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

Summary

This is the Bermuda Monetary Authority's October 2013 Corporate Governance Policy issued for entities licensed under the Trust (Regulation of Trust Business) Act 2001, the Investment Business Act 2003, and the Investment Funds Act 2006. The document combines the Authority's response to industry consultation feedback with the final Policy text, and it is accompanied by draft Amendment Orders that write a statutory corporate governance requirement into each Act's licensing schedule.

• Scope: Applies to trust companies licensed under the Trust Act, investment providers licensed under the Investment Business Act, and fund administrators licensed under the Investment Funds Act. Investment funds themselves and Corporate Service Providers are explicitly out of scope for now.
• Approach: Adopts a principles based (not comply or explain) framework of nine principles covering board practices, senior management, risk management and reporting, applied proportionately to an institution's size, complexity, structure and risk profile.
• Statutory minimum criteria amended: The Trust Act, Investment Business Act and Investment Funds Act schedules are amended to require licensees to implement corporate governance policies and processes, to be effectively directed by at least two individuals (or one individual if the Authority approves), and to have oversight by such number of non-executive directors as the Authority considers appropriate.
• Group structures: Bermuda licensed subsidiaries of foreign or group parents must ensure group level governance practices do not breach Bermuda law or the Policy, and board composition should allow independent evaluation where the parent is not Bermuda licensed.

The Authority indicated it would work with licensed entities over the twelve months following publication to support full implementation of the governance framework, and the related Amendment Orders were set to take effect on 1 January 2014.

Key obligations

• Institutions licensed under the Trust Act, Investment Business Act, or Investment Funds Act (as fund administrators) must implement a corporate governance framework and policies appropriate to their size, complexity, structure and risk profile.
• The business of a licensed institution (company or partnership/firm) must be effectively directed by at least two individuals, unless the Authority approves direction by one person given the circumstances.
• Licensed institutions must maintain oversight by such number of non-executive directors as the Authority considers appropriate given the institution's nature, size, complexity and risk profile.
• Where a licensee cannot meet a particular Principle, it must be able to justify to the Authority's satisfaction the adequacy of its governance arrangements.
• Boards of Bermuda licensed subsidiaries with non-Bermuda parents must evaluate group level decisions to ensure they do not breach Bermuda laws, regulations, or the Policy.

Applies to

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

Deadlines

• 1 January 2014: Commencement date for the Trust, Investment Business, and Investment Funds Amendment Orders 2013 inserting the corporate governance licensing criteria.
• 12 months from October 2013: Period during which the Authority stated it would work with licensed entities to achieve full implementation of the Corporate Governance Policy framework.