Consultation Paper - The Corporate Service Provider Business Amendment Act 2019 (with Bill) (2019-06-03)

Summary

This is a Bermuda Monetary Authority consultation paper (with draft Bill) proposing amendments to the Corporate Service Provider Business Act 2012, its Order, Code of Practice and Statement of Principles. It seeks industry views before the changes are finalised into law; nothing in it is yet binding.

• Physical presence: Licensed corporate service providers (CSPs) would be required to maintain and continually demonstrate a physical presence in Bermuda, with the Authority assessing factors such as location of strategic decision-making, business operations, staff residence and board meetings.
• Licence surrender: The Authority would need to approve surrender of a licence before it takes effect, to ensure orderly wind-down or transfer and protect clients.
• Client funds: Licensed undertakings holding client money would have to segregate it from their own funds and keep records allowing client funds to be clearly identified.
• Prudential standards power: A new section 55A would let the Authority exempt or modify prudential standards or reporting requirements for a licensee, subject to conditions and a right for the licensee to make representations before revocation.
• Exemption Order changes: CSPs seeking exemption from licensing would need to apply for exemption and re-declare annually that they still qualify.
• Code of Practice updates: Proposed changes cover enhanced employee vetting, conflict-of-interest disclosure, managing shareholder-controller risk, board delegation and compliance responsibility, a ban on corporate directors on a CSP's own board, record-keeping, fee/termination clauses in client agreements, complaints handling, and advertising standards.
• Statement of Principles updates: Shareholder controllers would need to demonstrate source of wealth on acquisition and ongoing basis; expectations on insurance cover and outsourcing oversight are clarified; references to the 2012 Enforcement Statement of Principles would be replaced with the 2018 Enforcement Guide.
• Housekeeping: Minor administrative changes include removing the register inspection fee reference in section 12.

Licensed institutions and other interested parties were invited to comment on these proposals; the amendment Act itself would only come into force on a date later appointed by the Minister by Gazette notice, with different provisions potentially commencing on different dates.

Key obligations

• Submit consultation comments to policy@bma.bm no later than 21 June 2019 (for this consultation round only)
• If enacted, licensed CSP undertakings would be required to maintain and continuously demonstrate a physical presence in Bermuda
• If enacted, licensed undertakings holding client funds would be required to segregate such funds from their own funds and maintain records allowing client money to be readily identified
• If enacted, licensed undertakings could only surrender a licence once the Authority has approved the surrender
• If enacted, CSPs seeking exemption from licensing would need to apply for exemption and re-notify the Authority annually to confirm continued eligibility
• If enacted, a licensed undertaking served with a notice of revocation of an exemption/modification may make written representations to the Authority within 28 days of the notice

Applies to

corporate service providers, licensed undertakings under the Corporate Service Provider Business Act 2012

Deadlines

• 21 June 2019: Deadline for licensed institutions and other interested parties to submit consultation comments to policy@bma.bm
• 28 days from the date of the notice: Period within which a licensed undertaking may make written representations after being served notice of proposed revocation of an exemption or modification under proposed section 55A
• on such day as the Minister may appoint by notice published in the Gazette: Commencement of the Corporate Service Provider Business Amendment Act 2019, once enacted (different provisions may commence on different days)

Related documents

• This document amends Bermuda Monetary Authority Act 1969
• This document amends Corporate Service Provider Business Act 2012