securities investment business

Who is caught

The Investment Business Act 2003, administered by the Bermuda Monetary Authority (BMA), is the primary statute. It applies to persons carrying on investment business in or from Bermuda and establishes a tiered licensing, registration and designation regime, together with a parallel recognition regime for market infrastructure.

Investment business means engaging by way of business in listed investment activities (broadly dealing, arranging, managing, advising, safeguarding and administering, and promoting investments) involving the categories of instruments defined in the Act's First Schedule. The July 2022 reforms formally introduced promotion of investments to the public as a regulated activity.

• Licensed persons: Persons holding a standard licence (ongoing activity) or a test licence (time-limited activity within the BMA's regulatory sandbox).
• Class A Registered Persons: Bermuda-formed entities without a Bermuda place of business that are already regulated by a recognised foreign regulator.
• Class B Registered Persons: Persons serving only institutional, sophisticated, high net worth or high income investors, or investment funds, or carrying on business with no more than 20 persons without soliciting the public; also qualifying by an asset test of not less than 5,000,000 dollars or as a look-through entity whose owners all qualify.
• AIFMs: Alternative investment fund managers managing an AIF, who must be licensed under a dedicated chapter of the Act.
• Recognised bodies: Investment exchanges and clearing houses seeking or holding a recognition certificate under Part IV.
• Controllers and officers: Controllers, shareholder controllers and officers of investment providers are within the supervisory perimeter.

Sector-specific AML/ATF guidance additionally treats investment business providers, investment funds and their operators, fund administrators, and certain non-licensed persons conducting exempt investment business as regulated financial institutions in the securities sector.

Sources: Investment Business Act 2003 · Investment Business (Class B Registered Persons) Order 2022 · Annex III - Sector-Specific Guidance Notes for the Securities Sector (2022) · Guidance for Prospective Applicants for Licensing and Registration (Investment Business) - July 2022 · Investment Business - Framework at a Glance (Effective 27 July 2022) · Letter to Stakeholders - Investment Business Regime Changes (2022-07-22) · Investment Business Guidance for Prospective Applicants for Licensing and Registration (July 2022) · Guidance for Prospective Applicants for Licensing and Registration (Investment Business) · AML/ATF Sector-Specific Guidance Notes for the Securities Sector (Annex III) 2021

Key duties

The core continuing obligation is to hold the correct authorisation before carrying on investment business, and thereafter to file periodic returns, meet prudential standards, and notify the Authority of specified events. Several filings carry fixed deadlines.

Authorisation and presence

• Licence or registration: Persons must be licensed, registered as Class A or Class B, or designated non-registrable before carrying on investment business in or from Bermuda.
• Place of business: Licensed persons and Class B Registered Persons must maintain a principal place of business in Bermuda; Class A Registered Persons must appoint a Bermuda-resident senior representative with a Bermuda office who notifies the Authority of material changes.

Statutory returns and accounts

• Annual return and accounts: An Annual Regulatory Information Return and annual accounts (audited where client money is held) are due within four months of financial year end, along with a certificate of compliance.
• Quarterly filings: Where required by the Authority, a quarterly return, financial statement and liquidity analysis are due within 21 days after quarter end.
• CFD supplementary return: Providers dealing in OTC leveraged products, including contracts for differences, with retail clients must file the Schedule III supplementary return quarterly.
• Director declaration: Each annual and quarterly return must be accompanied by a declaration signed by two directors, one of whom is the chief executive.

Prudential standards

• Net assets: Standard and test licensees must maintain minimum net assets of 100,000 dollars (agents), 250,000 dollars (principals), or 12,000 dollars (neither), unless the Authority determines otherwise; a risk-based capital requirement of at least 8 percent of risk weighted assets (minimum 250,000 dollars) may be imposed.
• Liquidity: Providers acting as principal or agent must hold liquid assets equal to three months of annual expenditure; others at least one month.
• Recognised bodies: Recognised bodies must maintain prescribed minimum equity capital and liquid assets of at least three months of annual expenditure, and file half-yearly returns electronically.
• Breach notification: Providers, Class A Registered Persons and recognised bodies must notify the Authority forthwith on breaching, or expecting to breach, any capital or liquidity requirement.

