Investment Business Act 1998

[Notice in Official Gazette]

WHEREAS it is expedient to make provision for regulating investment business and for connected matters:

[Words of enactment omitted]

PART I
PRELIMINARY

Short title and commencement

1 (1) This Act may be cited as the Investment Business Act 1998.

(2) This Act shall come into operation on such day as the Minister may appoint by notice published in the Gazette.

Meaning of "investment business"

2 (1) In this Act, "investment business" means a business which includes any of the following activities—

(a) dealing, whether as principal or agent, in securities by buying, selling, subscribing for, or underwriting, securities, or offering or agreeing to do any of those activities, or inducing or attempting to induce any person to do any of those activities;

(b) arranging deals in securities by making or offering, or agreeing to make or offer any arrangements with a view to two or more persons buying, selling, subscribing for or underwriting, securities;

(d) giving or offering, or agreeing to give or offer, to persons in their capacity as clients or potential clients, advice on the merits of their purchasing, selling, subscribing for or underwriting, a security, or exercising any right conferred by a security to acquire, dispose of, underwrite or convert such security.

(2) None of the following activities constitute investment business—

(a) giving general advice on securities—

(i) in a newspaper, journal, magazine or other periodical publication; or

(ii) in a locally sponsored or produced television programme or sound broadcast;

if the principal purpose of the publication, programme or broadcast, taken as a whole and including any advertisements contained in it, is not to lead persons to invest in any particular security;

(b) the operation by an employer of employee savings or share schemes for the benefit of bona fide employees or former employees, or of their spouses, widows, widowers or children;

(c) transactions in securities which are entered into by a person as principal with another person if they are companies or entities within the same group;

(d) group transactions, being transactions in securities by an unincorporated association of two or more persons, each of whom acts as principal, where the profit or loss arising from such transactions is shared between the members of that group;

(e) carrying on investment business as principal and exclusively for one's own account and benefit, issuing or redeeming one's own securities, carrying on investment business in the capacity of a liquidator or receiver of a company, a receiver, executor or administrator of an estate or a receiver or trustee in bankruptcy;

(f) an activity falling within subsection (1) carried on by a person who is not otherwise carrying on investment business in or from within Bermuda, and who is subject to the supervision of a recognised regulator outside Bermuda, where—

(i) it is carried on in conjunction with an investment provider; or

(ii) it was not solicited in any way by that person.

(3) The Minister may by order add paragraphs to subsections (1) and (2) so as to add to the list of activities which are, and which are not, investment business.

Meaning of "security"

3 (1) In this Act, "security" means any of the following—

(a) shares and stock in the share capital of a company;

(b) debentures, including debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness;

(c) warrants and other instruments entitling the holder to subscribe for securities falling within paragraph (a) or (b) above;

(d) certificates of interest or participation in any profit sharing arrangements, or participatory rights in property forms, trust certificates, collateralised mortgage obligations and certificates of deposit;

(e) options to acquire or dispose of—

(i) any security;

(ii) any currency;

(iii) gold or silver;

(iv) an option to dispose of any security;

(v) any group, or index, of securities,

and "security" in this paragraph means a security falling within any of the other paragraphs of this subsection;

(f) financial and commodity futures;

(g) any right or privilege listed or traded on any securities exchange;

(h) interests in a limited partnership;

(i) rights under a contract for differences or under any other contract, the purpose or intended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the value or price of property of any description or in an index or other factor designated for that purpose in the contract;

(j) rights under a contract the effecting and carrying out of which constitutes long-term insurance business;

(k) units in a unit trust scheme;

(l) rights to and interests in any security falling within any of the preceding paragraphs.

(2) For the purposes of subsection (1)(j), "long-term insurance business" means contracts of insurance of the following descriptions, namely life, annuity, marriage, birth, permanent health, and long term disability coverage, tontines, capital redemption and pension fund management, including retired lives deposit funds, group permanent, level premium, permanent insurance used in connection with pension plans, but does not include contracts under which—

(a) the benefits are payable only on death or in respect of incapacity due to injury, sickness or infirmity including credit life and disability insurance;

(b) no benefits are payable under the contract on a death (other than a death due to accident) unless it occurs within ten years of the date on which the life of the person in question was first insured under the contract or before that person attains a specified age not exceeding 70 years;

(c) there is no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium; and

(d) there is no provision for its conversion or extension in a manner that would result in its ceasing to fall within the preceding paragraphs.

