BMA Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003 and Investment Funds Act 2006 (October 2013)

Summary

This document is the Bermuda Monetary Authority's finalised Corporate Governance Policy applicable to entities licensed under the Trust (Regulation of Trust Business) Act 2001, the Investment Business Act 2003 and the Investment Funds Act 2006. It follows a 2012 consultation and summarises the Authority's responses to industry comments before setting out nine principles covering board practices, senior management, risk management and reporting, and confirms accompanying legislative amendments giving these principles statutory effect as minimum licensing criteria.

• Scope: Applies to trust companies, investment business licensees (investment providers) and fund administrators licensed under the Investment Funds Act 2006. Investment funds themselves and Corporate Service Providers are excluded from scope at this time.
• Principles-based approach: The Authority rejected a 'comply or explain' model in favour of a principles-based, proportionate approach that takes into account an institution's size, complexity, structure and risk profile.
• Legislative amendments: The Trust (Regulation of Trust Business), Investment Business and Investment Funds Acts' schedules are amended to add a new 'Corporate Governance' minimum licensing criterion requiring licensees to implement corporate governance policies and processes, to be effectively directed by at least two individuals (or one person if Authority-approved), and to have appropriate non-executive director oversight.
• Group structures: Bermuda-licensed subsidiaries of foreign parents must ensure group-level practices do not breach Bermuda law or contravene the Policy, and their board composition should allow independent evaluation.
• Transition: The Authority will work with licensed entities over the twelve months following the Policy's issuance to support full implementation.

The Policy itself does not replace existing statutory licensing requirements but will be considered by the Authority when assessing compliance with the minimum criterion to have corporate governance policies and procedures in place. Institutions must be able to justify the adequacy of their governance arrangements to the Authority if challenged.

Key obligations

• Licensed entities (trust companies, investment providers, fund administrators) must implement corporate governance policies and processes appropriate to their nature, size, complexity and risk profile.
• The business of a licensed entity must be effectively directed by at least two individuals, or by one individual only where the Authority has approved this given the entity's circumstances.
• Licensed entities must maintain oversight by such number of non-executive directors as the Authority considers appropriate given the entity's nature, size, complexity and risk profile.
• An institution must be able to justify to the Authority's satisfaction the adequacy of its governance arrangements if and when challenged to do so.
• Boards of Bermuda-licensed subsidiaries of non-Bermuda parents must evaluate group-level decisions or practices to ensure they do not place the subsidiary in breach of Bermuda law or in contravention of the Policy.

Applies to

trust companies licensed under the Trust (Regulation of Trust Business) Act 2001, investment providers/licensees under the Investment Business Act 2003, fund administrators licensed under the Investment Funds Act 2006

Deadlines

• 1 January 2014: Commencement date of the Trust, Investment Business and Investment Funds Amendment Orders 2013 introducing the new corporate governance licensing criteria.
• 12 months from issuance of the Policy: Transition period during which the Authority will work with licensed entities to achieve full implementation of the Corporate Governance Policy framework.