Client money and records

• Segregation: Client money must be kept separate and paid into a designated client bank account with an approved bank, generally by the next day, with written bank acknowledgement that funds are held as trustee.
• Reconciliation and controls: Client bank accounts must be reconciled at least monthly (within 10 days of the relevant date), and client money controls reviewed annually by a qualified person, with the report retained at least five years.
• Records: Adequate accounting records and systems must be maintained; client money and general accounting records must be retained for at least five years.
• Client communications: A contract note must be provided no later than one day after each transaction, and portfolio statements provided within six months of account opening and quarterly thereafter.

Notifications and governance

• Control notifications: New or increased control must be notified before it is assumed; changes of controller or officer must be notified within 14 days.
• Breach and material change: Investment providers (or a Class A senior representative) must alert the Authority forthwith to actual or potential breaches of the Act and to any proposed material change in their business.
• Auditor reporting: Auditors and reporting accountants must notify the Authority of defined facts or matters of material significance (such as material misstatement, going concern doubt, internal control weakness, or senior executive fraud) under sections 42, 45, 73D and 75A.
• Corporate governance: Licensed and registered persons must implement proportionate corporate governance policies, be effectively directed by at least two individuals (or one if approved), and maintain appropriate non-executive oversight.
• Conduct standards: Investment providers must observe the Code of General Business Conduct and Practice and, for advertising, the applicable advertising standards, covering suitability, disclosure, best execution, conflicts and record-keeping.

Operational and AML duties

• Cyber risk: Investment businesses as relevant licensed entities must maintain an operational cyber risk management programme, appoint a Chief Information Security Officer, notify cyber reporting events, and were required to comply by 15 February 2023.
• Operational resilience and outsourcing: Firms must manage material outsourcing (prior notification with a 20 working day objection period) and, under the 2025 Operational Resilience and Outsourcing Code, identify important business services, set impact tolerances and prepare annual self-assessments, with compliance required by 31 March 2028.
• AML/ATF: Regulated financial institutions in the securities sector must appoint a compliance officer and reporting officer, conduct customer due diligence and ongoing monitoring, screen employees, file suspicious activity reports, and independently test controls at least annually.

Sources: Investment Business (Prudential Standards) (Recognised Bodies) Rules 2024 · Investment Business (Recognised Bodies Recognition Requirements) Regulations 2024 · Investment Business (Recognised Bodies) (Reporting Accountants) (Facts and Matters of Material Significance) Regulations 2024 · Investment Business Act 2003 · Investment Business (Client Money) Regulations 2004 · Investment Business (Prudential Standards) (Standard Licences, Test Licences, and Class A Registered Persons) (Capital, Net Assets and Liquidity) Rules 2022 · Investment Business (Prudential Standards) (Statutory Returns) Rules 2022 · Investment Business (Reporting Accountants) (Facts and Matters of Material Significance) Regulations 2006 · Investment Business Regulations 2004 · Annex III - Sector-Specific Guidance Notes for the Securities Sector (2022) · Guidance for Prospective Applicants for Licensing and Registration (Investment Business) - July 2022 · Investment Business - Framework at a Glance (Effective 27 July 2022) · Investment Business Act 2003 - Statement of Principles (July 2022) · Investment Business Act 2003 Code of General Business Conduct and Practice (July 2022) · Operational Cyber Risk Management Code of Conduct - Corporate Service Providers, Trust Companies, Money Service Businesses, Investment Businesses and Fund Administration Providers (2022-03-15) · Investment Business - Advertising Code of Conduct (June 2010) · Operational Resilience and Outsourcing Code (September 2025) · Stakeholder Letter - AML/ATF Sector Specific Guidance Notes for Investment Business Providers, Investment Funds and Fund Administrators (2017-07-25) · BMA Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003 and Investment Funds Act 2006 (October 2013) · Letter to Stakeholders - Investment Business Regime Changes (2022-07-22) · Investment Business Guidance for Prospective Applicants for Licensing and Registration (July 2022) · Operational Cyber Risk Management Code of Conduct (September 2022 Revised) · Outsourcing for Banks, Deposit Companies, the Bermuda Stock Exchange, Corporate Service Providers, Trust Companies, Money Service Businesses, Investment Businesses, Fund Administrators and the Credit Union (28 June 2019) · Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003, and Investment Funds Act 2006 (October 2013) · Guidance for Prospective Applicants for Licensing and Registration (Investment Business) · Corporate Governance Policy for Trust, Investment Business and Fund Administration Providers (Revised August 2022) · Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003 and Investment Funds Act 2006 (October 2013) · AML/ATF Sector-Specific Guidance Notes for the Securities Sector (Annex III) 2021

Exemptions and carve-outs

The regime provides for designated non-registrable persons who fall outside the Act's registration and licensing obligations, plus targeted carve-outs in individual instruments.

