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 accompanying three draft Bermuda Monetary Authority bills (amending the Banks and Deposit Companies Act 1999, the Trusts (Regulation of Trust Business) Act 2001, and the Investment Business Act 2003) that would add new enforcement powers to each Act. It explains the background consultation process and summarises the proposed amendments; it is not itself a binding rule but a consultation document inviting comment on the draft legislation.

• Civil fines: A new power to impose civil fines for late or missed filings (e.g. annual returns, certificates of compliance), replacing the current criminal offence approach.
• Prudential returns (banks): Proposed section 36A of the Banks and Deposit Companies Act would let the Authority prescribe returns by Rules, require filing within 28 days of the specified date, and impose a default fine of $5,000 per week (or part week) for non-compliance.
• Investigations: Broader power to investigate any regulatory matter, including fitness and propriety of officers, alongside the existing power to appoint inspectors.
• Civil penalty power: Power to impose a penalty of up to $500,000 on a person who fails to comply with a requirement or contravenes a prohibition under the Act.
• Public censure: Power to publish a statement identifying that a registered person has contravened a requirement, after following warning notice and decision notice procedures.
• Prohibition orders: Power to prohibit an individual from performing specified functions (e.g. director, chief executive, senior executive) based on a fitness and propriety test; breach carries criminal sanction and licensed entities must not engage a prohibited person.
• Injunctions: Power for the Authority to seek court orders compelling or restraining specific conduct.
• Due process notices: Before restrictions, civil penalties, public censure or prohibition orders are imposed, the Authority must issue a warning notice, allow submissions (at least 14 days), and then issue a decision notice within 90 days, with a right of appeal to an appeal tribunal.
• Publication of decisions: The Authority may publish decision notices (subject to prior notice to the person and no publication while an appeal is pending) and must publish in certain cases such as registration cancellation or prohibition orders.

The memorandum notes that criminal liability will be narrowed to the most serious breaches (e.g. unlicensed business, misleading or obstructing the Authority), with other breaches shifting to civil penalties or fines; a person convicted criminally cannot also be subject to a civil penalty for the same breach. Comments on the draft Bills were invited by 18 May 2012, and a further Bill making identical amendments to the Investment Funds Act 2006 was expected to follow for separate consultation.

Key obligations

• Under proposed section 36A of the Banks and Deposit Companies Act, banks and deposit companies would be required to file prudential and other prescribed returns within 28 days of the date specified in the Rules, or face a default fine of $5,000 per week (or part week) in default.
• Licensed entities would be required not to engage or employ any individual who is the subject of a prohibition order.
• A person given a warning notice would have not less than 14 days to make submissions to the Authority before a decision notice is issued.
• The Authority would be required to issue a decision notice within 90 days of a warning notice.
• Interested parties were invited to submit comments on the draft Bills to policy@bma.bm by 18 May 2012.

Applies to

banks, deposit companies, trust companies (licensees under the Trusts (Regulation of Trust Business) Act), investment business licensees/registered persons, (prospectively) investment funds licensees under a forthcoming related bill

Deadlines

• 18th May 2012: Deadline for submitting comments on the draft Bills to policy@bma.bm.
• 28 days of the day specified in the Rules: Proposed deadline for banks and deposit companies to file prudential and other prescribed returns under new section 36A.
• not less than 14 days: Minimum period given to a person to make submissions after receiving a warning notice, before a decision notice is issued.
• within 90 days: Time within which the Authority must issue a decision notice following a warning notice and submissions.

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