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Barbados Considers Relaxing Private Placement Regulation

by Mike Godfrey, Lowtax.net, Washington
09 May, 2014

The Barbados Financial Services Commission (FSC) has invited industry feedback on proposals to introduce a private placement regime that would exempt issues of securities by way of private placements from certain provisions of the Securities Act.

The new measures, if adopted, would bring the regulatory regime in line with other countries and are intended to stimulate economic growth in this area.

The FSC said that the current Securities Act's scope is too broad. In the case of domestic private placements, the law imposes a level of reporting and disclosure that is not commensurate with the level of risk to the capital market and investors at large, it said. It also noted that in most other jurisdictions private placements are not subject to such regulation.

The proposed new measures would apply to offers made to fewer than fifty people who must all be "sophisticated investors" within the meaning of the Securities Act. The Securities Act defines sophisticated investors as people who have access to substantially the same information as would have been provided in an offering document, High Net Worth Individuals (HNWIs), and officers of the issuing company and their families. The above proposed exemptions would therefore cover almost all private placement arrangements.

To qualify for the exemption, the offering document must state that the offer is not being made to the public and is not being advertised, and is to be distributed to a specified list of people. The proposed measures also require the applicant to apply for an exemption by submitting a declaration and paying a fee of BBD750 (USD350). The approval process is expected to take one month.

The exemptions seek to remove unnecessary bureaucracy to encourage growth in this area, while maintaining an effective level of oversight.

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