The Investment Business Act 2003 (Act) came into force as at 30 January 2004. The updated Act, as amended in July 2022, provides a licensing and registration regime for any person or entity engaging or wishing to engage in investment business in or from Bermuda. Part II, section 8 of the Act, confers upon the Authority the powers of supervising and regulating all investment business operating in or from Bermuda. The Act also provides for persons meeting certain criteria while carrying on investment business to be designated either as non-registrable, or excluded from the frameworks.
As a guideline for the development and ongoing relevance of the Authority’s investment business policies, the Authority refers to the core principles issued by the International Organization of Securities Commissions (IOSCO). The principles issued by IOSCO are deemed to provide a universal standard of conduct within the investment business industry. Along with IOSCO, the Authority works closely with the Ministry of Finance for the continuous evolvement of various pieces of legislation to meet the ever-changing nature of today’s business world. In order to ensure the highest standards are upheld, the Authority liaises closely with other regulators, both domestically and internationally, to provide the most effective consolidated supervision, both in relation to entities for which the Authority acts as the consolidated group-wide supervisor.
Supervision of investment providers involves a programme of off-site monitoring and on-site visits, the mix of which is determined in part by the class of licence or registration held. The Authority assesses each investment business using a risk evaluation model, and generally, institutions where the risks are higher or increasing, can expect to be subject to a higher incidence of review.
Off-site Supervision
For most licensed (and certain registered persons), the Authority’s off-site supervision programme involves holding regular prudential meetings with an undertaking’s senior management to discuss the development of the investment provider’s business, including past performance and future strategies for the business.
On-site Supervision
The Authority’s on-site supervision programme involves conducting routine compliance visits to licensed institutions. The purpose of the on-site visit is to enable the Authority to review compliance with policies and procedures (e.g., record keeping, segregation of assets, etc.), as well as the processes that management has put into place to monitor and control key risks in the business. On-site supervision involves structured visits to an investment provider’s offices when, typically, the Authority interviews a range of management and staff and reviews a selection of documentation and files. On-site visits will usually be scheduled on a three-year rolling basis. However, the frequency of on-site visits will also reflect the Authority’s assessment of the degree of risk in the business and the effectiveness of the undertaking’s personnel, systems and controls for monitoring risk.
Reporting & Regulatory Requirements
Once licensed or registered, all investment providers are subject to the Authority’s continued supervision and regulation. Investment providers are required to submit, on a quarterly, annual and ongoing basis, financial and other information about their business. Beyond routine reporting obligations, the Authority also must be notified immediately of any significant material developments in relation to an investment provider’s business.
Quarterly and Annual Reporting
Standard information is required from licensed investment providers (and certain Class A Registered Persons) on a quarterly basis to enable the Authority to assess whether net assets and liquidity requirements are being met.
The Act also requires all investment providers to submit to the Authority annual regulatory information as outlined in Schedule 1 of the Statutory Return Rules.
The Act also requires that, on an annual basis, each investment provider submit a certificate of compliance to the Authority confirming that it has complied with the minimum criteria or indicating any failure to do so and, where the licence is subject to limitations imposed pursuant to section 17(3) of the Act, that it has observed such limitations.
