Pursuant to the Amended IBA, a person shall not carry on, or purport to carry on, investment business in or from Bermuda unless that person is for the time being licensed, registered or designated as a Non-registrable person by the Minister of Finance of Bermuda by order made under the IBA. Pursuant to both the Current IBA and the Amended IBA, “investment business” means engaging in one or more investment activities specified in the statute by way of business.

The following three significant IBA Amendments are discussed below (1) the expansion of the definition of “carrying on, investment business in or from Bermuda” (2) the changes to the licensing and registration categories and (3) the addition of promotion of investments to the public as a specified investment activity.

Amendments to the Act

  1. Expansion of the definition of “carrying on, investment business in or from Bermuda”

For the purposes of the Current IBA, a person carries on investment business in or from Bermuda if such person carries on investment business from a place of business maintained by such person in Bermuda.

For the purposes of the Amended IBA, a person carries on investment business in or from Bermuda if such person (a) is incorporated or formed in Bermuda and carries on investment business or (b) is incorporated or formed outside Bermuda and carries on investment business in or from Bermuda.

As a result of the IBA Amendments, all persons incorporated or formed in Bermuda carrying on investment business (regardless of where such business is conducted) will be required to be licensed, and subject to full regulatory and supervisory oversight by the Bermuda Monetary Authority (BMA) (or, if they meet certain qualifications, be registered).

The IBA Amendments will remove the requirement for a physical place of business in Bermuda in order to be deemed as conducting investment business in or from Bermuda. From implementation of the IBA Amendments, the IBA will apply to any entity incorporated or formed outside of Bermuda that conducts investment business in or from Bermuda.

  1. New categories of licenses

Under the Current IBA, a person carrying on, or purporting to carry on, investment business in or from Bermuda is required to be licensed or obtain an exemption from the BMA.

Under the Amended IBA, a person carrying on, or purporting to carry on, investment business in or from Bermuda is required to (a) be licensed; (b) be registered as a Class A Registered Person; (c) be registered as a Class B Registered Person; or (d) be designated as a non-registrable person.

Under the current regime, several categories of persons who carry on investment business have been exempted – whether owing to the characteristics of their clientele, status as regulated entities or based on their (quasi-) public mandates – from requirements to be licensed and supervised by the BMA in connection with their investment activities. Such categories of persons will continue to be granted some relief from the fulsome licensing requirements under the Amended IBA however the extent of the relief granted has been modified.

(a) Class A Registered Person

Several Bermuda-formed or incorporated persons carrying on investment business outside of the jurisdiction (and thus falling out of scope of Bermuda’s existing investment business regime) may already be subject to regulatory and supervisory oversight in the jurisdictions in which they operate and as such will receive different regulatory treatment. Any Bermuda formed or incorporated person carrying on investment business that is licensed, authorised or registered by a recognised regulator and which does not maintain a place of business in Bermuda can apply to be a Class A Registered Person.

A “recognised regulator” means a regulatory authority recognised by the BMA to be empowered by law to supervise entities conducting investment business in a country or territory outside of Bermuda, which imposes standards equivalent to those established by, or under this or any other Act on persons conducting investment business in Bermuda.

(b) Class B Registered Person

An order has been made pursuant to the Amended IBA such that persons that currently qualify as exempt under paragraphs 1 and 3 of the Schedule to the Investment Business (Exemptions) Order 2004 will be recategorized as “Class B Registered Persons”. Such persons include those who fully meet either or both of the following:

(i)            exclusively providing investment services to the classes of undertakings specified in paragraphs 1(a) – 1(i) of the Schedule to the Exemptions Order including (but not limited to) “high income”, “high net worth” and “sophisticated private investors” and “investment funds”[1]; or

(ii)           providing investment services to 20 or fewer clients at any time, and not soliciting investment business from the public.

In addition to their re-designation, the BMA has increased the ongoing requirements of such persons and eligible persons who are desirous of operating as Class B Registered Persons will be required to apply to and obtain formal approval from the BMA prior to undertaking investment business under such designation.

(c) Non-registrable person

An order has also been made under the Amended IBA such that persons that previously qualified as exempt under paragraphs 2 and 4-8 of the Schedule to the Exemptions Order will be recategorized as “Non-Registrable Persons” (NRPs). Such persons include:

(i)            Investment funds;

(ii)           Persons who are registered under the Insurance Act 1978 to carry on insurance business (as defined under that Act), where such persons provide investment services in connection with the insurance business for which those persons are registered;

(iii)         Persons who are registered under the Insurance Act 1978 as insurance managers, brokers, agents, salespeople, or members of an association of underwriters, where such persons provide investment services in connection with the business for which those persons are licensed;

(iv)         The Government of Bermuda;

(v)          The Bermuda Monetary Authority; and

(vi)         Other public authorities in Bermuda.

Those persons that are licensed under the Digital Asset Business Act 2018 to carry on digital asset business and who carry on investment business ancillary to the digital asset business for which they are so licensed are also included within the category of NRPs.

NRPs are not proposed to have any obligations under the Amended IBA where they fully comply with any limitations or conditions that may attach to their designation.

(d) Fully Licensed

If the person carrying on investment business in or from Bermuda does not qualify to be registered as a Class A Registered Person or Class B Registered Person or be designated as a non-registrable person, they will be required to obtain a full license under the Amended IBA.

  1. Introduction of a new investment activity of “promotion of investments to the public”

The Amended IBA also includes “promotion of investments to the public” as a new investment activity covered by the Amended IBA. Promotion to members of the public includes (a) advertising or agreeing to advertise, material or information which promotes an investment to members of the public; (b) issuing or agreeing to issue a prospectus, application form or proposal form in relation to an investment, to members of the public; or (c) distributing, circulating or agreeing to distribute, circulate or make available, material relating to an investment, to members of the public.

  1. Transitional Period

The IBA Amendments include a one-year grace period for organizations to bring themselves into compliance.

Current licensees who remain in good standing, will not be required to apply for a new licence and as such, will be preapproved into the enhanced regime under their existing licences.

Previously unlicensed persons who will require a licence to operate under the amended framework will be required to apply to the BMA to be licensed.

Persons satisfying the criteria of Class A Registered Persons as set out above will be required to apply for approval from the BMA to operate as Class A Registered Persons.

Persons satisfying the criteria of Class B Registered Persons as set out above will be required to apply to the BMA to operate as Class B Registered Persons. As such, the existing obligation for such persons to submit a one-time declaration to the BMA will be replaced by a requirement for eligible persons to apply and receive formal approval from the BMA to operate as Class B Registered Persons.

NRPs are not required to take any action under the Amended IBA where they fully comply with any limitations or conditions that may attach to their designation.

About Appleby

Appleby has an experienced, multi-disciplinary regulatory team which includes expert compliance professionals as well as a team of lawyers across the corporate, dispute resolution and trust practice areas.  With expert advisors across a range of disciplines we can help you navigate regulated environments throughout the lifecycle of your business.

Please contact a member of the team below if you have any questions regarding the impact of the IBA Amendments to your business.

[1] Current references within the Act to ‘collective investment schemes’ will be updated to instead refer to ‘investment funds’, for conformity with language used in the Investment Funds Act 2006.

Key contacts

Brad Adderley

Managing Partner: Bermuda

T +1 441 298 3243
E Email Brad

Sally Penrose

Partner, Head of Regulatory: Bermuda

T +1 441 298 3286
E Email Sally

Matthew Ebbs-Brewer

Partner, Head of Funds & Investment Services: Bermuda

T +1 441 298 3226
E Email Matthew

Katie Blundy

Associate: Bermuda

T +1 441 298 3524
E Email Katie

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