Upon authorisation, funds are classified as one of the following:
Institutional Funds are targeted essentially at institutional/sophisticated investors and are restricted to qualified participants or those investing at least $100,000.
They are required to have an officer, trustee, or resident representative in Bermuda, being a person who has access to the books and records of the fund.
Funds qualify for authorisation as Administered funds if they have an administrator licensed under Part III of the Act and:
- Require participants to invest a minimum amount of $50,000; or
- A Fund listed on a Stock Exchange recognised by the Authority for the purpose of Section II of the Act
Specified Jurisdiction Funds:
For a fund to qualify for authorisation as a specified jurisdiction fund, the Minister of Finance, by Order, recognises:
i. the jurisdiction, outside Bermuda, in which the fund operates; and
ii. a particular law, or particular set of laws, of such jurisdiction as applicable to such fund.
The fund must also satisfy the requirements set out in the Investment Funds (Specified Jurisdiction Fund) (Japan) Rules 2012.
A fund qualifies as a Standard fund if it does not fit within any other class of fund. Such funds are not restricted to sophisticated investors and may include a more significant retail element among their investors. Consequently they are subject to more comprehensive and regulation and supervision.
Upon registration, funds are classified as one of the following:
Funds are considered Private under the Act if the number of participants does not exceed 20 persons and the fund does not promote itself by communicating invitations or inducements to the public generally.
The operator of a Private fund is required to appoint a local service provider authorised and regulated by the Authority and appoint a Custodian to ensure safekeeping of the fund’s assets.
Professional Class A and Class B Funds:
An Investment Fund, which satisfies the criteria set out in section 6A(2) of the Act, may apply to the Authority to be registered as a Professional Class A fund while an Investment Fund which satisfies the criteria set out in section 7(2) of the Act may apply to the Authority to be registered as a Professional Class B fund.
The criteria that must be satisfied for both classes, as detailed in sections 6A(2) and 7(2), are:
i. the fund must be open to qualified participants as defined under section 9(2) and 9(3) of the Act;
ii. the operator of the fund has appointed an officer, trustee or representative resident in Bermuda who has authority to access the books and records of the fund;
iii. the operator of the fund has appointed the following service providers to the fund—
- an investment manager;
- fund administrator;
- an auditor; and
- a custodian or prime broker; and
iv. the financial statements of the fund are prepared in accordance with any one of the following standards—
(i) International Financial Reporting Standards (“IFRS”);
(ii) Generally Accepted Accounting Principles (“GAAP”) in Bermuda, Canada, the United Kingdom or the United States of America; or
(iii) any such other GAAP as the Authority may recognise.
The qualification criteria differs between the two classes as it relates to the appointment of the investment manager. Professional Class A funds must appoint an investment manager for the fund who is either:
(i) licensed under the Investment Business Act 2003;
(ii) authorised or licensed by a foreign regulator recognised by the Authority; or
(iii) carrying on business in or from Bermuda or in a jurisdiction recognised by the Authority, being a person who
A. has gross assets under management of an amount that is not less than $100 million; or
B. is a member of an investment management group that has consolidated gross assets under management of an amount that is not less than $100 million;
The Authority has certain powers under that Act to require information and documents from any financial institution. As such, Registered funds are required to submit an AML Registration form which provides the Authority with certain contact details for the fund, especially the Compliance Officer and Money Laundering Reporting Officer. A copy of the fund’s AML/ATF Policies and procedures must be submitted with the form.