securities investment business

Who is caught

The Investment Business Act 2003, administered by the Bermuda Monetary Authority (BMA), is the primary statute. It requires any person carrying on investment business in or from Bermuda to be licensed, registered, or designated as non-registrable before doing so, subject to exemptions. Investment business is defined as engaging by way of business in listed investment activities (dealing, arranging, managing, advising, safeguarding and administering, and promoting investments) involving categories of instruments set out in the Act's First Schedule.

Categories of person

• Standard and test licensees: Persons licensed under section 17 to carry on investment activities, including time-limited test licensees operating within the BMA's regulatory sandbox.
• Class A Registered Persons: Bermuda-formed persons without a Bermuda place of business that are already licensed or regulated by a recognised foreign regulator.
• Class B Registered Persons: Persons serving only high income, high net worth or sophisticated investors, or an investment fund, or carrying on business with no more than twenty persons without soliciting the public, or meeting an asset-based or look-through test set out in the Class B Registered Persons Order 2022.
• Recognised investment exchanges and clearing houses: Bodies recognised under a parallel regime in Part IV of the Act and the Recognised Bodies Recognition Requirements Regulations 2024.
• Controllers and officers: Controllers, officers and shareholder controllers of investment providers are also within the supervisory scope of the Act.

The revised framework took effect on 27 July 2022 and formally introduced promotion of investments to the public as a regulated investment activity.

Sources: Investment Business Act 2003 · Investment Business (Class B Registered Persons) Order 2022 · Guidance for Prospective Applicants for Licensing and Registration (Investment Business) · Investment Business - Framework at a Glance (Effective 27 July 2022) · Letter to Stakeholders - Investment Business Regime Changes (2022-07-22)

Key duties

Continuing obligations vary by category and are set out across the Act, its Rules, Orders and Codes. The duties that recur and carry deadlines are authorisation, statutory returns, prudential maintenance, client money handling, and notifications.

Authorisation and place of business

• Licence or registration: Persons must hold a licence, be registered as a Class A or Class B Registered Person, or be designated non-registrable before carrying on investment business. AIFMs managing an AIF must be licensed.
• 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.
• Senior representative: Licensed and registered persons must appoint a senior representative and report certain events to the Authority through that representative.

Statutory returns and filings

• Annual return and accounts: Every investment provider must file an Annual Regulatory Information Return and annual accounts (audited if holding client money), due, per BMA guidance, four months after financial year end, together with a certificate of compliance.
• Quarterly returns: Investment providers to whom the relevant section applies must file a quarterly return, due, per BMA guidance, 21 days after quarter end.
• CFD supplementary return: Providers dealing in contracts for differences with retail clients must additionally file a quarterly Schedule III supplementary return.
• Director declaration: Each annual and quarterly return must carry a declaration signed by two directors, one of whom is the chief executive, and be filed electronically in the format the Authority requires.
• Half-yearly returns (recognised bodies): Recognised bodies must file half-yearly returns electronically containing the specified information.

Prudential requirements

• Minimum 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.
• Risk-based capital: Where a market risk-based requirement applies, the provider must hold at least 8% of risk weighted assets and not less than 250,000 dollars, with at least 6% as tier 1 capital.
• 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 must hold at least three months of annual expenditure.
• Breach notification: Providers, Class A Registered Persons and recognised bodies must notify the Authority forthwith on breaching or anticipating breach of 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.
• Controls review and reconciliation: Client money controls must be reviewed annually by a qualified person, and client bank accounts reconciled at least monthly, within 10 days of the relevant date.
• Record retention: Client money accounting records and account records generally 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 a first portfolio statement within six months of account opening, then quarterly unless otherwise agreed in writing.

Governance, conduct and notifications

• Corporate governance: Licensees must implement corporate governance policies proportionate to their nature, scale and complexity, be effectively directed by at least two individuals (or one if the Authority approves), and have appropriate non-executive oversight; this is a statutory minimum licensing criterion.
• Codes of conduct: The Code of General Business Conduct and Practice and the Advertising Code set conduct, disclosure, advertising, portfolio management and conflicts standards; non-compliance is weighed in assessing sound and prudent conduct rather than being a standalone offence.
• Control notifications: Notification of new or increased control must be given before assuming control, and change of controller or officer within 14 days of the change.
• Breach and material change: Investment providers (or a Class A senior representative) must alert the Authority forthwith to actual or potential breaches and to any proposed material change in their business.
• Reporting accountants: Auditors and accountants must notify the Authority of specified facts or matters of material significance, such as material misstatement, going concern doubt, internal control weakness, or senior executive fraud.

