Bermuda: Offshore Investment
The HedgeTrust Exchange (HTX), launched early in 2000, offered the first secure online trading facility for existing, non-U.S. domiciled hedge funds. HTX provides liquidity for buyers and sellers of hedge funds that are closed or that have restrictive subscription or redemption periods. Hedge funds do not have to be listed on the BSX in order for a HTX crossing to take place between buyer and seller, but hedge fund managers must consent to the transfer between buyer and seller, where applicable.
HedgeWorld.com, which is based in Bermuda and which launched in September of 1999, claims to have been the first e-commerce-enabled Web site serving the needs of the hedge fund and global alternative investment industry. HedgeWorld.com is the exclusive Internet distributor of TASS+, the industry's premier hedge fund and CTA performance database. Registered accredited investors can access detailed fund profile reports with more than 350 data fields of information on 6,900 hedge funds run by more than 1,300 managers through HedgeWorld.com.
In December 2006, the Bermuda International Business Association (BIBA) soundly endorsed the passing in Bermuda’s House of Assembly of the eagerly anticipated Investment Funds Act 2006, which more clearly outlines how public funds are regulated and refines the framework for non-public, institutional funds.
The bill has the following key features:
- There is a clearly defined distinction between public (retail) funds and institutional or non-public funds.
- The powers to exclude funds from particular requirements are more refined so that there is certainty as to what minimum requirements must be met by fund operators.
- Exclusions from fund regulation are more clearly defined so funds of a ‘private nature’ are not captured.
- Under previous legislation, partnerships were not covered but this gap has been now closed and they are included, as well as mutual fund companies and unit trusts.
- Fund administrators are now regulated and licensed.
- A new class of funds, known as “administered funds” has been introduced. With the introduction of licensed administrators, it is now possible to register funds under this class with the level of regulation adapted, 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.
- There is clearer definition of the rules for the appointment of service providers and delegation of powers.
- A new section clearly enables unit trustees to hold property in segregated accounts, and defines how these accounts will be managed. This affords trustees the same benefits as companies operating with segregated accounts.
- The rules for prospectuses of funds are clearly set down and distinguished from the general rules under the Companies Act of 1981.
- The powers of the BMA to require more information and to inspect are enhanced.
- The requirements and powers for sharing of information with other regulators are more clearly defined.
- Similar to other financial institutions, a right of appeal to an appeal tribunal was introduced.
Deputy Premier, Paula Cox, who successfully piloted the Act to unanimous approval by the House of Assembly, is confident that the legislation enhances Bermuda’s abilities and reputation as a premier fund jurisdiction.
The Bermuda Monetary Authority published a consultation paper in May, 2010, with a view to aligning the regulatory framework for funds and fund administrators. The Amendment Act included the following:
- Definition of service provider to include auditors appointed to a fund.
- Requirement for exempted funds to appoint an investment manager, registrar, custodian and broker.
- Right of objection by the Authority to change of control of a fund.
- Right of appeal by person subject to Authority objection.
- 'Four eyes' provision for funds (a minimum criteria for licensing in the amendment provides that fund administration should be carried out by a minimum of two individuals to avoid excessive control).
The amendment came into force on December 22, 2010.