Non-registrable persons

• Investment funds: Any investment fund as defined in the Investment Funds Act 2006.
• Digital asset business licensees: Persons licensed under the Digital Asset Business Act 2018 carrying on investment business ancillary to their digital asset business.
• Insurance sector persons: Registered insurers, insurance intermediaries (managers, brokers, agents, salesmen, members of a recognised association of underwriters) and insurance marketplace providers, for investment business connected to their insurance business.
• Government and public bodies: The Government of Bermuda, the BMA, and public authorities established under a Bermuda Act.

Designation is conditional: a non-registrable person operating inconsistently with the terms of its designation may be required to apply for a licence.

Ancillary digital asset business

BMA guidance treats a DAB licensee's investment business as ancillary, qualifying for non-registrable treatment, only where investment business revenue does not exceed 25 percent of total gross revenue from combined activities. A buffer zone of 25 to 35 percent is permitted for up to one year, subject to notification, a remediation plan or a roadmap to licensing, with breaches notified forthwith under section 20 of DABA.

Instrument-specific carve-outs

• Client money: The Client Money Regulations do not apply to a bank licensed under the Banks and Deposit Companies Act 1999 insofar as it holds client money in an account with itself; money held for a sophisticated person may be excluded from client money protections only where specified warnings and consents (including the Authority's) are met.
• Corporate governance policy: The Corporate Governance Policy applies to investment providers but excludes investment funds themselves and, at the relevant time, corporate service providers.
• Operational resilience: The Operational Resilience and Outsourcing Code applies to standard-licence investment businesses; entities under a regulatory sandbox or test licence are excluded.

The Act also allows persons to apply under section 10B(1) to have specific requirements, including client money requirements, modified or disapplied.

Sources: Investment Business (Non-Registrable Persons) (Designation) Order 2022 · Investment Business (Client Money) Regulations 2004 · Guidance Notes - Guidance for DAB Conducting Investment Business in an Ancillary Manner - October 2022 (Revised) · Guidance for Entities Seeking Exemption from Dual Licensing Due to Ancillary Nature of Activities · Operational Resilience and Outsourcing Code (September 2025) · BMA Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003 and Investment Funds Act 2006 (October 2013) · Letter to Stakeholders - Investment Business Regime Changes (2022-07-22) · Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003, and Investment Funds Act 2006 (October 2013) · Corporate Governance Policy for Trust, Investment Business and Fund Administration Providers (Revised August 2022) · Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003 and Investment Funds Act 2006 (October 2013)

Enforcement and penalties

The Act gives the BMA broad supervisory, protective and disciplinary powers, and the Authority's Statement of Principles on the Use of Enforcement Powers explains how it exercises them. Enforcement is intended to be proportionate and is generally raised with the entity first before referral to the Enforcement Committee.

• Disciplinary tools: The Authority may restrict, revoke or direct licences and registrations, impose conditions, object to controllers, issue public censures, warning and decision notices, make prohibition orders against directors and officers, and publish enforcement outcomes.
• Protective measures: The Authority may seek winding up, injunctions and restitution orders, and may refer matters to the police.
• Civil penalties: Per the enforcement Statement of Principles, a penalty of up to 5,000 dollars per week may be imposed for late lodgment of statutory filings, and up to 500,000 dollars per breach of an obligation under the relevant Act.

AML/ATF penalties

In the securities-sector AML/ATF context, non-compliance with specified regulations is a criminal offence carrying fines of up to 50,000 dollars on summary conviction, or up to 750,000 dollars and/or two years' imprisonment on indictment, and the BMA may impose civil penalties of up to 10,000,000 dollars per breach.

Appeals

Decisions such as licence revocation, civil penalties, public censure, controller objections and prohibition orders may be appealed to the Investment Business Appeal Tribunal, subject to strict time limits (generally 10 or 28 days from the decision notice depending on the decision type). BMA decisions remain effective unless the Tribunal orders a stay.

Sources: Investment Business Act 2003 · Investment Business Appeal Tribunal Regulations 2004 · Annex III - Sector-Specific Guidance Notes for the Securities Sector (2022) · Statement of Principles on the Use of Enforcement Powers · Notice - Statement of Principles on the Use of Enforcement Powers · Statement of Principles on the Use of Enforcement Powers (2012-12-13) · AML/ATF Sector-Specific Guidance Notes for the Securities Sector (Annex III) 2021