The Bahamas Financial Services Board (BFSB) says the Investment Funds bill now going through parliament will create a more flexible regulatory approach that will help generate new business and preserve the country’s wealth management industry.
Traditionally, the Bahamas offshore sector competed on the basis of bank secrecy, no taxes and a relatively low level of regulatory involvement. But the regulatory environment has changed dramatically in recent years, becoming much stricter.
The Investment Funds bill was originally designed to respond to these new demands by strengthening the industry’s supervisory regime, but the BFSB and the Bahamas Funds Association has turned the bill into a marketing opportunity for the country’s mutual fund sector.
The new law will include a process to pre-approve certain business models as they are being developed by fund managers. Dubbed the SMART fund concept, the legislation will allow the Securities Commission to look at various risk factors involved in private investment funds to maintain a flexible approach to regulation.
“Some of our financial experts proposed a way to meet the regulatory requirements of the Securities Commission whilst expanding on the product options available in The Bahamas,” BFSB chairman Wendy Warren told the Guardian. “Rather than prohibiting certain business models outright, the concept allows clients to submit proposals to the Securities Commission for approval based on a range of specific variables.
Such variables might include the use of a reduced-content offering memorandum or the ability of the product to be licensed directly by a fund administrator in The Bahamas. SMART funds models will be subject to due diligence reviews by the Securities Commission aand will be made available to the industry as they are developed. They can then be applied to any number of clients.
“An example that will likely be well received is the common practice of pooling funds for administrative efficiency where a private bank has received a discretionary investment mandate from its clients,” Mrs Warren said.
The Nassau Guardian