(3) The Minister may by order add paragraphs to subsection (1) so as to add to the definition of "security" any description of interest or instrument (whether issued in Bermuda or elsewhere) and any rights to, and interest in, such interest or instrument.

Other definitions

4 In this Act—

"application" means an application under section 6, and "applicant" means a person making an application;

"approved auditor" has the meaning given in section 16(2);

"the Authority" means the Bermuda Monetary Authority established by the Bermuda Monetary Authority Act 1969 [title 16 item 11];

"company" means a company registered or incorporated under the Companies Act 1981 [title 17 item 5] or any other Act, and any body corporate incorporated or registered outside Bermuda;

"court" means the Supreme Court;

"documents" includes information recorded in any form; and in relation to information recorded otherwise than in legible form, references to its production include references to producing a copy of the information in legible form;

"financial year", in relation to an investment business, means the period not exceeding fifty-three weeks at the end of which the balance of the accounts is struck or, if no such balance is struck or a period of more than fifty-three weeks is employed for that purpose, means a calendar year;

"investment provider" means a person licensed under section 7;

"licence" means a licence granted under section 7;

"licensing criteria" means the criteria set out in section 7(3);

"the Minister" means the Minister of Finance;

"prescribed" means prescribed by regulations made by the Minister under section 30;

"recognised regulator" means an authority, whether a governmental or private body, in Bermuda or elsewhere which the Authority is satisfied exercises functions corresponding to those of the Authority under this Act;

"recognised securities association" has the meaning given in section 8(5);

"recognised securities exchange" has the meaning given in section 8(5);

"senior executive", in relation to an investment business, means a person, regardless of his official title, who performs or is to perform the usual functions of any of the following offices—

(a) director;

(b) chief executive;

(d) company secretary;

(e) partner in a partnership;

"statutory requirements", in relation to an investment provider, means—

(a) any condition imposed on his licence;

(b) the licensing criteria; and

PART II
LICENSING

Requirement for licence and exemptions

5 (1) A person shall not carry on, or purport to carry on, an investment business in or from within Bermuda unless that person holds a licence granted under this Act, or is exempted from holding a licence.

(2) A contract in connection with investment business to which a person contravening subsection (1) is a party is unenforceable by that person.

(3) The persons specified in the Schedule are exempted from the provisions of this Act to the extent there provided.

(4) The Minister may amend the Schedule by order so as to exempt any class of persons from the provisions of subsection (1) or from any other provision of this Act, and any such exemption may be made subject to such terms and conditions as he may impose.

(5) In making any exemption under subsection (4), and in imposing any terms and conditions, the Minister shall act in accordance with any recommendation of the Authority.

Application for licence

6 (1) A person who intends to carry on an investment business in or from within Bermuda—

(a) shall make an application to the Authority for a licence, and

(b) shall advertise his application in such manner as may be prescribed.

(2) An application for a licence—

(a) shall be accompanied by—

(i) a statement setting out the nature and scale of the investment business which is to be carried on by the applicant, and particulars of the arrangements proposed for the operation of that business;

(ii) an application fee of $250, or such other fee as may be prescribed under the Government Fees Act 1965 [title 15 item 18];

(iii) such other information and documents as the Authority may require for the purpose of considering the application;

(b) shall be made in such form as may be prescribed;

(c) in any particular case, but in addition to the requirement in paragraph (b), shall be made in such manner as the Authority may require.

(3) An application may be withdrawn by notice in writing to the Authority at any time before it has determined the application, but in any such case no application fee shall be refundable to the applicant.

(4) A person who is exempted under section 5 from holding a licence may nevertheless make an application in accordance with this section; and once a licence has been granted to such a person this Act shall apply to him as it applies to all other investment providers.

Power to grant licence

7 (1) The Authority may, in accordance with this section, grant an application for a licence for a specified period or may reject the application.

(2) The Authority shall not grant a licence unless it is satisfied that the applicant—

(a) complies with the licensing criteria or is capable of complying with the licensing criteria before he begins his investment business; and

(b) will continue to comply with the licensing criteria throughout the period for which he is granted a licence.

