Investment Fund Rules 2019

Summary

This Rule sets out operational requirements that apply to all investment funds authorised or registered by the Bermuda Monetary Authority under the Investment Funds Act 2006. It covers custodian licensing, segregation of fund property, valuation practices, disclosure to investors, access to constitutional documents, and financial reporting and audit standards. It revoked and replaced the Fund Rules 2007 and took effect on 1 January 2020, with later amendments made by BR 82/2023.

• Custodians: The custodian of a standard fund must be licensed by the Authority under the Banks and Deposit Companies Act 1999, the Trusts (Regulation of Trust Business) Act 2001 or the Investment Business Act 2003, unless the administrator carries on fund administration provider business in Bermuda.
• Segregation and safekeeping: Operators of Professional Closed Funds and closed-ended Private Funds must designate a fit and proper person responsible for segregating and safeguarding fund property, and disclose the designate's identity and arrangements to the Authority and investors.
• Valuations: Operators must value fund assets and liabilities at least monthly (standard funds), quarterly (institutional, administered and specified jurisdiction funds), or annually (registered funds), file valuations with the Authority within 20 business days of the relevant period, and disclose the valuation and pricing method to investors.
• Valuation function: Valuations must be performed by an external valuer, an independent investment manager, or a fund administrator with appropriate systems; if not performed by an external valuer, valuation procedures must be verified by an external valuer or the auditor.
• Fund constitution and pricing: Operators must make the fund's constitution available for inspection and copies available on request, and must publish issue and redemption prices via the fund's website or a Bermuda office.
• Financial reporting: Authorised funds and registered Professional Class A, Class B and Professional Closed funds must prepare audited financial statements within six months of financial year end; registered Private funds must prepare audited or unaudited statements within the same period, and reports must be distributed to participants free of charge.
• Accounting and audit standards: Financial statements must follow IFRS, GAAP of Bermuda, Canada, the UK or the US, or other Authority-recognised GAAP; audits must follow ISA, GAAS of those same jurisdictions, or other Authority-approved standards.
• Late fees: Failure to file valuations or financial reports on time makes the operator liable to a late fee under the Fourth Schedule to the Bermuda Monetary Authority Act 1969 (provisions added by BR 82/2023, effective 29 September 2023).

These Rules apply across all fund categories authorised or registered under the Investment Funds Act 2006, and non-compliance with valuation or financial reporting timelines triggers statutory late fees rather than merely administrative consequences.

Key obligations

• Operators of Professional Closed Funds and closed-ended Private Funds must designate a fit and proper person for segregation and safekeeping of fund property and disclose this to the Authority and investors
• Custodians of standard funds must be licensed under the Banks and Deposit Companies Act 1999, Trusts (Regulation of Trust Business) Act 2001, or Investment Business Act 2003 (unless the administrator conducts fund administration provider business in Bermuda)
• Operators must carry out valuations at least monthly (standard funds), quarterly (institutional, administered, specified jurisdiction funds), or annually (registered funds)
• Operators must file valuations with the Authority within 20 business days after the relevant valuation period, in the prescribed format
• Operators must disclose the valuation and pricing method to investors in the offering document and apply it consistently
• Operators must ensure the valuation function is performed by an external valuer, an independent investment manager, or a suitably systems-equipped fund administrator
• Where valuation is not performed by an external valuer, procedures or valuations must be verified by an external valuer or the auditor
• Operators must make the fund's constitution available for inspection by participants and potential participants, without charge, at a Bermuda office
• Operators must publish issue and redemption prices on the fund's website or make them available without charge at a Bermuda office
• Authorised funds and registered Professional Class A, Class B and Professional Closed funds must prepare audited financial statements within six months of financial year end and distribute them to participants without charge
• Registered Private funds must prepare audited or unaudited financial statements within six months of financial year end and distribute them to participants without charge
• Financial statements must be prepared under IFRS, specified GAAP standards, or Authority-recognised GAAP
• Audits must be conducted under ISA, specified GAAS standards, or Authority-approved GAAS
• Failure to file valuations or financial reports on time results in liability for a late fee under the Fourth Schedule to the Bermuda Monetary Authority Act 1969

Applies to

investment funds, standard funds, institutional funds, administered funds, specified jurisdiction funds, registered funds, Professional Closed Funds, Private Funds, Professional Class A funds, Professional Class B funds, fund operators, fund administrators, custodians, investment managers, external valuers, auditors

Deadlines

• 1 January 2020: Commencement date of the Investment Fund Rules 2019
• 20 business days after the relevant valuation period: Deadline for operators to file required valuations with the Authority
• within six months after the end of the financial year: Deadline for operators of authorised funds and registered Professional Class A, Class B, Professional Closed and Private funds to prepare financial reports
• 29 September 2023: Effective date of late fee provisions inserted into Rules 7, 13 and 14 by BR 82/2023

Related documents

• This document commences Investment Funds Act 2006
• This document is made under Investment Funds Act 2006
• Consultation Paper - Proposed Enhancements to Supervisory Powers within the Investment Funds Act 2006 (April 2023) amends this document