Investment Funds Act 2003
November 2014

FOREWORD

This Explanatory Note is not intended to provide a technical legal analysis of the provisions of the Investment Fund Act, 2003.

We have focused only on the main provisions of the Investment Funds Act, 2003 as it relates to investment funds and have intentionally omitted explanations of various other sections of the legislation which we believe are not of primary concern to this topic.

Unless otherwise stated all references to "$" are to Bahamian Dollars.  The law is stated as at October 2014.

 

DISCLAIMER

The contents of this publication are intended to be only an aid to understanding the legislation reviewed in this Explanatory Note.  The contents do not in any way constitute legal advice to any person for payment or otherwise and the partners of the firm of Lennox Paton do not and will not in any way accept responsibility or liability for any loss or damage caused by or arising from reliance on the information contained herein.

Persons reading this publication are reminded that where a decision is to be made which depends for its correctness on the effect of the new legislative regime discussed herein or on any other legislation or Common Law rules, professional advice should be sought from the firm of Lennox Paton or any other firm of qualified legal professionals.

 

INVESTMENT FUNDS ACT, 2003

INTRODUCTION TO INVESTMENT FUNDS

On the December 15th, 2003 the Mutual Funds Act, 1995 was repealed and the Investment Funds Act, 2003 ("the Act") came into operation. The primary objective of the Act is to provide legislation that is flexible enough to accommodate the needs and growing demands of the financial sector and there have been various amendments to the Act to reflect these changes in the financial sector.

Under the Act an "Investment Fund" is defined as:

"a unit trust, company, partnership or an investment condominium that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits or gains arising from the acquisition, holding, management or disposal of investments."

To be a Bahamas-based investment fund a nexus to The Bahamas must also be established.

For a unit trust:

  • the trustee or the administrator, is either a company incorporated or registered in The Bahamas or a person who has a place of business in The Bahamas or uses an address in The Bahamas; or
  • the trust instrument is governed by the laws of The Bahamas; or

For a company:

  • it is incorporated or registered in The Bahamas; or
  • the administrator, is either a company or companies incorporated or registered in The Bahamas or one or more companies or individuals any one of whom has a place of business in The Bahamas or which uses an address in The Bahamas; or

For a partnership:

  • one or more of the general partners is incorporated or registered in The Bahamas or is a person residing in The Bahamas or uses an address in The Bahamas; or
  • the partnership articles are governed by the laws of The Bahamas.

For an investment condominium:

  • it is established and registered in The Bahamas.

The definition of an investment fund does not include a unit trust, a company or a partnership where the holder of equity interests does not have the option to redeem his equity interests or require the issuer to repurchase his equity interests.  However, these closed end structures do have the option to elect to be licensed as an investment fund. An Investment condominium must be licensed as an investment fund whether the holders of equity interests have the right to redeem or not.

 

TAX & EXCHANGE CONTROL EXEMPTIONS

Under the Trustee Act, no income tax, capital gains tax, estate tax, inheritance tax, succession tax, gift tax, rate, duty levy or other charge is payable by any beneficiary who is treated as non-resident for Exchange Control purposes in respect of any distribution to him by the trustee of any trust.  Further the Exchange Control Regulations will not apply to any settlor, grantor, donor or beneficiary who is treated under the Trustee Act as non-resident for Exchange Control purposes.

Under the Exempted Limited Partnership Act, 1995 an exempt limited partnership registered under that Act or a partner thereof shall not be subject to any business license fee, income tax, capital gains tax or any other tax on income or distributions accruing to or derived from such partnership or in connection with any transaction to which that partnership or partner, as the case may be, is a party. The Exchange Control Regulations Act shall not apply to exempt limited partnerships registered under this Act or to any transaction of a partner thereof unless the partner is resident in the Bahamas pursuant to the Exchange Control Regulations.

Under the International Business Companies Act, 2000 the Exchange Control Regulations shall not apply to a company incorporated under that Act provided that the operations are exclusively overseas.

In addition, a company incorporated under the International Business Companies Act shall not be subject to any business licence fee, income tax, corporation tax, capital gains tax or any other tax on income or distributions accruing to or derived from such company or in connection with any transaction to which that company or shareholder is a party.

No estate, inheritance, succession or gift tax rate, duty, levy or other charge is payable in The Bahamas with respect to any shares, debt obligations or other security of that company or shareholder.