(3) The licensing criteria are—

(a) that the applicant or, in the case of a company or an unincorporated body, the senior executives who are to be responsible for the investment business, are fit and proper persons to carry on the investment business;

(b) that the applicant has sufficient personnel (whether directly employed or available through other arrangements) with adequate knowledge, skill and experience necessary for the conduct of the business;

(d) where the applicant is a company, that its objects and powers include the carrying on of the investment business of the type proposed by the applicant;

(e) that the applicant has sufficient capital to carry on the investment business of the nature and scope in respect of which the application is made;

(f) that the applicant has sufficient record-keeping systems and controls to carry on the investment business in a prudential manner;

(g) that the applicant has adequate insurance, in respect of the business.

(4) After consulting the Authority, the Minister may amend subsection (3) by order so as to prescribe additional licensing criteria.

(5) Notwithstanding that it is satisfied that the applicant complies, or is capable of complying, with the licensing criteria, the Authority shall not grant a licence if it determines that it is not in the public interest to do so; and in making that determination the Authority shall, in particular, consider—

(a) whether the applicant proposes to carry on investment business in Bermuda, or outside Bermuda from a place of business in Bermuda;

(b) the economic situation in Bermuda;

(d) the need to protect investors.

Conditions on licence

8 (1) The Authority may impose conditions on a licence, including, in particular, conditions—

(a) limiting the nature and scope of the investment business to be carried on;

(b) specifying whether the investment business is to be carried on only either in or from within Bermuda, or both in and from within Bermuda;

(c) requiring that the appointment of any senior executive of the investment business be subject to the prior approval of the Authority;

(d) where the holder of a licence is a company, requiring that the issue or transfer of a controlling interest of its shares be subject to the prior approval of the Authority;

(e) specifying whether or not the holder of a licence may hold clients' assets; and

(f) requiring the holder of a licence to acquire and maintain membership of a recognised securities association or recognised securities exchange.

(2) The Authority may, by notice in writing to an investment provider, revoke at any time any condition attached to his licence.

(3) An investment provider shall at all times comply with the conditions attached to his licence and all other statutory requirements.

(4) For the purposes of subsection (1)(d), a controlling interest of the shares of a company means shares which entitle the holder to exercise or control the exercise of 10% or any multiple thereof of the voting power at any general meeting of the company.

(5) In subsection (1)(f)—

(a) "recognised securities association" means an association which regulates its members in relation to the conduct of investment business; and

(b) "recognised securities exchange" means an organisation, association or group of persons, whether incorporated or unincorporated, which constitutes, maintains or provides a market place or facility for the purchase and sale of securities, or otherwise performs functions commonly performed by a stock exchange,

which the Authority has declared, by notice published in the Gazette, to be a recognised association or exchange for the purposes of this Act.

Form, display and registration

9 (1) A licence shall be in such form as may be prescribed.

(2) An investment provider shall, at all times, keep the licence on display in Bermuda at his principal place of business or at his registered office.

(3) The Authority shall publish in the Gazette notice of every grant of a licence.

(4) The Authority shall cause to be compiled and maintained a register containing, in respect of each licence, such particulars as may be prescribed; and the register shall, at all reasonable times, be available for inspection by any person on payment of such fee as may be prescribed under the Government Fees Act 1965 [title 15 item 18].

Fees and duration

10 (1) An investment provider shall pay such fee as may be prescribed under the Government Fees Act 1965 [title 15 item 18]—

(a) on the grant of his licence; and

(b) on each anniversary of the grant of his licence.

(2) Notwithstanding section 4(1) of the Government Fees Act 1965 [title 15 item 18], all fees payable under this Act shall be paid to the Authority.

(3) A licence shall remain in force until it expires or is cancelled.

Variation

11 Subject to section 14, the Authority may by notice in writing to an investment provider vary the conditions attached to his licence—

(a) at the request of the investment provider; or

(b) if the investment provider is—

(i) in breach of any of the statutory requirements; or

(ii) carrying on business in a manner detrimental to the interests of any of his creditors or clients, or in a manner contrary to the public interest.

Suspension

12 (1) Subject to section 14, if an investment provider is in breach of any of the statutory requirements the Authority may, by notice in writing to him, suspend his licence—

(a) for a specified period; or

(b) until such breach has been remedied to the satisfaction of the Authority.

(2) While his licence is suspended, an investment provider—

(a) shall carry on his investment business only in accordance with directions given by the Authority; or

(b) shall cease to carry on his investment business where the Authority so directs.

