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THE REGULATORY ENVIRONMENT IN THE BAHAMAS

Securities Commission of the Bahamas


The Securities Board Act, 1995 created The Securities Board. The Securities Industry Act, 1999 repealed the Securities Board Act and changed the name of the Securities Board to the Securities Commission of The Bahamas.

Securities Commission of the Bahamas (contd)


The Commission is a statutory body mandated to administer the Securities Industry Act, 1999 and the Securities Industry Regulations, 2000 and also the Mutual Funds Act, 1995 and the Mutual Funds Regulations, 1995.
The Commission is hence responsible for the administration of the Investment Funds Bill.

Functions of the Commission


Formulate principles to regulate and govern mutual funds, securities and capital markets. Maintain surveillance over mutual funds, securities, and capital markets ensuring orderly, fair and equitable dealings. Create and promote conditions to ensure the orderly growth and development of the capital markets. Advise the Minister of Finance regarding mutual funds, securities and capital markets. Perform any other functions prescribed by this Act or any other written law.

Activities of the Commission


Licensing/registration of market participants (including investment fund administrators, broker-dealers, securities investment advisors, brokers, associated persons, facilities, public companies and the stock exchange) Monitoring the activities of registrants/ licencees to ensure compliance with provisions in the legislation (Post Registration/licensing activities) Examining annual audited accounts and interim reports of registrants/ licencees and listed companies for compliance with approved accounting standards and financial reporting requirements

Activities of the Commission (contd)


Compiling statistics pertaining to the industry

Recommendation of policies, guidelines and rules for the Commission (e.g. licensing)
Monitoring developments in the local and international securities markets Field Examiners Conduct on-site inspections on a regular basis (following a rotation system) and for cause

Activities of the Commission (contd)


Investigations Respond to requests for information by local and international regulatory bodies Respond to inquires/reports from investors and potential investors Investigate claims of participation of rogue operators in securities markets Produce information to be distributed to the public via various outlets: printed reports, website and newspapers (e.g. annual/ quarterly reports, booklets, press releases, orders, rules, website)

Regulatory Structure

Bahamas-based Investment Funds


All investment funds with a substantial/direct connection to The Bahamas are Bahamas-based investment funds. Thus any investment fund incorporated, administered, managed etc. in The Bahamas is considered a Bahamas-based fund. All substantive provisions of the Bill relating to investment funds relate to Bahamas-based funds as defined in Section 2 of the Bill.

Non-Bahamas-based Investment Funds


Investment funds with an indirect connection to The Bahamas (e.g. the appointment of a custodian or the fund being sold from the Bahamas) are NonBahamas-based investment funds. Non-Bahamas-based Investment funds intended to be sold in or from the Bahamas must appoint a representative. All other non-Bahamas-based investment funds must notify the Commission of their relationship to the Bahamas

ALL INVESTMENT FUNDS CONNECTED TO THE BAHAMAS IN ONE WAY OR ANOTHER MUST BE REGULATED BY OR REPORTED TO THE COMMISSION.

Types of Investment Funds


Professional Funds to be licensed by the Commission or Unrestricted Investment fund Administrator. SMART Funds to be licensed by the Commission or Unrestricted Investment fund Administrator. Standard Funds will be licensed by the Commission only. Recognized Foreign Funds which will be registered with the Commission only.

SMART Funds
Regulatory control is found initially through the approval of the SMART fund models by the Commission only. The Regulatory Regime of SMART funds is specified in the approval of each model. ALL supervisory, disciplinary and enforcement authority of the Commission will apply to SMART funds as they do to any other regulated investment fund.

Investment Fund Administrators


Administrators are classified as Unrestricted and Restricted Applicants may apply for exemption from licensing or authorization to administer an investment fund.

