Guidance for Prospective Applicants for Licensing and Registration (Investment Business) - July 2022

Summary

This BMA guidance note explains how the Investment Business Act 2003 (IBA) regulates persons and entities carrying on investment business in or from Bermuda. It sets out the licensing and registration framework, the criteria distinguishing licensed persons from Class A and Class B Registered Persons and Non Registrable Persons, and the Authority's ongoing supervisory expectations once a firm is authorised.

• Licensing options: Applicants may seek a standard licence (ongoing investment activities) or a test licence (time limited activity within the Authority's regulatory sandbox).
• Registration classes: Class A Registered Persons are Bermuda formed entities without a Bermuda place of business that are already regulated by a recognised foreign regulator; Class B Registered Persons serve only institutional or sophisticated investors, or 20 or fewer private clients, without soliciting the public.
• Non Registrable Persons: Certain persons, such as investment funds, insurance intermediaries acting incidentally, DABA licensees conducting ancillary investment business, and government/public bodies, are excluded from obligations under the Act unless they act outside the terms of their exemption.
• Place of business requirement: Licensed persons and Class B Registered Persons must maintain a principal place of business in Bermuda, with staff and expenses paid from that location (or, for sole traders, premises they occupy).
• Senior representative requirement: Class A Registered Persons must appoint a Bermuda based senior representative who maintains an office in Bermuda and notifies the Authority of material changes.
• Supervisory process: Once authorised, firms are subject to reporting requirements, prudential visits, on-site supervision, auditor communication obligations, confidentiality/disclosure rules, and potential consolidated group supervision.

The guidance also clarifies scope issues, such as which instruments and activities count as investment business, what excluded activities exist, and that digital asset derivatives are not investments under the Act (though dealing in them may trigger DABA licensing). Firms uncertain about applicability are encouraged to engage the Authority early.

Key obligations

• Persons carrying on investment business in or from Bermuda must apply to the Authority for a licence or registration unless they qualify as non-registrable.
• Each licensed person must maintain a principal place of business in Bermuda as required by the Act.
• Class A Registered Persons must appoint a senior representative resident in Bermuda who maintains an office there and notifies the Authority of specified material changes.
• A Class A Registered Person may not operate until it demonstrates to the Authority that it has secured the requisite licence, authorisation or registration from a recognised regulator; if that approval is not obtained, it must notify the Authority immediately and apply to be licensed or registered as a Class B Registered Person.
• Class B Registered Persons must maintain a principal place of business in Bermuda.
• A Non-Registrable Person found operating inconsistently with the conditions of its designation may be required to apply for an investment business licence.
• Auditors and accountants are obliged under sections 42 and 45 of the Act to give the Authority written notice of certain facts or matters.
• Licensed persons and registered persons are subject to statutory return filing and reporting requirements under rules issued pursuant to Section 10A of the Act.

Applies to

investment providers, licensed persons, Class A Registered Persons, Class B Registered Persons, Non-Registrable Persons, test licence holders, auditors, accountants, prospective applicants for investment business licensing or registration