The changes found in the Investment Funds Amendment Act 2010 are designed to “strike a balance between securing appropriate protection for investors in Bermuda funds, while not imposing an undue regulatory burden on the industry.”
The key changes include extending the definition of “service provider” to include auditors appointed to a fund. As a result, auditors are now required to comply with the “fit and proper” tests set out elsewhere in the Act.
Operators of exempted funds and their service providers are required to be “fit and proper persons to act as such.” Funds are now required to have a recognized fund administrator, an auditor and a Bermuda resident officer or trustee or resident representative who has access to the books and records of the investment fund. Exempted funds are also required to appoint an investment manager, registrar, custodian and/or prime broker.
Under the amended act, fund administrators must notify the Bermuda Monetary Authority in advance when there is a prospective change of control and the Authority now has power to object to a change in control to prevent it happening or to object to existing controllers where they are no longer deemed to be fit and proper to be controllers.
The amended also provides for a right of appeal in cases where the Authority has exercised this power to object.
Fund administration businesses in Bermuda must also meet the “four-eyes” criterion, that is, they must be directed by at least two people to ensure no one person exercises “excessive” control.
Finally, fund officers must be “fit and proper” at the time of authorization to ensure that the business of the fund is being conducted in a prudent manner.