Under the Investment Condominium Act provided no resident of The Bahamas pursuant to Exchange Control Regulations Act has an interest in the investment condominium formed under such Act it is not subject to any business license fee, or any other tax on income on distributions accruing to or derived from such investment condominium or in connection with any transaction to which that investment condominium or participant is a party.

 

THE SEGREGATED ACCOUNTS COMPANIES ACT, 2004

This Act will enable both companies incorporated under the Companies Act, 1992 and companies incorporated under the International Business Companies Act, 2000 engaged in investment fund business, with the consent of the Securities Commission (the "Commission") and/or investment fund administration, where applicable, to be registered as segregated accounts companies.

Investment funds in The Bahamas registered as segregated accounts companies will be able to set up accounts containing assets and liabilities that are legally separated from the assets and liabilities of the investment fund's ordinary account thus allowing the assets of one account to be protected from the liabilities of another account.

This ability to segregate accounts removes the need to use separate companies for each investment strategy whilst affording each segregated account the same limited liability that would be obtained if separate companies were used.

In addition the segregated accounts company structure enables an investment fund to be structured whereby each investor has their own segregated account.

 

CLASSIFICATIONS OF INVESTMENT FUND

The Act provides for four classes of investment fund, these are as follows:

1) The Standard Fund

Standard Funds are similar to regulated funds under the repealed Mutual Fund legislation and are designed to operate as a traditional collective investment scheme. A Standard Fund is highly regulated as it is anticipated that it will be offered to the general public and may only be licensed by the Commission.

2) The Professional Fund

Designed for the sophisticated investor and may only be offered to the following categories of person:

(i) any bank or trust company licensed under the Bank and Trust Companies Regulation Act or licensed pursuant to the laws of another jurisdiction, whether acting in its individual or fiduciary capacity;

(ii) any registered firm under the Securities Industry Act or pursuant to the laws of another jurisdiction

(iii) any insurance company licensed under the Insurance Act or licensed pursuant to the laws of another jurisdiction;

(iv) any investment fund licensed or registered under this Act or regulated pursuant to the laws of another jurisdiction;

(v) any natural person whose individual net worth, or joint net worth with the persons spouse exceeds one million dollars ($1,000,000);

(vi) any natural person who had an individual income in excess of two hundred thousand dollars ($200,000) in each of the two most recent years or joint income with that persons spouse in excess of three hundred thousand dollars ($300,000) in each of those years and has a reasonable expectation of reaching the same income level in the current year;

(vii) any trust with total assets in excess of five million dollars ($5,000,000);

(viii) any entity in which all the equity owners satisfy one of the requirements in the above paragraphs (i) to (vii); or

(ix) any entity with net assets in excess of five million dollars ($5,000,000);

The licensing process for a Professional Fund may be much faster than that of a Standard Fund as an unrestricted investment fund administrator can license a Professional Fund. However, the Commission has undertaken to licence Professional Funds within 72-hours.

3) The SMART Fund

Officially known as the Specific Mandate Alternative Regulatory Test Fund.  A SMART Fund must satisfy certain prescribed parameters and requirements of a category, class or type of investment fund. At present the Commission has pre-approved seven templates and has published the parameters for them in approved rules. A SMART Fund that meets the requirements prescribed in one of the pre-approved rules may be licensed by an unrestricted investment fund administrator or the Commission.

Financial institutions or professional advisors may also submit written proposals to the Commission for the approval of additional templates and on approving such additional templates the Commission shall prescribe Rules for that type of Smart Fund.

4) The Recognised Foreign Fund

An investment fund (i) whose equity interests are listed on a securities exchange (including an over-the-counter market) prescribed by the Commission by notice in the Gazette and the investment fund is not licensed in The Bahamas or (ii) an investment fund licensed or registered, in a jurisdiction prescribed by the Commission by notice in the Gazette and such investment funds is not suspended from operation or (iii)  an investment funds incorporated or established and in good standing in a jurisdiction prescribed by the Commission by notice in the Gazette.