Cancellation and winding up

13 (1) Subject to section 14, the Authority may, by notice in writing to an investment provider, cancel his licence—

(a) on any ground constituting a breach of any of the statutory requirements;

(b) if the investment provider has been convicted—

(i) of an offence under this Act; or

(ii) under any other law, in Bermuda or elsewhere, of an offence involving dishonesty or fraud;

(d) if the investment provider has ceased to carry on any investment business and has not otherwise surrendered his licence to the Authority; or

(e) if the investment provider carries on his business in a manner which is detrimental to the interests of any of his clients or creditors, or contrary to the public interest.

(2) An investment business in respect of which a licence is cancelled or which otherwise ceases to operate as such shall be wound up or otherwise terminated in such manner as may be prescribed; and where the business was being carried on by a company, the Authority may, if it considers such action to be just and equitable, apply to the court for an order to wind the company up in accordance with the Companies Act 1981 [title 17 item 5].

Variation, suspension and cancellation: supplementary

14 (1) Before the Authority varies, suspends or cancels a licence under section 11(b), 12 or 13, the Authority shall—

(a) give the investment provider notice in writing of the grounds on which it intends to do so;

(b) afford the investment provider an opportunity to make representations in writing to the Authority within a period of thirty days after receipt of the notice (or such longer period as the Authority may allow in his case); and

(2) Where the Authority varies the conditions attached to a licence, or suspends or cancels a licence, and an investment provider asks for its reasons within twenty-one days of its decision, the Authority shall inform him in writing of the reasons within twenty-one days of his request.

(3) The variation, suspension or cancellation of a licence takes effect—

(a) if made by the Authority and if no appeal to the Minister has been lodged within the period referred to in section 15(5), on the expiration of that period;

(b) if pursuant to an appeal to the Minister, on the date on which the Review Committee gives its decision or the date on which the appeal is withdrawn or abandoned.

(4) The Authority shall publish in the Gazette, in such form as it thinks fit, notice of every suspension or cancellation of a licence under this Act.

Review Committee

15 (1) For the purpose of this Act there shall be a committee ("the Review Committee") consisting of the Chairman and two other members selected by the Chairman from a panel of members.

(2) The Minister shall appoint a barrister and attorney to be Chairman of the Review Committee and he shall hold office during the Minister's pleasure.

(3) The Minister shall appoint not fewer than five nor more than nine members to the panel who shall hold office during the Minister's pleasure; and the Minister shall ensure that a majority of the panel are persons whom the Minister considers to have appropriate experience in investment business or accounting.

(4) An investment provider who is aggrieved—

(a) by the conditions attached to his licence;

(b) by a decision of the Authority to vary, suspend or cancel his licence;

(c) by the rejection of his application for a licence, where the investment provider has previously held a licence which was not cancelled,

may apply to the Minister for a review of the decision and the Minister shall refer the application to the Review Committee.

(5) An application under this section shall be made in such form, within such period, and subject to such conditions, as may be prescribed.

(6) The Review Committee shall conduct reviews under this section in such manner as it thinks fit.

(7) On the determination of a review under this section the Review Committee may confirm, vary or revoke the decision appealed against; but any such variation or revocation shall not affect the previous operation of the Authority's decision to vary or suspend a licence in a case falling within section 21(3) or anything duly done or suffered thereunder.

(8) [Omitted]

PART III
REGULATION AND SUPERVISION

Duty to keep records and accounts

16 (1) An investment provider shall maintain—

(a) such systems and records relating to his investment business as may be prescribed; and

(b) accounts in respect of all transactions and balances relating to his investment business and shall, in particular, maintain such accounts for his clients' assets separately from his own.

(2) Every investment provider who is entitled under his licence to hold clients' assets shall cause the accounts of his business to be audited annually by an accountant who is, for the time being, nominated or approved by the Authority as the investment provider's auditor for the purposes of this section ("an approved auditor").

Duty to file financial and other information

17 An investment provider shall, within four months after the last day of each financial year (or such longer period as the Authority may allow on the request of the investment provider in respect of a particular financial year) submit to the Authority in relation to that year—

(a) a certificate of a senior executive responsible for the investment business or, in the case of a corporate investment provider, a certificate of a director and the chief executive officer, confirming that the investment provider has complied with all of the statutory requirements or indicating any failure to do so; and

(b) where section 16(2) applies—

(i) a certificate of an approved auditor prepared in accordance with the provisions of that section, certifying whether the investment provider has at all times complied with the provisions of section 16(1)(b); and

(ii) a copy of the auditor's report.

