prescribed
• If enacted, CSPs would be required to maintain minimum net assets ($50,000 unlimited licence holders, $12,000 limited licence holders) and report liquidity and net asset positions to the Authority
• If enacted, a licensed CSP failing to submit a mandatory filing on time would be liable for a $1,000 late fee
• If enacted, a CSP seeking a filing extension would need to pay a $300 application fee, and one seeking exemption or modification of a prudential requirement would need to pay a $635 fee with detailed justification
• If enacted, all licence surrenders would need to be gazetted
• If enacted, CSPs holding client money would need to appoint auditors who must report specified matters directly to the Authority

Applies to

Corporate Service Providers (CSPs), licensed CSPs holding client money, limited licence holders, unlimited licence holders, auditors of CSPs

Deadlines

• 9 August 2024: Deadline for stakeholders to submit feedback and comments on the proposed enhancements to the CSP regime via email to policy@bma.bm