Consultation Paper - The Trusts (Regulation of Trust Business) Amendment Act 2019 (with Bill)

Summary

This is a Bermuda Monetary Authority consultation paper (3 June 2019) seeking comments on a draft Trusts (Regulation of Trust Business) Amendment Act 2019 (Bill) and related changes to the Order, Code of Practice and Statement of Principles governing licensed trust businesses. It is a draft proposal, not yet in force; the Authority invited licensed institutions and other interested parties to comment by 21 June 2019.

• Physical presence: Proposes amending section 4A so every licensed undertaking must maintain, and continue to demonstrate, adequate physical presence in Bermuda, with the Authority assessing factors such as where strategic decisions are made, where the trust business is carried on, and residence of directors/employees.
• Licence surrender: Proposes amending section 22 so a surrender of licence only takes effect once the Authority approves it, to ensure orderly wind down or transfer of the business.
• Client fund segregation: Proposes a new section 47A requiring licensed undertakings holding client funds to segregate those funds from their own funds and maintain records allowing client money to be readily identified.
• Prudential rules and returns: Proposes a new section 57A/57B giving the Authority power to prescribe statutory returns, and to exempt or modify prudential standards or requirements for licensed undertakings, with a proposed 28-day filing deadline and civil penalties for late filing.
• Liquidity requirement: Proposes enhancing the minimum criteria for licensing (First Schedule) so a business is not regarded as prudently conducted unless it maintains adequate liquidity.
• Exemption order changes: Proposes requiring trust businesses seeking exemption from licensing to apply for exemption and re-declare annually that they continue to qualify.
• Code of Practice and Statement of Principles updates: Proposes clarifications on recruitment vetting, conflicts of interest, shareholder controller risk management, recordkeeping, delegation and board responsibilities (including a ban on corporate directors), advertising standards, complaints handling, insurance expectations, source of wealth disclosure for shareholder controllers, oversight of outsourcing, and updated references to the 2018 Enforcement Guide.
• Housekeeping changes: Removes the section 13 reference to a prescribed fee for register inspection and renumbers/updates other provisions of the Statement of Principles.

Because this is a consultation on a draft Bill, none of the proposed requirements are yet legally binding; they would take effect only once the Act is passed and brought into force by the Minister, who may set different commencement dates for different provisions.

Key obligations

• If enacted, every licensed undertaking would be required to maintain adequate physical presence in Bermuda
• If enacted, licensed undertakings holding client funds would be required to segregate those funds from their own funds and keep records allowing client money to be readily identified
• If enacted, licensed undertakings would be required to file statutory returns prescribed by the Authority within 28 days of the relevant day, subject to civil penalties of up to $5,000 per week for late filing
• If enacted, licensed undertakings would be required to maintain adequate liquidity to be considered as conducting business in a prudent manner
• If enacted, licensed trust businesses seeking exemption from licensing would need to apply for exemption and re-notify the Authority annually that they continue to qualify
• Comments on the consultation proposals were requested to be submitted to policy@bma.bm no later than 21 June 2019

Applies to

licensed trust businesses, licensed undertakings holding trust licences, shareholder controllers of trust businesses

Deadlines

• 21 June 2019: Deadline for licensed institutions and other interested parties to submit comments on the consultation paper to policy@bma.bm
• 28 days after the relevant day: Proposed deadline in draft section 57A for licensed undertakings to file prescribed statutory returns with the Authority
• 28 days from the date of notice: Proposed period in draft section 57B for a licensed undertaking to make written representations after being served notice of proposed revocation of an exemption or modification

Related documents

• This document amends Trusts (Regulation of Trust Business) Act 2001