Cyber, resilience and AML

• Operational cyber risk: Investment businesses, as relevant licensed entities, must implement a documented 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: Standard-licence investment businesses must identify important business services, set impact tolerances, prepare annual self-assessments and manage outsourcing, with compliance required by 31 March 2028; material outsourcing requires prior notification with a 20 working day objection period.
• AML/ATF: Providers carrying on securities-sector business are regulated financial institutions that must appoint compliance and reporting officers, conduct customer due diligence and ongoing monitoring, screen employees, audit controls at least annually, and file suspicious activity reports.

Sources: Investment Business (Prudential Standards) (Recognised Bodies) Rules 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) · Investment Business - Framework at a Glance (Effective 27 July 2022) · Investment Business Act 2003 - Statement of Principles (July 2022) · Guidance Notes on the Maintenance of Capital, Net Assets and Liquidity (July 2022) · Investment Business Act 2003 - Code of General Business Conduct and Practice (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) · 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) · Corporate Governance Policy for Trust, Investment Business and Fund Administration Providers (Revised August 2022) · AML/ATF Sector-Specific Guidance Notes for the Securities Sector (Annex III) 2021

Exemptions and carve-outs

The instruments provide several carve-outs from the registration and licensing requirements, principally through the Non-Registrable Persons Order and category-specific tests.

• Non-Registrable Persons: Investment funds under the Investment Funds Act 2006, digital asset business licensees carrying on ancillary investment business, insurers and insurance intermediaries registered under the Insurance Act 1978 in respect of connected investment business, and the Government of Bermuda, the BMA and public authorities are designated non-registrable and fall outside the Act's registration obligations.
• Ancillary digital asset business: A DABA licensee whose investment business revenue does not exceed 25% of total gross revenue may qualify for non-registrable treatment, with a buffer zone up to 35% permitted for up to one year subject to BMA direction.
• Client money bank exclusion: The Client Money Regulations do not apply to a bank licensed under the Banks and Deposit Companies Act 1999 in respect of client money it holds in an account with itself.
• Sophisticated persons: Money held for a sophisticated person may be excluded from client money protections only where specific warnings, written client consent and the Authority's consent are met.
• Test and sandbox entities: Entities under a regulatory sandbox or test licence are excluded from the Operational Resilience and Outsourcing Code.
• Digital asset derivatives: Digital asset derivatives are not investments under the Act, though dealing in them may trigger licensing under the Digital Asset Business Act.

A non-registrable person found operating inconsistently with the terms of the relevant Order may be required to apply for an investment business licence.

Sources: Investment Business (Non-Registrable Persons) (Designation) Order 2022 · Investment Business (Client Money) Regulations 2004 · Guidance for Prospective Applicants for Licensing and Registration (Investment Business) · 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) · Letter to Stakeholders - Investment Business Regime Changes (2022-07-22)

Enforcement and penalties

The Act gives the Authority a range of supervisory and disciplinary powers, and the BMA's Statement of Principles on the Use of Enforcement Powers describes how these are applied across several sectoral acts, including the Investment Business Act 2003.

• Disciplinary and protective powers: The Authority may restrict, revoke or direct licences, object to controllers, issue public censures, prohibition orders, warning and decision notices, and take protective measures such as winding up, injunctions and restitution orders.
• Civil penalties: Per the BMA's 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 penalties: For securities-sector AML breaches, non-compliance can be a criminal offence (fines up to 50,000 dollars on summary conviction, or up to 750,000 dollars and up to two years imprisonment on indictment), and the BMA may impose civil penalties of up to 10,000,000 dollars per breach.
• Offences: The Act creates offences for providing false documents or information and restricts disclosure of information obtained by the Authority.
• Appeals: Certain enforcement decisions, including licence revocation, civil penalties, public censure and prohibition orders, may be appealed to the Investment Business Appeal Tribunal within prescribed time limits, and 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