Consultation Paper - Securing Enhanced Protection for Investors: Proposed Revisions to the Investment Funds Act 2006 (2010-05-21)

Summary

This is a Bermuda Monetary Authority consultation paper proposing amendments to the Investment Funds Act 2006, aimed at strengthening investor protection and aligning fund regulation with other Bermuda regulatory regimes. It sets out draft bill text (the Investment Funds Amendment Act 2010) and invites industry comment before the Authority seeks legislative approval.

• Service provider definition: Proposes adding auditors to the definition of service provider, bringing fund auditors within the fit and proper test applicable to authorised and exempted funds.
• Exempted fund service providers: Proposes requiring exempted funds to also appoint an investment manager, registrar, custodian and/or prime broker, subject to fit and proper vetting, mirroring requirements for authorised funds.
• Change of control for fund administrators: Proposes new sections 45A to 45E requiring fund administrators to notify the Authority in advance of a prospective change in control, giving the Authority power to object to new or existing controllers and creating related offences and share restriction powers.
• Right of appeal: Proposes amending section 55 to allow a person objected to as a controller to appeal to a Tribunal.
• Four eyes criterion: Proposes adding a new minimum licensing criterion requiring fund administrators to be effectively directed by at least two individuals.
• Fund officers fit and proper: Proposes amending section 14(1) so that fund officers, not just directors, must be fit and proper at the time of authorisation.

As a consultation paper, none of these changes are yet in force; they represent proposals on which the Authority sought industry feedback, with intent to bring an amendment bill before Parliament shortly after the consultation closed.

Key obligations

• Interested parties wishing to comment must submit feedback using the Summary of Consultation Comments form to the Authority (attention Leanne Alami-Merrouni) by the stated deadline.
• If enacted, fund administrators would be required to notify the Authority in advance of any prospective change in control (proposed section 45A).
• If enacted, fund administrators would need to demonstrate that their business is effectively directed by at least two individuals (four eyes criterion).
• If enacted, exempted funds would need to appoint an investment manager, registrar, custodian and/or prime broker in addition to an auditor to meet exemption criteria.
• If enacted, fund officers would need to be fit and proper at the time of fund authorisation.

Applies to

investment funds (authorised and exempted), fund administrators, fund operators, auditors of funds, service providers (custodians, investment managers, registrars, prime brokers)

Deadlines

• 10 June 2010: Deadline for interested parties to submit comments on the consultation paper to the Authority.
• mid July 2010: The Authority's intended timing to submit the proposed amendments to the Investment Funds Act 2006 for legislative approval in Parliament.

Related documents

• This document amends Investment Funds Act 2006