 

THE STANDARD FUND & THE PROFESSIONAL FUND

Licensing Requirements

The offering document of a Standard Fund and Professional Fund shall contain the following information:

(i) Details of fund name, registered address, principal office address and place and date of the creation of the investment fund;

(ii) Investment objectives and restrictions - summary of the investment and borrowing restrictions;

(iii) Risks a description of the risks involved in an investment in the investment fund;

(iv) Operators and principals - the names and registered addresses of the parties related to the investment fund and the auditors, the attorneys and the bankers;

(v) Characteristics of equity interests - description of the different types of equity interest and their currency, the minimum investment, form of certification, and the frequency of valuation and dealing;

(vi) Application and redemption procedures - procedure for subscribing and redeeming equity interest in the investment fund;

(vii) Valuation of property and pricing - methodology and when it can be changed;

(viii) Distribution policy - details of the distributions of dividends, if applicable;

(ix) Fees and charges - level of fees and who the fees are payable by;

(x) Reports and accounts date of financial year-end and date when annual audit reports will be distributed to investors;

(xi) Warnings - prominently display warnings reading substantively as follows:

  • A warning that states if you are in doubt about the contents of this offering document, you should consult your financial advisor; and
  • A warning that the price of equity interests in the investment fund and the income from them (where income is distributed) may be subject to market fluctuations.

(xii) General information list of constitutive documents and availability for inspection;

  • Date of publication;
  • Acceptance of responsibility for the accuracy of the information in the Offering document;
  • Disclaimer, that the Commission does not take responsibility for the financial soundness of the fund or for the correctness of any statements made or opinions expressed in this regard.

 

The constitutive documents of a Standard Fund and Professional Fund shall contain the following information:

(i) Name of investment fund;

(ii) Governing law;

(iii) For Unit Trust Schemes only

  • A statement that the deed is binding on each investor as if he had been a party to it and so to be bound by its provisions and authorizes and requires the trustee and the administrator to do as required of them by the terms of the deed;
  • A provision that an investor is not liable to make any further payment after he had paid the purchase price of his units and that no further liability can be imposed on him in respect of the units which he holds or owns; and
  • A declaration that the property of the investment fund is held by the trustee on trust for the investors of the units pari passu according to the number of units held or owned by each investor.

 

(iv) Investment and borrowing restrictions - summary of the investment and borrowing restrictions;

(v) Suspension and deferral of dealing Provisions for:

  • the deferral and suspension of dealing; and
  • the maximum interval between the applicable redemption date and the payment of redemption proceeds.

(vi) Meetings manner in which meetings are conducted to be in accordance with the Act;

(vii) Distribution policy and date - Provision for the payment of annual income, if any, and when any such distribution can be made;

(viii) Annual accounting period;

(ix) Base currency;

(x) Modification of the constitutive documents to include provisions that amendments to the constitutive documents can only be done in accordance with the Act;

(xi) Termination of investment fund; and

(xii) Exemption standard - provisions that nothing in the constitutive documents may provide that the operator, custodian, investment fund administrator, investment manager or investment advisor of the investment fund shall be exempted from any liability to investors imposed under Bahamian law in the case of willful default.

The following information can be included in the Memorandum and Articles of Association, the Trust Deed or Partnership Articles, as applicable or in the Material Agreements of the investment fund:

(i) Role of custodian statement to list the duties of the custodian in accordance with the Act;

(ii) Role of Investment Fund Administrator Statement to list the duties of the administrator and manner of retirement in accordance with the Act; and

(iii) Fees and charges level of fees and charges payable by an investor and by the investment fund.

COMMON REQUIREMENTS FOR STANDARD FUNDS AND PROFESSIONAL FUNDS

These are as follows:

1) Requirement to appoint an administrator licensed in The Bahamas (except for self- administered funds);

2) Ongoing obligation to file current Offering Document with the Commission;

3) Ongoing obligation to advise the Commission of any changes to the information contained in the application or information given to the Commission;

4) Make its annual audited financial statements available to investors within six months of the financial year-end;

5) File Annual Declaration with the Commission to confirm that all information filed with the Commission is current and applicable; and

6) Pay the Commission the Annual License fee of $1,300.00 or $1500.00 where self-administered.

 

THE SMART FUND

SMART Funds are not required to have a full Offering Document, SMART Funds are generally  required to have a term sheet, as detailed below, however certain SMART funds  can even dispense with this requirement if they so wish.

There are seven approved templates for SMART Fund:

 

 

SFM 001

Where the financial institution has a Discretionary Management Agreement with its customers the financial institution may set up an investment fund with such customers, this would meet the requirements of a SFM001.

