Notice Investment Funds Amendment Act 2013 - Update (2013-07-31)

Summary

This is a Bermuda Monetary Authority notice dated 31 July 2013 updating its earlier consultation on amending the Investment Funds Act 2006. Following stakeholder feedback, the Authority revised its proposal to replace the single exemption regime with two new exemption classes for investment funds, and attached a draft Bill and explanatory memorandum setting out the detailed proposed provisions.

Two proposed exemption classes

• Class A Exempt Fund: For funds open only to qualified investors investing at least $100,000, with an investment manager managing $100 million or more in assets (or licensed/regulated by the BMA or a recognised foreign regulator); qualifies by self-certifying notification to the Authority rather than an application, taking effect on delivery of the notification.
• Class B Exempt Fund: Replaces the existing section 7-9 exemption regime; requires a $100,000 minimum investor investment, appointment of service providers found fit and proper by the Authority, and an application (rather than notification) which is deemed approved if the Authority does not object within 10 days.
• Common features: Both classes must appoint a Bermuda-resident officer, trustee or representative with access to the fund's books, and appoint a fund administrator, auditor and custodian or prime broker.

Additional proposed requirements

• Disqualification reporting: Exempted funds must notify the Authority of any 'exemption disqualification' event (e.g. no longer meeting qualifying criteria); the Authority may direct reclassification, authorisation, or discontinuation, or may excuse minor/technical breaches.
• Annual certification: Both classes must annually certify continued compliance with exemption requirements and file audited financial statements and details of material prospectus changes.
• Class B service provider changes: Class B funds must notify the Authority of, and obtain approval for, changes to service providers, who will be reviewed for fitness and propriety.
• Transition: Funds already exempt under the current regime will be grandfathered and continue under the existing requirements.
• Fees: The draft Bill proposes new fees, including a $1,500 initial and annual fee for Class A funds and a $700 application and annual fee for Class B funds.

This document is a consultation update, not a final rule: it invites further comment on the revised proposal and includes a full draft Bill (Investment Funds Amendment Act 2013) and explanatory memorandum showing how the amendments would be drafted into the principal Act if enacted. Comments were requested to be submitted to the Authority by 30 August 2013.

Key obligations

• Once enacted, operators of Class A Exempt Funds must certify to the Authority, on or before commencement of the fund's business and annually thereafter (on or before 31 March), that the fund meets the exemption requirements, filing a copy of the prospectus and, annually, audited financial statements and details of material prospectus changes.
• Once enacted, operators of Class B Exempt Funds must apply to the Authority for exemption, obtain approval (or deemed approval after 10 days without objection), and thereafter certify annually by 31 March that exemption requirements continue to be met, filing audited financial statements, prospectus change details and a schedule of service provider changes.
• Once enacted, operators of Class B Exempt Funds must obtain the Authority's prior approval before appointing any new service provider, with the Authority required to respond within 14 days.
• Once enacted, operators of any exempt fund class must notify the Authority in writing within 14 days of the occurrence of a disqualifying event (e.g. accepting non-qualified investors or falling below minimum investment thresholds), or face a default fine of $5,000 plus $500 per day of continuing default.
• Comments on the updated exemption proposal were requested to be submitted to the Authority at Policy@bma.bm by 30 August 2013.

Applies to

investment funds, fund operators, Class A Exempt Funds, Class B Exempt Funds, investment managers, fund administrators, auditors, custodians/prime brokers

Deadlines

• 30th August 2013: Deadline for submitting comments on the updated exemption proposal to the Authority at Policy@bma.bm
• annually on or before 31st March: Proposed deadline for Class A and Class B Exempt Funds to certify continued compliance with exemption requirements, and file audited financial statements and prospectus change details
• within 14 days of occurrence: Proposed deadline for an exempt fund's operator to notify the Authority of a disqualifying event
• within 10 days of application: Proposed deadline for the Authority to notify a Class B applicant of its exemption decision, after which the application is deemed approved if no objection is given
• within 14 days of receipt of application: Proposed deadline for the Authority to approve or object to a Class B fund's proposed new service provider appointment

Related documents

• This document amends Investment Funds Act 2006