Consultation Paper - Proposed Enhancements to the Investment Business Regime: Regulations and Rules (2021-09-17)

Summary

This is a Bermuda Monetary Authority consultation paper proposing amendments to the Investment Business Regulations 2004 and the Investment Business (Client Money) Regulations 2004, plus new rule-making powers, as part of a broader overhaul of the investment business regime. It is a draft consultation, not yet final law, and includes illustrative draft amendment regulations and draft Client Money Rules 2022 for comment.

• New rule-making powers: BMA proposes powers to make binding Rules on net assets, liquidity and financial statements (the draft Investment Business (Capital, Net Assets, Liquidity, Statements and Returns) Rules 2022), plus a discretionary power to modify or dis-apply such rules in specific circumstances.
• IB Regulations changes: Repeal of the prescribed licence application form Schedule (forms to move to BMA's website); portfolio statements to be issued at least quarterly instead of half-yearly unless otherwise agreed in writing; 'confirmation note' renamed 'contract note' with issuance deadline shortened from seven days to the next business day; recognition of new 'registered persons' (Class A/Class B) with record-keeping and website-publication implications.
• Client Money Regulations transposed into Rules: The existing Client Money Regulations 2004 would be repealed and replaced by new Investment Business (Client Money) Rules 2022, giving BMA greater flexibility to vary or dis-apply client money requirements.
• Definition changes: The definition of 'client money' would be broadened beyond bank-held funds to include money received in connection with an investment agreement; 'high net worth' and 'high income' private investors would be removed from the 'sophisticated investor' exemption unless they also qualify as a 'sophisticated private investor', creating a new 'approved investor' category.
• Illustrative draft Client Money Rules obligations: The draft Rules would require written clarification of interest terms with clients, daily calculation of client balances, monthly reconciliation of client bank accounts (within 10 business days of the reconciliation date), and retention of client bank account records for at least 5 years.

Industry and other stakeholders were invited to submit feedback on these proposals to policy@bma.bm, and BMA intended the complete package of legislative and supervisory instruments (including related Codes, Statement of Principles and Guidance, to be consulted on separately) to take effect from 1 January 2022.

Key obligations

• Stakeholders wishing to comment must submit feedback to policy@bma.bm by the stated deadline
• Under the proposed rules, investment providers would need to issue portfolio statements at least quarterly unless otherwise agreed in writing with the client
• Under the proposed rules, investment providers would need to issue a contract note to each client no later than the next business day following each transaction
• Under the draft Client Money Rules, investment providers would need to reconcile client bank account balances at least monthly, within 10 business days of the reconciliation date
• Under the draft Client Money Rules, investment providers would need to retain client bank account accounting records for at least 5 years from the date of the transaction
• Under the draft Client Money Rules, Class A Registered Persons would need to maintain required accounting and other records at the office of their Senior Representative for inspection by the Authority

Applies to

investment providers, investment business licensees, Class A Registered Persons, Class B Registered Persons, registered persons under the Investment Business Act 2003

Deadlines

• 11 October 2021: Deadline for industry and stakeholders to submit feedback on the consultation proposals to policy@bma.bm
• 1 January 2022: Target date for the complete package of proposed legislative and supervisory instruments (Regulations, Rules, Codes, SOP and Guidance) to take effect

Related documents

• This document repeals Investment Business (Client Money) Regulations 2004
• This document amends Investment Business Regulations 2004