A term sheet is not required; however, if a term sheet for the offering of equity interests in a SFM 001 is prepared it must contain the following information:

  • The name of the investment fund and date established;
  • Structure of the investment fund;
  • Name and address of operators and parties related to the investment fund;
  • Nature of equity interests;
  • Investment objective and policy;
  • Dealing policy;
  • Distribution policy;
  • A statement that the investment fund is not required to have its financial statements audited but that the annual unaudited statements and the semi-annual performance statements will be filed with the Commission;
  • Fees and expenses;

 

Termination;

  • A statement that the assets of the investors will not be subject to fees at both the discretionary management level and the investment fund level; and
  • A statement that the investment fund meets the requirements of a SFM 001 Fund as aforementioned.

An investment fund licensed as a SFM 001 must file with the Commission performance reports every six months summarizing the subscriptions and redemptions, the NAV at the end of the relevant period and the asset allocation of the fund. In addition to this the unaudited financial statements of the investment fund shall be filed with the Commission annually.

The Operators must certify annually to the Commission that the investment fund is qualified to operate as a SFM 001 and pay the annual fee of $1,300.00 or $1,500.00 where self-administered.

 

SFM 002

 

An investment fund which has no more than 10 investors and each such investor would qualify to be an investor in a Professional Fund and the majority of the investors have the power to appoint and remove operators of the investment fund, it would meet the requirements of a SFM 002.

  • The term sheet for the offering of equity interests in a SFM 002 must contain the following information:
  • The name of the investment fund and date established;
  • Structure of the investment fund;
  • Name and address of operators and parties related to the investment fund;
  • Nature of equity interests;
  • Investment objective and policy;
  • Dealing policy;
  • Distribution policy;
  • A statement that the financial statements of the investment fund shall be audited annually unless unanimously waived by the holders of equity interests in the investment fund and where there is such waiver a performance report shall be filed with the Commission within six months of the waiver and every six months thereafter as long as the waiver exists;
  • Fees and expenses;
  • Termination; and
  • A statement that the investment fund satisfies the requirements of a SFM 002 as aforementioned.

 

The Operators must certify annually to the Commission that the investment fund is qualified to operate as a SFM 002 and pay the annual fee of $1,300.00 or $1,500.00 where self- administered.

 

SFM 003

Where a fund was operating as an exempt fund under the Mutual Funds Act, 1995 by reason of the equity interests being held by not more than 15-investors, the majority of whom were able to appoint or remove the Operators of the fund, it must now be licensed as an SFM 003. These funds were to be registered as SFM 003 funds by 16th September, 2004.

 

SFM 004

An investment fund operating as a private investment company with no more than five investors would meet the requirements of an SFM 004.

 

A term sheet is not required, however if a term sheet for the offering of equity interests in a SFM 004 is prepared it must contain the following information:

  • The name of the investment fund and date established;
  • Structure of the investment fund;
  • Name and address of operators and parties related; to the investment fund;
  • Nature of equity interests;
  • Investment objective and policy;
  • Dealing policy;
  • Distribution policy;
  • A statement that the financial statements of the investment fund shall be audited annually unless unanimously waived by the holders of equity interest in the investment fund and where there is such waiver a performance report shall be filed with the Commission within six months of the waiver and every six months thereafter as long as the waiver exists;
  • Fees and expenses;
  • Termination; and
  • A statement that the investment fund satisfies the requirements of a SFM 004 as aforementioned.

 

 

The SFM 004 is not required to appoint an administrator, the operators may administer the SFM 004 but such investment fund will not be treated as self-administered.

The Operators must certify annually to the Commission that the investment fund is qualified to operate as a SFM 004 and pay the annual fee of $1,300.00 or $1,500.00 where self-administered.

 

SFM 005

 

This is similar to the SFM 004 with the following differences:

i. investors must qualify to be investors in a Professional Fund;

ii. SFM 005 Fund must appoint an administrator that is either a) licenced as an investment fund, fund administrator in The Bahamas or b) a financial institution (as defined in the regulations) in The Bahamas or a recognised foreign jurisdiction.

 

SFM 006

Holders of equity interests in a specified investment fund may establish a SFM 006, in which no more than 30% of the gross assets of the specified investment fund may be invested in the SFM 006.

To operate as a SFM 006, the investor of the investment fund must be a person to whom a professional fund may be offered.

