Response to Industry Comments - Corporate Service Providers Business Act 2012 Code of Practice (2015-03-04)

Summary

This is the Bermuda Monetary Authority's formal response to industry comments received on the draft Code of Practice issued under the Corporate Service Provider Business Act 2012 (CSPB Act). It clarifies how the Authority will apply key provisions of the Code and confirms certain exemptions and an extended transition period, but does not itself amend the Code's text.

• Proportionality Principle: The Authority will apply the Code proportionately based on each CSP's nature, scale and complexity; unlimited licence holders are expected to maintain more sophisticated management and control frameworks than limited licence holders.
• Suitability determinations: The Authority will assess a CSP's systems, management and risk frameworks through desk-based reviews and on-site visits, tailored to each CSP's specific business.
• Record keeping: CSPs must keep and preserve appropriate records in Bermuda as required by any applicable law; where a client structure is not governed by Bermuda law, the CSP is expected to exercise appropriate due diligence and comply with prudent business standards, but need not adhere to another jurisdiction's recordkeeping law if not contracted to do so.
• Regulatory co-operation: CSPs are expected to maintain open dialogue with the Authority and notify it of 'material' or 'significant' changes to their business (e.g. mergers, new offices, changes to services offered) or staffing (e.g. changes to senior staff, directors, or substantial changes in staff responsibilities); CSPs should contact the Authority if in doubt.
• Exemptions from licensing: The Authority confirms exemptions from the section 8 licensing prohibition for: fund administrators licensed under section 42(1) of the Investment Funds Act 2006 providing registrar and transfer services; companies providing corporate service provider business only to members of their own group; and single-shareholder companies whose sole activity is providing director services through their sole employee-owner.
• Transition period extended: The Authority has recommended extending the transition period for an additional one-year period commencing 1 April 2015.

Key obligations

• CSPs must keep and preserve appropriate records in Bermuda as required by any applicable law relevant to their functions.
• CSPs must exercise appropriate due diligence when dealing with clients or structures governed by non-Bermuda law.
• CSPs should notify the Authority of material or significant changes to their business or staffing, and contact the Authority for guidance if unsure whether a change qualifies.
• CSPs should be prepared to explain their management, control and risk arrangements to the Authority during desk-based reviews and on-site visits.
• Unlimited licence holders must maintain a more sophisticated management and control framework than limited licence holders.

Applies to

corporate service providers (CSPs), fund administrators licensed under the Investment Funds Act 2006

Deadlines

• 1st April 2015: Commencement of an additional one-year extension to the transition period recommended by the Authority.