In addition to these new economic substance requirements, the Substance Act also introduced legislative changes to the Investment Funds Act 2006 (IFA):

  • References to Excluded Funds have been removed. The term Excluded Fund(s) can no longer be used interchangeably with that of Private Fund(s), being a fund with few than 20 investors that does not promote itself by communicating an invitation or inducement to the public generally.
  • Exempted Funds will now be known as Professional Funds. Exempted Funds included Class A Exempt Funds and Class B Exempt Funds which will now be known as Professional Class A Funds and Professional Class B Funds.
  • Professional Funds and Private Funds are now Registered Funds. The current self-certification process (for Class A Exempt Funds), procedure for exemption (for Class B Exempt Funds) and notification process (for Private Funds) is no longer available. New Registered Funds now must apply to the BMA for registration and approval before commencing trading. Registered Funds are no longer required to separately register as NLPs under AML/ATF regulations.
  • Private Funds must appoint a local service provider authorised and regulated by the BMA and a custodian with regard to the safekeeping of the fund’s assets. The IFA expanded the definition of “service provider” to include corporate service providers; as such, most funds will meet the local service provider requirement through the engagement of a Bermuda corporate services provider. Waiver from the requirement to appoint a custodian is possible.

Confirmation of Compliance

“Existing Funds” (i.e. Private Funds, Class A Exempt Funds or Class B Exempt Funds which existed as of 31 December 2018) have until June 30 to comply with any new requirements.

Professional Class A Funds and Professional Class B Funds are likely to already comply with the applicable provisions of the IFA as amended by section 17 of the Substance Act. An assessment should be undertaken to confirm compliance with applicable provisions. Funds that comply with the requirements should note this in their annual filings due at the end of June.

Private Funds must also confirm that they comply with applicable provisions of the IFA as amended by section 17 of the Substance Act. In order to confirm compliance, existing Private Funds must complete the new Private Fund form and submit this form via ERICA (the BMA’s electronic filing system). A notation should be included on the form to indicate that this is an existing Private Fund. The following information must also be provided to the BMA:

  • information related to the fund;
  • a copy of its offering document, or if a master fund in a master/feeder structure, the offering document of its feeder fund; and
  • details of the service providers.

There is no separate registration fee that is payable for existing Private Funds.

Ongoing filings

Registered Funds are also required to make an annual filing by 30 June. For Professional Funds, these filing requirements are unchanged from previous years.

The operators of a Private Fund must also certify annually that it satisfies the qualifying criteria and the requirements for registration and will continue to satisfy them on an ongoing basis. The operators must also file annually:

  • information on the fund’s net asset value and its underlying assets;
  • a copy of the fund’s management accounts or audited financial statements; and
  • information on any material changes that took place during the year.

Existing funds are required to file the annual certification with the BMA this year.

We recommend that operators of funds that were previously Private Funds, Class A Exempt Funds and Class B Exempt Funds reach out to the fund’s legal counsel in Bermuda to confirm the applicable filing and/or registration requirements.

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