Alex Erskine
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Bermuda’s international business community has, as one of its main objectives, the need to ensure that the Island remains a
jurisdiction where best international business practices are undertaken in conjunction with the fundamental principle, ‘know
your customer’. There is also
keen awareness on the part of Bermuda’s regulator, the Bermuda Monetary Authority (“the
BMA”), that laws and regulations need to facilitate the successful development of new ideas. Bermuda takes pride in its legislative framework which actively encourages dialogue with its business community. Over the years, this interaction has yielded fundamental reforms to Bermuda’s body of financial services and company law. It is worth noting for example that:
- There is no longer a requirement to have Bermuda resident Directors.
- There is no longer a requirement to hold qualifying shares in a Bermuda company.
- There is no longer a requirement for prior ministerial consent for the formation of a mutual fund.
- The minimum capital of a mutual fund has been reduced to US $1.00.
- There is no longer a requirement for mutual funds to receive regulatory classification at the same time as they areincorporated.
- There is no longer a requirement for a Bermuda-approved mutual fund to have a licensed investment advisor. Such persons are exempt under the Bermuda Investment Business Act 2003.
- There is no longer a requirement for the prospectus to be filed prior to the commencement of a public offering of shares of a Bermuda company.
- There is no longer a requirement for the BMA to give its prior consent for the issue and transfer of non-votingsecurities.
- There is no longer a requirement for the BMA to give its prior consent for the transfer of any securities to an affiliate.
- There is also no longer a requirement for the BMA to give its prior consent for security arrangements whereby the shares of a Bermuda Company may, pursuant to the security arrangements, be transferred to a licensed bank incorporated in certain approved jurisdictions.
It is not unusual to find that major market participants are unaware of some, or indeed all of the fundamental reforms thathave been listed above. This is much to the detriment of Bermuda’s reputation, which has in some quarters, been unjustifiablyportrayed as unnecessarily wedded to regulation at the expense of pragmatic change.
Bermuda continues to develop fund structures which provide scope for risk based regulation by allowing the sophisticated market to benefit from ‘lighter touch regulation’.
At the end of last year, Bermuda’s Finance Minster signed regulations which introduced a new form of collective investment scheme which will be exempt from Bermuda’s Collective Investment Scheme Regulations (the “Exempted Scheme”). Only schemes limited to sophisticated investors may be granted this exempted status, provided that other conditions stipulated in the regulations are met. It is likely that other offshore jurisdictions will follow Bermuda’s lead in this regard.
The Exempted Scheme is part of Bermuda’s response to potential difficulties to which Bermuda’s funds industry was exposed as a result of the EU Savings Directive, and is a further product of close collaboration between government, regulators and industry which has typified Bermuda’s approach to legislation.
Bermuda now offers four distinct types of collective investment schemes to the global investment community. Recognised schemes which are retail; standard schemes which are available to both the retail sophisticated fund market; institutional schemes, which, are available to sophisticated investors only, but are regulated; and Exempted Schemes which are unregulated.
The demands of the market place remain a key component in dictating the pace of innovation and legislative reform. There is inevertheless a developing consensus within Bermuda’s fund industry that it needs to set the pace of change rather thanrespond to it. Bermuda must be prepared to meet this challenge.
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