mutual funds

Who is caught

The Investment Funds Act 2006 is Bermuda's principal statute for collective investment vehicles, administered by the Bermuda Monetary Authority (BMA). It prohibits the operation of an unauthorised, unregistered or undesignated investment fund in or from Bermuda, so the trigger for being caught is carrying on business as an investment fund from a Bermuda base. The Companies Act 1981 separately governs the formation and operation of mutual fund companies as a corporate form.

Fund categories

• Authorised funds: Standard, institutional, administered and specified jurisdiction funds authorised by the BMA under the Act.
• Registered funds: Professional Class A, Professional Class B, Professional Closed Funds and Private Funds, which qualify for lighter-touch treatment.
• Designated Overseas Funds: Overseas funds that may not be managed or promoted in or from Bermuda unless designated as an Overseas Fund by the Authority.
• Closed-ended funds: The 2019 amendments expanded the statutory definition of investment fund to capture closed-ended funds in addition to open-ended funds.

Persons within scope

Beyond the fund itself, the framework reaches fund operators, officers, service providers, custodians, investment managers, external valuers, auditors and fund administrators. Fund administrators were originally licensed under Part III of the Act, but fund administration is now regulated separately under the Fund Administration Provider Business Act 2019. The Investment Funds (Definition) Order 2019 clarifies which arrangements fall outside the statutory definition entirely.

Sources: Companies Act 1981 · Investment Fund Rules 2019 · Investment Fund Offering Document Rules 2019 (BR 134 / 2019) · Investment Funds (Definition) Order 2019 · Investment Funds Act 2006 · Investment Fund Guidelines (Updated December 2023) · AML/ATF Information Form · NOTICE - Bermuda Investment Funds Amendment Act 2019 (2020-01-20) · Notice - Changes to Bermuda's Investment Fund Regime (2019-05-30)

Key duties

The core obligation is that a fund must be authorised, registered or designated by the BMA before it carries on business, accepts subscriptions or represents itself as registered or authorised. Several continuing duties carry deadlines, principally around valuations, financial statements and annual filings.

Authorisation and offering documents

• Prior authorisation: A fund must be authorised, registered or designated before operating; an optional Approval in Principle pre-approval process does not substitute for formal registration or authorisation.
• Offering document approval: Every authorised or registered fund must prepare an offering document complying with the Investment Fund Offering Document Rules 2019, have it approved by the Authority before use, and make it available to participants free of charge at a Bermuda office.
• Updated offering documents: Operators must publish an updated offering document reflecting material changes, failing which a late fee arises under the Fourth Schedule to the Bermuda Monetary Authority Act 1969.

Valuations and reporting

• Valuations: Operators must value fund assets at least monthly (standard funds), quarterly (institutional, administered, specified jurisdiction funds) or annually (registered funds), and file valuations with the Authority within 20 business days of the relevant period.
• Financial statements: 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 may prepare audited or unaudited statements within the same period, distributed to participants free of charge.
• Annual filings: Designated, registered and authorised funds make annual filings (and standard funds monthly, institutional/administered/specified jurisdiction funds quarterly) via INTEGRA, covering NAV, subscriptions/redemptions, financial statements and compliance certifications.
• Accounting standards: Financial statements must follow IFRS or recognised GAAP, and audits ISA or recognised GAAS.

Governance and AML/ATF

• Fit and proper: Operators, officers and service providers of authorised, registered or designated funds must be fit and proper and conduct business prudently, per the Schedule's minimum criteria; new appointees submit personal declarations unless vetted within the prior 12 months.
• AML/ATF: Registered and authorised funds must appoint a Money Laundering Reporting Officer and Compliance Officer, provide their details and board-approved AML/ATF policies to the BMA, and ensure overseas administrators meet POCA-equivalent standards.
• Custodian: Fund property must be entrusted to a custodian unless the Authority grants an exemption; Private Funds must appoint a custodian subject to possible waiver.
• Segregation designate: Operators of Professional Closed Funds and closed-ended Private Funds must designate a fit and proper person responsible for segregating and safekeeping fund property.

Notifications

• Material changes: Operators must notify the Authority of material changes and other specified matters; registered funds must give notice of any disqualifying event.
• Auditor communication: Appointed auditors must communicate certain matters concerning a fund to the Authority.
• Overseas Funds: Designated Overseas Funds must submit an annual declaration within six months of financial year end.