A term sheet is required and must contain the following information:

  • The name  of the investment fund, date established and reason for the investment fund;
  • Name and address of operators;
  • Nature of equity interests;
  • Redemption policy including a statement that redemptions shall only occur with prior written notice by the operators to all shareholders of record giving a notice period within which shareholders shall redeem their shares;
  • Name and address of all parties related to the Fund;
  • A statement that all the holders of the equity interests, creditors of the fund and assets are the same as those of another specified investment fund or group of funds (excluding recognised foreign funds);
  • A statement that no new subscribers are permitted to enter into the Fund once launched;
  • Statement that the Fund shall not be audited annually and a performance report or management accounts shall be filed every six months with the Commission & each shareholder of record;
  • Statement that the net asset valuation reports are not required and shall only be effected at the discretion of the Operators;
  • Statement by the Operators that they are in possession of satisfactory due diligence on each shareholder of record;
  • Statement that at leave seventy-five percent of the shareholders, who would be the shareholders & creditors of the originating investment fund, approved the establishment of the fund;
  • Statement whether the assets require a custodian or prime broker;
  • Fees & expenses;
  • Termination;

The Operators must certify annually to the Commission that the Fund is qualified to operate as SFM 006 and pay the annual fee of $1,300.00 or $1,500.00 where self-administered.

Under its current policy guidelines the Securities Commission of The Bahamas may licence a SMART Fund which is restricted to investors to whom a professional fund may be offered within 72-hours.

 

SFM 007

 

An investment fund limited to having no less than 1 investor and no more than 50 investors who hold equity interests in the fund and the minimum initial investment of every investor in the fund is US$500,000.00.

An offering document or term sheet is required and must contain the following information:

  • The name of the investment fund and date established;
  • Structure of the investment fund;
  • Name and address of operators and parties related; to the investment fund;
  • Nature of equity interests;
  • Investment objective and policy;
  • Dealing policy;
  • Distribution policy;
  • A statement that the financial statements of the investment fund shall be audited annually unless unanimously waived by the holders of equity Interest in the investment fund and where there is such waiver a performance report shall be filed with the Commission within six months of the waiver and every six months thereafter as long as the waiver exists;
  • Fees and expenses;
  • Termination;

 

A statement that "The fund is licensed as a SFM 007 pursuant to the Investment Funds Act, operating as a fund - (1) with a minimum of one investor and a maximum of fifty investors holding equity interests in the fund; (2) where the minimum initial investment per investor in the fund is five hundred thousand United States Dollars".

  • A statement that "The operators of the fund accept responsibility for the information contained in the offering document or term sheet as being accurate".

The SFM 007 is not required to appoint an administrator. Where the fund does not appoint an administrator the operator of the fund will administer the fund but it will not be treated as self-administered.

 

THE RECOGNISED FOREIGN FUND

Registration requirements:

In order to be registered as a Recognised Foreign Fund an application must be made to the Commission stating the following:

  • Name;
  • Details of registration with any regulatory authority;
  • Details of parties related to the investment fund;
  • Registered address and business address;
  • Name and addresses of any contact persons for the Securities Commission;
  • Copy of the license, or documents confirming listing on a prescribed securities exchange (if applicable); and

 

  • Fee in the amount of $200.00
  • Document confirming the fund's formation and good standing in a prescribed jurisdiction (if applicable)

 

An investment fund (i) whose equity interests are listed on a securities exchange (including an over-the-counter market) prescribed by the Commission by notice in the Gazette and the investment fund is not licensed in The Bahamas or (ii) an investment fund licensed or registered, in a jurisdiction prescribed by the Commission by notice in the Gazette and such investment funds is not suspended from operation or (iii)  an investment funds incorporated or established and in good standing in a jurisdiction prescribed by the Commission by notice in the Gazette.

A Recognised Foreign Fund shall renew its registration annually by submitting to the Commission on or before the 31st January of each year a written declaration in the prescribed form stating all information filed with the Commission is current and applicable and paying the annual registration fee of $900.00.

In addition, failure of an investment fund to:

  • renew its license or registration on an annual basis by submitting the required written declaration and annual license fee;
  • advise the Commission of any material change;
  • have its accounts audited annually where required to do so and provide the Licensor with the same within 6 months of the financial year end.

 

is an offence subject to a fine of $75,000 or to imprisonment for 2-years or both.

 

NON-BAHAMAS BASED FUND

A non-Bahamas based investment fund:

  • Does not satisfy the nexus requirements to be deemed a Bahamas based investment fund;
  • Is sold in or from The Bahamas; or
  • Appoints a custodian, investment manager or investment advisor incorporated, registered or operating in The Bahamas.

