The Government is seeking to regulate the mutual funds industry to attract investments in The Bahamas.
The plan is also to put The Bahamas ahead of its main regional competitor, the Cayman Islands, which demonstrates innovative product development, promotional flair, professional competence, and legislative and regulatory support.
“We in The Bahamas, must now aspire with renewed energy and sharper focus,” Minister of Financial Services and Investments Allyson Maynard-Gibson told a meeting between the Bahamas Financial Services Board and the Bahamas Association of Mutual Fund Association on Monday at the British Colonial Hilton.
In an extensive presentation on the proposed Investment Funds Bill 2003, Mrs. Maynard-Gibson said: “This legislation that we are gathered to consider today exemplifies that renewed energy and sharper focus that will result in the creation of a force with which our competitors will have to reckon.”
She hailed the bill as a progressive piece of legislation that she believes has succeeded in addressing the fundamental flaws of the current act.
Most notable, however, was the crafters’ ability to achieve a “genuine” regulatory structure while providing an environment that will not stifle the flexibility and creativity of an industry, which is so fast moving, she said.
“This delicate balance could only have been achieved through a process, which involved all of the stakeholders of the legislation and I submit this bill to you ladies and gentleman as a manifestation of the benefits that can be achieved as a result of a marriage between the industry and government,” she said.
The aim of the legislation is to present a workable regulatory structure that does not fetter the growth of the industry but improves the business framework of this aspect of the financial services sector.
The Investment Funds Bill creates a new licensing structure for funds, which means that all Bahamas-based Funds (funds incorporated, administered or whose investment adviser or investment manager is located in the Bahamas) must be licensed or registered with the commission.
Nonï¾–Bahamas-based funds, depending on their relationship to the Bahamas, must either appoint a representative registered with the commission or notify the commission of the relevant relationship.
The practical effect is that the “exempt fund” structure will be no more; instead all funds operating in the jurisdiction will be “regulated” or “submitted” to the commission in one way or another.
“The efficiency of the Bahamian licensing process has however been preserved, as investment fund administrators will continue to be empowered to license funds.”
She said the jurisdiction has been fortunate that there have been no “scandals” attributed to exempt entities, this exemption has been “a thorn in the side” of regulators as there was no way to insist that those privileged to have the benefit of the exemption comply with even minimum standards of regulation.
“The fact that much of what will now be regulatory requirements were procedures in place as a matter of practice by many of the banks and trusts, provided the Bahamas with a de facto regulatory structure over bank and trust administrators which protected the jurisdiction from scandal. De facto regulation by practice, however, is not an internationally recognised form of regulation,” Mrs. Maynard-Gibson said.
With regard to disciplinary matters, the bill provides the commission with “administrative sanctioning” powers, which allow it to deal with breaches of the act by both, regulated and unregulated funds. These powers, though existing in the current legislation are unclear and limited. The implementation of the current provisions is cumbersome and in many instances the only real recourse available to the commission is through the criminal system.
“Administrative sanctioning powers are an international regulatory norm and thus The Bahamas in this legislation is essentially catching up to its competitor jurisdictions” Mrs. Maynard-Gibson said.
“The ability to deal swiftly and effectively with breaches of legislation by registrants or to take action against ‘rogue’ market participants is essential to a well-regulated jurisdiction.”
She said the bill is not “selfish” as it does not only address the interests of its main stakeholder, the commission.
The bill further provides a new fee structure for both investment fund administrators and investment funds that are more realistic, yet remains competitive. By lifting the exemptions from fees afforded to bank and trusts there will be a substantial increase in the commission’s income, which should be “one small step toward self-sufficiency,” which is ultimately the commission’s financial goal.
By Lindsay Thompson, The Nassau Guardian
