All trustees conducting trust business in Bermuda are required to be licensed by the Bermuda Monetary Authority (BMA) pursuant to the Trusts (Regulation of Trust Business) Act 2001 (2001 Act), unless otherwise exempted. In addition licensed trustees in Bermuda must adhere to the trust business Code of Practice (Code) issued pursuant to section 7 of the 2001 Act and the Statement of Principles issued pursuant to section 6 of the 2001 Act.
The Amendment Act introduces the following changes to the 2001 Act:
- New section 4B – To require that a physical presence in Bermuda is maintained by all licensed undertakings and that the trust business is directed and managed from Bermuda. The BMA has acknowledged that a licensed undertaking might reasonably require the holding of some meetings or operations outside of Bermuda, or the inclusion of directors, controllers or employees not resident in Bermuda. The BMA has confirmed that this is acceptable, provided that persons located outside Bermuda remain available to the BMA when required and the record-keeping provisions of the Code are followed;
- Amended section 22 – To empower the BMA, where deemed appropriate, to restrict surrender of a licence by a licensed undertaking;
- New section 47A – To require each licensed undertaking holding client funds, to segregate such funds from its own funds;
- New section 57A – To empower the BMA to make prudential rules;
- New sub-paragraph 6A in First Schedule – To enhance the minimum criterion for licensing by requiring the maintenance of adequate liquidity; and
- To provide for consequential amendments.
Exemption from Licensing
The Trusts (Regulation of Trust Business) Exemption Order 2002 (Exemption Order) sets out the instances where a trustee is not required to hold a licence under the 2001 Act. A trustee is not required to be licensed where the trustee is:
- A private trust company (PTC);
- A member of a professional body in Bermuda recognized by the Minister of Finance who holds a certificate issued for those purposes by that body;
- A professional person who appoints a specified licensed trust company (as defined in the Exemption Order) to maintain trust records of the trust of which he is a trustee;
- A bare trustee; or
- A trustee of a registered pension fund or certain approved collective schemes.
Changes have also recently been made to the Exemption Order with the passing of the Trusts (Regulation of Trust Business) Exemption Amendment Order 2019 (Amendment Order) which came into force on 31 December 2019. Trustees who are seeking to be exempted from licensing pursuant to the 2001 Act are now required to apply for an exemption, and in the case of PTCs to declare on or before 31 March in every year that they continue to qualify for exemption. The BMA has stated that it does not intend to introduce a full licensing regime or annual fee for PTCs, as is done in other jurisdictions. Instead the changes will simply allow the BMA to monitor the activities of PTCs without introducing unduly burdensome regulation. This will ensure that Bermuda remains a competitive jurisdiction for the formation of PTCs and trust structures.