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Bermuda passes new Investment Funds Act

Bermuda's House of Assembly has passed the Investment Funds Act 2006, which sets out the regulatory regime for public funds and refines the framework for non-public, institutional funds.

Under the Act, fund administrators in Bermuda will, for the first time, be licensed. Fund administrators are currently regulated under the Proceeds of Crime Act 1977 but the new Act will bring in fit and proper requirements for staff and ensure standards for systems and procedures.

The Act will also introduce a new class of funds, known as "administered funds", which will benefit from a lighter level of regulation on the grounds that the administrator is based in Bermuda and subject to codes of conduct and fund rules that will ensure the proper level of governance of the fund.

Finance Minister Paula Cox said: "Regulation has become more important to the ongoing successful development of this sector. It is important that these service providers are recognised to have proper personnel operating their businesses with the proper systems in order to continue to secure business from all parts of the world."

Other provisions contained in the Bill include:

· a clearly-defined distinction between public (retail) funds and institutional or non-public funds;

· refinement of powers to exclude funds from particular requirements to provide certainty as to what minimum requirements must be met by fund operators, and to ensure that funds of a 'private nature' are not captured;

· the inclusion of partnerships, as well as mutual fund companies and unit trusts;

· clearer definition of the rules for the appointment of service providers and delegation of powers;

· unit trustees to be enabled to hold property in segregated accounts, so as to provide trustees with the same benefits as companies operating with segregated accounts.

The Act also clarifies rules for prospectuses of funds, enhances the powers of the Bermuda Monetary Authority to require more information and to inspect, and more clearly defines the requirements and powers for sharing of information with other regulators.

Cox said the legislation would streamline the incorporation process for investment funds and eliminate unnecessary administrative procedures by bringing more clarity and certainty to the authorisation process.

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