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

Summary

This explanatory memorandum from the Bermuda Monetary Authority accompanies 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 comments on the draft Bills.

• Civil fines: New power to impose civil fines for late or missing filings (e.g. annual returns, certificates of compliance), replacing the current criminal offence approach.
• Prudential returns (Banks and Deposit Companies Act): New section 36A would let the Authority prescribe prudential and other returns by Rules, requiring filing within 28 days of the specified date, with a default fine of 5,000 dollars per week or part-week of default.
• Investigations: Broadened power to investigate any regulatory activity, including fitness and propriety of officers.
• Restrictions: Procedural requirement to issue a warning notice and decision notice before imposing licence restrictions.
• Civil penalty power: Authority may impose a penalty of up to 500,000 dollars for failure to comply with requirements or prohibitions under the Acts (excluding matters already subject to a specified civil penalty).
• Public censure: Authority may publish a statement identifying a contravention by a registered person, after following warning notice and decision notice procedures.
• Prohibition orders: Authority may prohibit an individual from performing specified functions (e.g. director, chief executive, senior executive) based on a fitness and propriety test; licensed entities must not engage a prohibited person.
• Injunctions: Authority may seek court orders compelling or restraining conduct, similar to existing Investment Business Act powers.
• Warning and decision notices: Before taking action, the Authority must issue a warning notice, allow at least 14 days for submissions, and then issue a decision notice within 90 days; a notice of discontinuance issues if no action is taken.
• Publication of decisions: Authority may generally publish decision notices (discretionary) but must publish in certain cases such as cancellation of registration or prohibition orders; publication is barred while an appeal is pending.
• Offence reclassification: Most breaches move from criminal (indictable/summary) offences to civil penalty or civil fine regimes, with criminal liability retained only for serious matters such as unlicensed business, misleading the Authority, or obstruction.

The memorandum notes that a further Bill applying identical amendments to the Investment Funds Act 2006 was expected to follow for separate consultation. Comments on the draft Bills discussed here were invited by 18 May 2012.

Key obligations

• Licensed banks and deposit companies must file prudential and other returns prescribed by Rules within 28 days of the date specified in those Rules, or face a default fine of 5,000 dollars per week or part-week in default.
• Licensed entities must not engage or employ a person who is subject of a prohibition order.
• A person given a warning notice must be allowed not less than 14 days to make submissions before a decision notice is issued.
• The Authority must issue a decision notice within 90 days of the warning notice process, or a notice of discontinuance if no action is taken.
• The Authority must inform the person concerned before publishing a decision notice, and may not publish while an appeal is pending, except where publication is mandatory (e.g. cancellation of registration or prohibition orders).

Applies to

banks, deposit companies, trust companies (licensed under the Trusts (Regulation of Trust Business) Act), investment business licensees, individuals performing regulated functions (e.g. directors, chief executives, senior executives)

Deadlines

• 18th May 2012: Deadline for submitting comments on the draft Bills to policy@bma.bm.
• within 28 days of the day specified in the Rules: Proposed deadline under new section 36A of the Banks and Deposit Companies Act for filing prescribed prudential and other returns.
• 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: Timeframe within which the Authority must issue a decision notice.