Reporting accountants

18 (1) The Authority may by notice in writing require an investment provider to provide the Authority with a report by an accountant nominated or approved by the Authority for the purposes of this section, on, or on any aspect of, any matter relating to the investment business.

(2) The Authority may require the accountant's report to be in such form as may be specified in the notice.

(3) The costs and expenses of and relating to a report under this section shall be paid by the investment provider.

Investigation of affairs

19 (1) Where the Authority is satisfied that an investigation into the affairs of an investment provider is required in the interests of his clients or otherwise in the public interest, it may appoint an inspector to carry out the investigation and make a report, and shall notify the investment provider accordingly.

(2) An investment provider in relation to whose affairs an inspector has been appointed under subsection (1), and any past or present senior executive, officer, employee or agent of such a person has a duty—

(a) to produce to the inspector, on request, any documents relating to the investment business which are in his possession, custody or power; and

(b) to give the inspector any information and assistance in connection with the investigation which he is reasonably able to give.

(3) An inspector may examine on oath an investment provider and any of its past or present senior executives, officers, employees or agents in relation to the investment business, and may administer an oath accordingly.

(4) An inspector may, if he considers it necessary for the purposes of his investigation that a person whom he has no power under subsection (3) to examine on oath should be so examined, make an application to the court; and the court may, if it thinks fit, order that person to attend and be examined on oath before the court on any matter relevant to the investigation.

(5) The expenses of an investigation under this Act shall be borne by the investment provider, unless the Authority directs otherwise.

(6) The Authority may give a copy of a report made by an inspector, or any part of such a report, to—

(a) the Minister;

(b) the investment provider in relation to whom the report is made;

(d) any person whose financial interests appear to the Authority to be adversely affected by the matters dealt with in the report, whether as a client or a creditor of the investment provider, or in any other capacity; and

(e) the Bermuda Stock Exchange or the Bermuda Commodities Exchange where the report deals with an investment provider who is listed on, or is a member of, that Exchange.

(7) In any legal proceedings, a copy of a report of an inspector, certified by him to be a true copy, is admissible as evidence of any fact stated therein or of the opinion of the inspector in relation to any matter contained in the report.

Power of Authority to obtain information

20 The Authority may, in writing, direct any person who is, or has at any time been a senior executive, officer, employee or agent of an investment provider to produce to the Authority any document or information relating to the investment business which is in that person's possession, custody or power and which the Authority reasonably requires for the purposes of this Act.

Measures to safeguard interests of clients, creditors etc

21 (1) If the Authority considers that an investment provider or any of his senior executives, officers, employees or agents—

(a) knowingly and wilfully is doing or has done anything in breach of any of the statutory requirements; or

(b) is, or has been, carrying on the affairs of the investment business in a manner detrimental to the interests of the investment provider's clients or creditors or contrary to the public interest,

the Authority may take any of the steps mentioned in subsection (2).

(2) The steps which the Authority may take are—

(a) to require, by notice in writing, the investment provider to take such measures as the Authority considers necessary within such period as the Authority may specify—

(i) to cease or remedy the contravention;

(ii) to comply with the requirement; or

(iii) to rectify the affairs of the investment business;

(b) to vary, suspend or cancel the licence of the investment provider under section 11(b), 12 or 13; and

(c) to appoint a custodian manager to manage the investment business and carry out the functions of the executive officers so as to protect the interests of its clients or creditors and to safeguard its assets.

(3) Where the Authority varies or suspends the licence of an investment provider by virtue of subsection (2)(b), the variation or suspension may take effect immediately, notwithstanding section 14, where the Authority considers that any delay would be severely detrimental to the interests of the investment provider's clients or creditors or contrary to the public interest.

(4) In any case where the licence of an investment provider is varied, suspended or cancelled under this Act, the Authority may order that the books of account and any other documents relating to the investment business be preserved and not be disposed of.

Codes of conduct

22 (1) The Authority may, after consultation with the Minister and such persons as the Authority considers representative of investment providers, issue codes of conduct relating to investment business.

(2) Any such code of conduct may in particular—

(a) specify standards regulating the form and content of advertisements—

(i) which invite persons to acquire or dispose of securities, or

(ii) which contain information calculated to lead directly or indirectly to persons doing so;

(b) impose obligations on an investment provider to make full and proper disclosure to clients of the capacity in which he is acting in relation to a particular transaction and whether the transaction is being effected for his own account or for the account of any person other than the client;

(c) provide for the prohibition against the making, by investment providers, of untrue statements of material facts or the omission of material facts necessary to ensure that such statements or omissions are not misleading.

