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

Summary

This is Bermuda Monetary Authority (BMA) guidance, dated July 2022, explaining the licensing and registration framework for investment business under the Investment Business Act 2003 (IBA). It is aimed at prospective applicants and sets out what counts as investment business, the categories of authorisation available, and the BMA's supervisory approach once authorised.

• Scope: Investment business means engaging by way of business in one or more of six listed investment activities (dealing, arranging, managing, advising, safeguarding/administering, and promoting investments) involving eleven categories of instruments defined in the Act's First Schedule.
• Licensing: Persons carrying on investment business in or from Bermuda must apply for a standard licence (for ongoing activity) or a test licence (time limited, within the BMA's regulatory sandbox), unless eligible for registration or designated non-registrable.
• Registration categories: Bermuda-formed entities without a Bermuda place of business that are regulated by a recognised foreign regulator must apply as Class A Registered Persons (unless they choose full licensing); certain persons serving only institutional/sophisticated investors or 20 or fewer private clients may register as Class B Registered Persons.
• Non-Registrable Persons: Certain persons and classes (e.g. investment funds, certain insurance intermediaries, certain DABA licensees, government/public bodies) are designated non-registrable and outside the Act's obligations, provided they act consistently with the relevant Ministerial Order.
• Place of business: Licensed persons and Class B Registered Persons must maintain a principal place of business in Bermuda; Class A Registered Persons must instead appoint a Bermuda-resident senior representative with an office in Bermuda.
• Supervisory process: The guidance describes the BMA's ongoing supervisory processes for authorised investment providers, including reporting requirements, prudential visits, on-site supervision, communication with auditors, disclosure of confidential information, and consolidated group supervision.

The document is explanatory guidance rather than a standalone source of new binding rules; substantive obligations derive from the Investment Business Act 2003, related Ministerial Orders (Class B Registered Persons Order 2022, Non-Registrable Persons Order 2022), the Authority's Rules on net assets/capital/liquidity and statutory returns, the Statement of Principles, and the Code of Conduct and Practice, all cross referenced throughout.

Key obligations

• Persons carrying on investment business in or from Bermuda that do not qualify for registration or non-registrable status must apply to the BMA for a licence.
• Bermuda-formed entities without a place of business in Bermuda that are regulated by a recognised foreign regulator must apply to be registered as a Class A Registered Person unless they opt for full licensing.
• Class A Registered Persons must appoint an individual as senior representative resident in Bermuda, who must maintain a Bermuda office and notify the Authority of specified material changes.
• If a prospective Class A Registered Person fails to secure the necessary approval from its recognised regulator, it must notify the Authority immediately and, if it still wishes to carry on business, apply to be licensed or registered as a Class B Registered Person instead.
• Licensed persons and Class B Registered Persons must maintain a principal place of business in Bermuda as defined in the guidance.
• Persons eligible for Class B registration (serving only institutional/sophisticated investors, or 20 or fewer private clients without soliciting the public) must apply to the Authority for registration in that class.
• Non-Registrable Persons found operating inconsistently with the terms of the relevant Order may be required to apply for an investment business licence.
• Investment providers must comply with BMA reporting requirements and cooperate with prudential visits and on-site supervision as part of ongoing supervision.

Applies to

investment business licensees, Class A Registered Persons, Class B Registered Persons, Non-Registrable Persons, prospective applicants for investment business licensing or registration, investment providers, auditors and accountants of investment providers