 

The Commission must be advised of any other form of nexus to The Bahamas within 14-days of such relationship.

In order to sell its equity interests in or from The Bahamas an approved representative must be appointed and an application made to the Commission.

A non-Bahamas based investment fund shall renew the appointment of its representative in The Bahamas on an annual basis by submitting to the Commission on or before the 31st January of each year a written declaration in the prescribed form and the prescribed annual fee of $100.00.

 

Bahamas Representative

A representative shall be:

  • a counsel and attorney-at-law or a firm of counsel and attorneys-at-law in The Bahamas;
  • an accountant or firm of accountants in The Bahamas;
  • a bank or trust company licensed pursuant to section 4 of the Banks and Trust Companies Regulation Act;
  • an investment fund administrator licensed under the Investment Funds Act;
  • a registered firm under the Securities Industry Act; or
  • such other person as the Commission may approve.

 

 

A representative may be authorized to:

  • receive applications and money for equity interests;
  • issue receipts in respect of application moneys received for equity interests;
  • issue contract notes to investors in accordance with the terms of the investment fund;
  • receive redemption notices, transfer instructions and conversion notices from investors for immediate transmission to the administrator of the investment fund;
  • accept any notice or correspondence which investors may wish to serve on the investment fund;
  • notify the Commission immediately if subscriptions or redemptions of equity interest cease or are suspended;
  • make the constitutive documents available for inspection by investors in The Bahamas free of charge at all times during normal office hours at its place of business and make copies of such documents available upon the payment of a reasonable fee;
  • provide investors in The Bahamas with information on the Investment Fund including the investment fund's financial reports and sales literature;
  • deliver to the Commission, if it so requests, all accounts and records relating to the sale and redemption of equity interests of the investment fund in and from The Bahamas; and
  • represent the investment fund in relation to matters in which any investor resident in The Bahamas has a pecuniary interest or which relates to the equity interest sold in or from The Bahamas.

 

 

SELF-ADMINISTERED FUNDS

A Self-Administered Investment Fund is an investment fund administered by its own operators who are responsible for the functions of the investment fund administrator.

Self-Administered Investment Funds may be licensed by the Commission only. Where the principal office of the Self-Administered Investment Fund is outside The Bahamas the investment fund shall at all times have a place of business in The Bahamas where duplicate corporate and accounting records are available.

 

DORMANT FUND

An investment fund that ceases trading and liquidates its assets, without formally liquidating its structure is deemed a Dormant Investment Fund and must inform the Commission within 14-days of becoming a Dormant Investment Fund.

The Commission will suspend the investment funds license or registration and publish in the Gazette that such license or registration has been suspended.

A Dormant Investment Fund may remain dormant for 1-year or such period as extended by the Commission not exceeding 18 months, within which time must apply to the Commission to re-launch its operation failing which the Commission may revoke the license or registration.

 

THE AUTHORITY OF THE SECURITIES COMMISSION

1) Maintain a general overview of the operation of investment funds and the parties related to investment funds;

2) On a regular basis conduct on site and off site examinations of the business of investment funds and parties related to investment funds;

3) May instruct any investment fund to have its accounts audited at any time and produce submitted its audited financial statements to the Commission within a specified time period;

4) May request a party related to an investment fund to give any such information or explanation in relation to an investment funds as the Commission may reasonably require in the performance of its duties under the Act;

5) May request a party related to an investment fund to give it access to its records relating to the investment fund;

6) May revoke the license or registration of an investment fund where the investment fund has ceased to carry on its business or if the investment fund becomes insolvent or goes into liquidation or is wound up or otherwise dissolved;

7) May apply to the Supreme Court of The Bahamas for an order compelling a person to comply with any order, cease contravening the Act, to rectify any omission or for the investment fund to be wound up dissolved, liquidated or terminated;

8) May attach conditions to a license or registration for 90-days but shall give the investment fund not less than 7 days' notice of their intention to do so;

9) May conduct Regulatory hearings; and

10) May impose sanctions, remedies or other relief as a result of the settlement of a dispute.

 

NOTE WORTHY PROVISIONS

Investment Fund Operators

The Operator shall be a person that is fit and proper for its duties.  Where the investment fund is a Unit Trust the Operator shall be:

  • An unrestricted Bahamian bank or trust company; such other bank or trust company or financial institution in a prescribed jurisdiction satisfying the requirements as prescribed by the Commission;
  • such other person as approved by the Commission.

