The following represents the procedure involved in the incorporation and authorisation process for investment funds.
The following information outlines the requirements for Authorised and Registered Funds.
Investment Funds are pooled investment vehicles structured either as Mutual Fund Companies, Unit Trusts, Partnership Funds or Limited Liability Company “LLC” Funds:
The Companies Act 1981 defines a mutual fund company as "... limited by shares and incorporated for the purpose of investing the moneys of its members for their mutual benefit and having the power to redeem or purchase for cancellation its shares without reducing its authorised share capital and stating in its memorandum that it is a mutual fund". Also, any company incorporated by private act and having the power to redeem or purchase for cancellation it’s issued shares at the option of, or on the request of, a member shall be deemed for the purposes of the Companies Act to be a mutual fund company.
**N.B.: For reporting purposes, funds commonly referred to as hedge funds fall within our definition of a mutual fund.**
A unit trust fund is defined in section 2 of the Act as a fund under which the property is held on trust for the participants.
A partnership fund means a fund under which the property is held on behalf of participating partners of the partnership registered under the Limited Partnership Act.
A limited liability company fund means a fund under which the property is held on behalf of the members of a limited liability company formed under the Limited Liability Company Act 2016.
An Investment Fund may make use of the Segregated Accounts Companies Act 2000 and take the form of a segregated accounts company. See the Investment Fund Guidelines for detailed provisions regarding certain requirements applying to funds making use of this option.
Mutual Fund Companies, Unit Trusts, Partnerships and Limited Liability Companies that meet the definition of an Investment Fund as stated in the Act must apply to the Authority to either be Authorised or Registered.
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:
For a fund to qualify for authorisation as a specified jurisdiction fund, the Minister of Finance, by Order, recognises:
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 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.
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:
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:
All Authorised and Registered funds are required to satisfy Proceeds of Crime (Anti-Money Laundering/ Anti-Terrorist Financing) Regulations 2008. As such, the Authority may require the fund to file AML/ATF information disclosing the contact details for the Compliance Officer and Money Laundering Reporting Officer, along with a copy of the Board approved AML/ATF Policies and procedures.