(3) The Authority shall publish notice in the Gazette of every code of conduct issued under this section which shall indicate—

(a) the date on which the code comes into effect;

(b) the types of investment business to which it applies; and

and codes of conduct shall be available for inspection at the offices of the Authority during normal working hours.

Directions to ensure compliance

23 Without prejudice to any other action that may be instituted or taken against an investment provider, if at any time it appears to the Authority that an investment provider has failed to comply with—

(a) any of the statutory requirements, or

(b) any provision of a code of conduct issued under section 22 relating to the kind of investment business for which he holds a licence,

the Authority may by written notice direct the investment provider to ensure that the requirement is complied with within such period and on such terms and conditions as the Authority may specify, and the investment provider shall comply with the notice.

Injunctions and restitution orders

24 (1) If, on the application of the Authority, the court is satisfied—

(a) that there is a reasonable likelihood that a person will contravene section 5 or that an investment provider will contravene any of the statutory requirements;

(b) that a person has contravened section 5 or that an investment provider has contravened any of the statutory requirements and that there is a reasonable likelihood that the contravention will continue or be repeated; or

it may grant an injunction restraining the contravention or the fraudulent act.

(2) If, on the application of the Authority, the court is satisfied that a person has entered into any transaction in contravention of section 5 or any statutory requirement, the court may order that person and any other person who appears to the court to have been knowingly concerned in the contravention to take such steps as the court may direct for restoring the parties to the position in which they were before the transaction was entered into.

(3) The court may, on the application of the Authority, make an order under subsection (4) if satisfied that a person has been carrying on investment business in contravention of section 5 or any of the statutory requirements and—

(a) that profits have accrued to that person as a result of his carrying on that business; or

(b) that one or more clients have suffered loss or been otherwise adversely affected as a result of his contravention of any of the statutory requirements.

(4) The court may under this subsection order the person concerned to pay into court, or appoint a receiver to recover from him, such sum as appears to the court to be just having regard—

(a) in a case within paragraph (a) of subsection (3), to the profits appearing to the court to have accrued;

(b) in a case within paragraph (b) of subsection (3), to the extent of the loss or other adverse effect; or

(c) in a case within both paragraphs (a) and (b) of subsection (3), to the profits and to the extent of the loss or other adverse effect.

(5) Any amount paid into court by, or recovered from, a person in pursuance of an order under subsection (4) shall be distributed, as the court may direct, among those who appear to the court to have entered into transactions with that person as a result of which the profits mentioned in paragraph (a) of subsection (3) have accrued to him, or the loss or other adverse effect mentioned in paragraph (b) of subsection (3) has been suffered.

(6) On an application under subsection (3) the court may require the person concerned to furnish it with such accounts or other information as it may require for establishing whether any and, if so, what profits have accrued to him as mentioned in paragraph (a) of that subsection and for determining how any amounts are to be distributed under subsection (5); and the court may require any such accounts or other information to be verified in such manner as it may direct.

(7) Nothing in this section affects the right of any person other than the Authority to bring proceedings in respect of any of the matters to which this section applies.

Failure to comply with statutory requirements

25 (1) An investment provider who fails to comply with any of the statutory requirements shall be guilty of an offence and liable on summary conviction to a fine of $5000.

(2) Where the Authority is satisfied that an investment provider is guilty of an offence under subsection (1), it may, with the consent of the investment provider accept from him a sum not exceeding $5000 and no proceedings shall be brought for that offence.

(3) Any sum accepted from an investment provider under subsection (2) shall be paid into the Consolidated Fund.

Other offences

26 (1) A person who, without a licence or without being exempt from holding a licence—

(a) carries on an investment business; or

(b) purports to be an investment provider,

shall be guilty of an offence.

(2) An investment provider who carries on an investment business in breach of directions given under section 12(2) at any time while his licence is suspended, shall be guilty of an offence.

(3) A person who, in relation to an application for a licence or in purported compliance with a statutory requirement, makes a statement or issues a document which he knows to be false or misleading in a material particular, or recklessly makes a statement or issues a document which is false or misleading in a material particular, shall be guilty of an offence.

(4) A person—

(a) who knows or suspects that an investigation under section 19 is being or is likely to be carried out; and

(b) who falsifies, conceals, destroys or otherwise disposes of, or permits the falsification, concealment, destruction or disposal of, documents which he knows or suspects are or would be relevant to an investigation,

shall be guilty of an offence, unless he proves that he had no intention of concealing from the inspector the facts disclosed by the documents.