Regulatory Regime
Investment Funds
Investment Fund Administrators

Investment Funds
Licensed or Registered General Regulatory Obligations Reporting Requirements Special Regulatory Requirements Annual Renewal of Licence or Registration

Investment Funds General Regulatory Obligations


Maintenance of Books and Records
Principal Office Reporting Requirements

Investment Funds Reporting Requirements


Investment funds must all provide the following : Offering Document Material Change Information Annual Audit (except where exempted by Commission)

Investment Funds Special Regulatory Requirements


Surrender of Licence or Registration Transfer to and from the jurisdiction Transfer or termination of Administration Agreement Dormant Funds Winding-up of investment funds

Investment Funds Annual Renewal of Licence and Registration


Annual Declaration

Annual Fee

Investment Fund Administrators


General Regulatory Obligations Financial Requirements Reporting Requirements Special Regulatory Requirements Annual Renewal of Licence or Registration

Investment Fund Administrators General Regulatory Obligations


Maintenance of Books and Records

Financial Requirements
Reporting Requirements

Investment Fund Administrators Financial Requirements


Financial Requirements in terms of requiring administrators to maintain various levels of net worth and professional indemnity insurance, (according to the type of licence they hold) will be prescribed by the Regulations.

Investment Fund Administrators Reporting Requirements


Investment Funds for which it is providing the Principal office. Material Change Information Issues relating to the Investment Funds which it administers. Ensuring compliance with the Bill and Regulations of Funds which it administers. Annual Audits

Investment Fund Administrators Special Regulatory Requirements


Transfer or disposal of shares of the Administrator will require prior approval of the Commission. Change of Directors of Administrator will require prior approval from the Commission.

Investment Fund Administrators Annual Renewal of Licence


Annual Declaration

Annual Fee

Due Diligence
Investment Funds Conducted on all Parties Related to an investment fund. These parties include; the administrator, operator, promoter, custodian, investment manager and investment advisor. Conducted on Auditors, which also have a duty to provide various reports, as stated in Section 45 of the Bill.

Due Diligence (cont)


Investment Funds Administrators Conducted on Shareholders Conducted on Directors Conducted on Senior Management Conducted on Auditors, which also have a duty to provide various reports, as stated in Section 45 of the Bill.

Regulatory Regime
Supervisory Authority

Disciplinary Authority
Enforcement Authority

Supervisory Authority
The Commission has powers to: Conduct on-site and off-site inspections Instruct audits to be conducted Require access to records at any time Require any information to be provided relevant to licencee/registrant.

Disciplinary Authority
The Bill provides the Commission with general powers to conduct: Investigations Regulatory Hearings
(The Bill adopts the procedure for Regulatory Hearings that is provided in the Securities Industry Act, 1999)

Enforcement Authority
The Commission has authority over both regulated and unregulated investment funds. Disciplinary authority is expressly provided to be the same over an unregulated investment fund or investment fund administrator as its authority over regulated investment funds and investment fund administrators.

Administrative Sanctions for any breach of the Act will be as follows: Censure Fines Disgorgement of Profit Restitution Reclassification, suspension, revocation of licence, registration, approval or authorization Substitution of any party related to the fund or administrator Appointment of Advisor/Manager to the fund or administrator Application to the Court for an Order to take other actions Impose any other Justice ordered sanctions or remedies

Enforcement Authority (contd)

Enforcement Authority (cont)


Criminal Sanctions are provided for particular serious breaches which carry sanction ranging from: $10,000 to $150,000 fine Six-month to three-year Prison Terms

Fees
New levels of Fees to be introduced according to the new classifications of investment funds. Investment Funds to pay: Application Fee (non-refundable) Annual Licence/Registration Fee (Pro-rated)

Fees (contd)
Investment Fund Administrators to pay: Application Fee (non-refundable) Annual Licence Fee (Pro-rated) Annual Principal Office Fee, for each investment fund for which it acts as Principal Office Minor additional Administrative Fees to be introduced. (e.g. Approval of new directors and for the registration of representative)

REGULATORY ENVIRONMENT IN THE BAHAMAS

Presentation by The Securities Commission of the Bahamas

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