Sources: Investment Funds (Specified Jurisdiction Fund) (Japan) Rules 2012 · Investment Fund Rules 2019 · Investment Fund Offering Document Rules 2019 (BR 134 / 2019) · Investment Funds Act 2006 · Investment Fund Guidelines (Updated December 2023) · AML/ATF Information Form · Notice - Pre-Approval Process for New Bermuda Funds (2026-03-19) · Notice - Investment Funds Amendment Act 2023 and Updates to the Related Rules (2023-12-05) · Notice - Changes to Bermuda's Investment Fund Regime (2019-05-30)

Exemptions and carve-outs

The Investment Funds (Definition) Order 2019, made under the Act, excludes specified arrangements from the statutory definition of an investment fund. Persons operating an excluded arrangement fall outside the Act and need not seek authorisation in respect of that arrangement.

• Business and group structures: Arrangements not operated by way of business, single-corporate-group arrangements, and holding entities under the Economic Substance Regulations 2018.
• Single-asset and non-pooled: Arrangements involving rights in only one asset, or property that is managed but not pooled.
• Employee and family schemes: Schemes limited to employees, former employees and certain family members of a group company.
• Deposit-based and shared-use: Deposit arrangements, shared-enjoyment arrangements, transferable-securities arrangements, and recognised clearing house or exchange services.
• Named excluded types: Pension funds, sovereign wealth funds, securitisation SPVs, joint ventures, debt issues, insurance contracts, occupational pension schemes, credit unions, registered insurers, and licensed digital asset businesses.

Other carve-outs

• Custodian exemption: The Authority may exempt a fund from the requirement to entrust fund property to a custodian, and may waive the Private Fund custodian requirement where certain conditions are met.
• Former exempt fund classes: The former Class A and Class B Exempted Fund regime (which replaced the repealed Section 7 exemption) has since been renamed to Professional Class A and Professional Class B Funds; grandfathered exempt funds were required to reclassify by 31 October 2017 or lose exempted status.

Sources: Investment Fund Rules 2019 · Investment Funds (Definition) Order 2019 · Investment Funds Act 2006 · Notice - Changes to Bermuda's Investment Fund Regime (2019-05-30) · NOTICE - Reclassification of Grandfathered Exempt Funds to Class A/Class B Exempt Funds (2017-09-27) · NOTICE - Grandfathering of Class A/Class B Exempt Funds (2016-09-23)

Enforcement and penalties

The Investment Funds Act 2006 gives the Authority a range of supervisory and enforcement powers over funds and their operators. Non-compliance with time-barred filing requirements generally attracts statutory late fees, while more serious or sustained breaches can lead to court-ordered winding up.

Enforcement powers

• Intervention: The Authority may issue directions, revoke authorisation, registration or Overseas Fund designation, impose civil penalties, issue public censures and prohibition orders, seek injunctions, and petition the Supreme Court for winding up.
• Investigation: The Authority may obtain information and documents, enter premises and investigate suspected contraventions.
• Appeals: Decisions such as revocation of authorisation, directions and removal of a controller or officer may be appealed to the Investment Funds Appeal Tribunal within the prescribed 10 or 28 day limits.

Late fees

• Filing late fees: Late annual filings incur a $1,000 fee and late statistical filings a $200 fee, recoverable as a civil debt; up to three annual filing extensions may be requested for $300 each.
• Valuation and reporting: Failure to file valuations or financial statements on time makes the operator liable to a late fee under the Fourth Schedule to the Bermuda Monetary Authority Act 1969.
• Fund administrators: BMA guidance states that failure by a licensed fund administrator to give required notices or file the annual compliance statement is a criminal offence carrying a fine of up to $10,000 on summary conviction.

Winding-up in practice

Published enforcement notices show the BMA petitioning the Supreme Court to wind up funds for sustained breaches, typically failure to conduct business prudently (section 4A(2) and the Minimum Criteria for Licensing), failure to prepare audited financial statements (section 14(1)(a)), failure to appoint required service providers (section 14(1)(b)), failure to carry out or file NAV valuations, and failure to file annual compliance statements (section 26(1)(b)). Examples include Cumulus Eastern European Property Fund, Sagehi Equity Fund, Rapture Global Investment Fund, Diversified Fund Platform and Yew Tree Investments.

Sources: Investment Funds Appeal Tribunal Regulations 2012 · Investment Funds Act 2006 · Investment Fund Guidelines (Updated December 2023) · Fund Administrators - Information for Prospective Applicants and Guidance Notes (February 2011) · Notice - Rapture Global Investment Fund Ltd. (2025-11-26) · Notice - Diversified Fund Platform Ltd. (2025-11-26) · Notice - Enforcement Action - Sagehi Equity Fund Ltd. (2025-05-09) · Winding Up - Yew Tree Investments Limited (2026-06-30) · Winding Up - Diversified Fund Platform Ltd. (2025-11-26) · Winding Up - Rapture Global Investment Fund Ltd. (2025-11-26) · BMA Winds Up Investment Fund For Regulatory Breaches - Cumulus Eastern European Property Fund Limited (2017-08-11)