Bermuda proposals for licensing of fund administrators

It is anticipated that, when the Collective Investment Schemes (CIS) Act is submitted to Bermuda Parliament (expected to occur in late 2004), it will contain a provision to require licensing of mutual fund administrators and will be under the supervision and regulation of the Bermuda Monetary Authority (‘BMA’).

Currently, the Authority is consulting with an industry working group on some of the detailed provisions is developing the content of the proposed Act.  As a result, there could be additions or deletions to the following information.

Licensing criteria will include that controllers, directors and senior executives are fit and proper persons; that the business is conducted by at least two individuals; that the company has a suitable board of directors; that the business is conducted in a prudent manner, with appropriate integrity and professional skill; that there are no impediments to the Authority’s consolidated supervision, where appropriate; that appropriate insurance is in place against the major risks faced in the business and that the company has minimum capital of $100,000.

As with other regulatory Acts, the BMA may not license unless it is satisfied that the minimum criteria are, or will be met, with regard to the applicant.   

Applications for licensing would be required to be made to the BMA in the normal way, accompanied by certain, specified information and such other material as the BMA may require. Such applications would also require the payment of a non-refundable application fee.  There will also be an annual, regulatory fee. 

The Act will provide for the BMA to be able to restrict a licence and also, to revoke a licence.  Arrangements will likely be based on the comparable provisions in the Trust Business Act.  The BMA would have the power to impose directions after a licence is surrendered or revoked, but only as long as the company retains any control over assets of CIS or underlying investors.  Also, as with the Trust Business Act model, the BMA would also be able to apply for a winding up, following revocation.      

In addition, it is anticipated that there will be scope for the Finance Minister to exclude and exempt persons or classes of persons.  It is proposed, also, to provide for the licensing only of bodies corporate, whether incorporated in Bermuda or elsewhere.  In practice, we anticipate that most licensees will be Bermuda-registered companies and for overseas companies.

This special update for Hedgeweek’s readers was provided by Cheryl-Ann Lister, Chairman and CEO, Bermuda Monetary Authority 

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