Explanatory Memorandum - Banks and Deposit Companies Amendment Act 2012, Trusts (Regulation of Trust Business) Amendment Act 2012, Investment Business Amendment Act 2012

Summary

This is an Explanatory Memorandum published by the Bermuda Monetary Authority (BMA) alongside draft Bills to amend the Banks and Deposit Companies Act 1999, the Trusts (Regulation of Trust Business) Act 2001, and the Investment Business Act 2003. It explains proposed new enforcement and disciplinary powers for the Authority, following earlier 2009 and 2010 consultation papers, and invites industry comment on the draft Bills before they are finalised.

Proposed New Powers

• Civil fines: Power for the Authority to impose civil penalties (up to $500,000) for breaches of regulatory requirements, replacing criminal offences for late filing of returns, certificates of compliance etc.
• Banking prudential returns: New section 36A of the Banks and Deposit Companies Act would require prudential and other returns to be filed within 28 days of the date specified in Rules, with a default fine of $5,000 per week (or part week) of default.
• Prohibition orders: Power to prohibit individuals from performing specified functions (e.g. director, CEO, senior executive, underwriting, actuarial, risk management) based on a fitness and propriety test; licensed entities would be barred from employing a prohibited person.
• Public censure: Power to publish a statement identifying that a registered person has breached a statutory requirement, after due process.
• Injunctions: Power for the Authority to apply to the Court for injunctions compelling or restraining specified conduct.
• Investigations: Broadened power to investigate any regulatory activity, including fitness and propriety of officers, in addition to appointing inspectors.
• Due process notices: Standardised warning notice and decision notice procedures would apply before restrictions, civil penalties, public censure or prohibition orders are imposed, including a right to make submissions within not less than 14 days and a right of appeal to the Appeal Tribunal.
• Publication of decisions: The Authority would generally have discretion to publish decision notices (after notifying the person concerned and subject to pending appeals), but publication would be mandatory for registration cancellations and prohibition orders.

The memorandum notes that comments on the draft Bills were invited by 18 May 2012, sent to policy@bma.bm, and that a further Bill making identical amendments to the Investment Funds Act 2006 was expected to be issued for consultation shortly. As a consultation document on draft legislation, it does not itself impose binding obligations on regulated entities; it describes powers and procedures proposed for future enactment.

Key obligations

• Interested parties were invited to submit comments on the draft Bills to policy@bma.bm by 18 May 2012.
• If enacted, licensees under the Banks and Deposit Companies Act would be required to file prudential and other returns within 28 days of the date specified in the Authority's Rules, subject to a default fine of $5,000 per week of delay.
• If enacted, licensed entities would be prohibited from employing or engaging any individual subject to a prohibition order.
• If enacted, persons subject to a warning notice would have not less than 14 days to make submissions to the Authority before a decision notice is issued.
• If enacted, the Authority would be required to issue a decision notice within 90 days of a warning notice.

Applies to

banks, deposit companies, trust companies (trust business licensees), investment business licensees, registered persons under the Investment Business Act

Deadlines

• 18th May 2012: Deadline for submitting comments on the draft Bills to policy@bma.bm
• within 28 days of the date specified in Rules: Proposed deadline for filing prudential and other returns under the amended Banks and Deposit Companies Act (section 36A)
• not less than 14 days: Proposed minimum period after a warning notice for a person to make submissions to the Authority before a decision notice is issued
• within 90 days: Proposed maximum period for the Authority to issue a decision notice

Related documents

• This document amends Banks and Deposit Companies Act 1999
• This document amends Investment Business Act 2003
• This document amends Trusts (Regulation of Trust Business) Act 2001