Where the investment fund is a Company there shall be a minimum of two Operators.  Corporate Operators are permitted with the prior consent of the Commission.

Where the Investment fund is an investment condominium the operation shall be the administrator of that condominium or the governing administrator.

An operator shall:

  • Ensure that the sale, issue, repurchase, redemption, and cancellation of equity interest of the investment fund are carried out in accordance with the provisions of the Regulations and the Constitutive Documents;
  • Ensure that the value of the equity interest is calculated in accordance with the provisions of the Constitutive Documents;
  • Carry out the proper instructions of the investment manager or investment fund administrator;
  • Ensure that the investment and borrowing limitations set out in the Constitutive Documents are complied with;
  • Ensure that the investment fund is audited annually or as required and cooperate with the auditors; and
  • Not issue equity interest or evidence of such equity interest unless subscription moneys have been paid.

 

 

Custodian

The Custodian of an investment fund must be independent of the Operator and Administrator unless a specific exemption is received from the Licensor or they are deemed independent pursuant to the Regulations.

A Custodian of an investment fund must be one of the following:

  • Bank and Trust Company licensed by the Central Bank of The Bahamas;
  • Financial institution in a prescribed jurisdiction; or
  • Such other person as approved by the Commission.

 

An investment fund must appoint one or more Custodians unless the Operators certify in writing that the structure of the investment fund or the nature of the assets of the investment fund are such that that do not require that a custodian be appointed to hold the assets.

 

Approved Auditors

The auditor of an investment fund must:

1) be approved by the Commission;

2) satisfy the Commission that they are members of The Bahamas Institute of Chartered Accountants in good standing or members in good standing of an international accounting body prescribed by the Commission.

 

FEES

Application Fee for a:

-Standard Fund;

-Professional Fund- with Administrator;

-Professional Fund-Self-Administered;

-SMART Investment Fund-with Administrator;

-SMART Investment Fund-Self-Administered;

 

$1,000.00

Fast Track Application Fee for a:

-Professional Fund- with Administrator;

-Professional Fund-Self-Administered;

-SMART Investment Fund-with Administrator;

-SMART Investment Fund-Self-Administered;

 

$2,000.00

Initial registration fee Recognized Foreign Fund

 

$200.00

Annual license fee for payable in the first year to be pro-rated from the date of licensing to Dec 31 of that year for:

Standard Fund;

-Professional Fund- with Administrator;

-SMART Investment Fund-with Administrator;

 

$1,300.00

Annual license fee for Self-Administered Fund payable in the first year to be pro-rated from the date of licensing to Dec 31 of that year for:

-Professional Fund-Self-Administered;

-SMART Investment Fund-Self-Administered;

 

$1500.00

Annual Recognized Foreign Fund

 

$900

Application fee for the approval of re-launching a dormant fund

$650.00

GLOSSARY

"CONSTITUTIVE DOCUMENTS" - The principal documents governing the formation of the investment fund, and includes the trust deed in the case of a unit trust, the memorandum and articles of association in the case of a company and the partnership agreement in the case of a partnership and all material agreements.

"EQUITY INTEREST" - A share, trust unit, or a partnership interest that carries entitlement to participate in the profits and gains of the issuer thereof and that is redeemable or re-purchasable at the option of the investor.

"INVESTOR" -A person who holds or owns an equity interest issued by an investment fund.

"LICENSOR" - The Securities Commission of The Bahamas (the "Commission") or a holder of an unrestricted investment fund administrator's license.

"OPERATOR" - is defined as follows:

1. where the investment fund is a unit trust, a trustee of that trust;

2. where the investment fund is a partnership, a general partner in that partnership; or

3. where the investment fund is a company, a director of that company;

4. where the investment fund is an investment condominium the administrator or governing administrator.

"OFFERING DOCUMENT" - A document or series of documents in the basis of which equity interests in the investment fund are offered for sale or persons are invited to subscribe for or purchase equity interests in the investment fund.

 

"PARTIES RELATED TO AN INVESTMENT FUND"

An administrator, operator, promoter, custodian, investment manager or investment advisor.

 

For further information please contact:

Michael Paton, Partner

Email: mpaton@lennoxpaton.com

 

Or

 

Michelle E. Neville-Clarke, Partner

Email: mneville-clarke@lennoxpaton.com

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