(5) A person who is guilty of an offence under this section shall be liable—

(a) on summary conviction to a fine of $25,000 or to imprisonment for a period of twelve months or to both; or

(b) on conviction on indictment, to imprisonment for a period of five years or to a fine of $100,000 or to both.

Offences by companies

27 Where a company is guilty of an offence under this Act and the offence is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, a senior executive, manager or other similar officer of the company, or a person who purported to act in any such capacity, he as well as the company, shall be guilty of that offence and is liable to be proceeded against and punished accordingly.

PART IV
SUPPLEMENTARY

Functions of the Bermuda Monetary Authority

28 (1) The Authority has, in addition to its functions under the Bermuda Monetary Authority Act 1969 [title 16 item 11] in relation to financial institutions, the functions conferred on the Authority by this Act.

(2) The Authority shall make a report to the Minister annually in relation to the carrying out of its functions under this Act; and, for the purpose of such reports, the Authority may disclose to the Minister any information which is relevant to the making of the report.

(3) The Authority may from time to time issue guidance to investment providers as to compliance with this Act and regulations made under this Act.

(4) Neither the Authority nor any officer, employee or agent of the Authority shall be liable in damages for anything done or omitted in the discharge or purported discharge of the Authority's functions under this Act, unless the act or omission was in bad faith.

(5) Section 31(1B) of the Bermuda Monetary Authority Act 1969 [title 16 item 11] (disclosure of information for purpose of assisting corresponding authority outside Bermuda) shall apply to recognised regulators, including recognised regulators in Bermuda.

(6) [Omitted]

Notices

29 Any notice which the Authority is required to serve on any person under this Act may be served—

(a) by delivering it to that person or, where that person is a company, by delivering it to any senior executive of that person;

(b) by leaving it at that person's principal place of business or registered office in Bermuda; or

(c) by sending it by registered post addressed to that person at his principal place of business (whether or not in Bermuda).

Regulations and orders

30 (1) The Minister may, after consultation with the Authority, make regulations prescribing anything which may be prescribed under this Act and generally for the implementation of this Act.

(2) Without prejudice to the generality of subsection (1), regulations may in particular—

(a) regulate the conduct of investment business;

(b) prescribe the standards of operational capability and qualifications for any person conducting investment business;

(d) provide for the discipline and control of investment providers or any person employed by or acting on behalf of an investment provider;

(e) prescribe the manner in which clients' assets are to be held on trust and preserved by an investment provider;

(f) prescribe capital and liquidity requirements for any person conducting investment business;

(g) prescribe systems for maintaining the records, and controlling the operations, of an investment business;

(h) prescribe systems for clearing and settling securities transactions; and

(i) regulate advertising and the solicitation of business by whatever means (including electronic solicitation).

(3) Regulations made under this Act shall be subject to the negative resolution procedure.

(4) Orders made under sections 2(3), 3(3), 5(4) and 7(4) and paragraph 2 of the Schedule shall be subject to the negative resolution procedure.

Amendment of Money Laundering Regulations

31 [Omitted]

Transitional provision

32 [Omitted]

SCHEDULE (section 5)

EXEMPTIONS

1 The following are exempt from all the provisions of this Act—

(a) the Government of Bermuda;

(b) the Bermuda Monetary Authority;

(d) the Bermuda Commodities Exchange;

(e) the Bermuda Commodities Exchange Clearing House;

(f) every public authority.

2 (1) A person carrying on an investment business is exempt from all the provisions of this Act if he does not solicit business from, and his clients do not include, any of the following persons—

(a) individuals who are—

(i) ordinarily resident in Bermuda, or

(ii) employed in Bermuda,

and the spouses and dependants of such persons;

(b) local companies, as defined by the Companies Act 1981 [title 17 item 5];

(c) partnerships formed in Bermuda, except those registered under the Exempted Partnerships Act 1992 [title 17 item 26];

(d) unincorporated associations formed in Bermuda.

(2) The trustees of a trust or settlement established or made by a person who is not resident in Bermuda shall, in their capacity as trustees, be deemed not to fall within subparagraph (1)(a).

(3) The Minister may amend this paragraph by order so as to add to the categories of person listed in subparagraph (1).

Bermuda Consolidated Legislation

Investment Business Act 1998