**Hon. Allyson Maynard-Gibson, M.P.
Minister of Financial Services and Investments**
Enhancing the present regulatory framework, providing for greater market efficiency, transparency and investor protection, the ***Investment Funds Act 2003*** came into effect on December 15th, with the ***Investment Funds Regulations*** subsequently signed into operation on December 16th.
The new Act and Regulations have been two years in the making, coming into effect after what the Bahamas Financial Services Board (BFSB) describes as a productive exercise of private sector partnership with Government. In particular, industry maintained close dialogue with the regulatory authority, the Securities Commission of the Bahamas (SCB), throughout the process.
According to the Minister of Financial Services and Investments, the Hon. Allyson Maynard-Gibson, who presented the legislation to the Bahamas Parliament earlier this year, the ***Investment Funds Act*** covers all aspects of the application, administration and supervision of funds. *”It sets the boundaries for acceptable practices and itemises fees and penalties for participants,”* says Minister Maynard-Gibson.
Designed to strengthen the regulatory powers of the Securities Commission, the legislation updates the definitions and classes of funds recognised locally, and creates a new style of fund, known as a ***SMART Fund***, to which The Bahamas “brand” has been affixed. *”The funds industry has become a major growth area in The Bahamas’ financial services industry over the past decade and the country has developed into a major international centre for mutual funds,”* continues the Minister.
It was the increase in mutual funds investment that prompted the government to pass the Mutual Funds Act and Regulations in 1995, regulating the fund industry through the Securities Commission and administrators who licence mutual funds. Although The Bahamas has gained considerable credibility and recognition as a properly regulated environment for the establishment and operation of funds, it nevertheless recognised the need to develop a risk-based system of regulation, and to deal with certain weaknesses in oversight.
The new ***Investment Funds Act*** strikes a reasonable balance between regulatory and market interests, providing a strong, attractive and fertile platform for the further development and expansion of investment fund business within the financial services sector.
*”In achieving this balance, while it is proposed that all funds will now be subject to the regulatory oversight by the Securities Commission, the legislation establishes a series of classes of funds, each subject to varying regulatory oversight, based on its defined risks,”* explains the Financial Services Minister. This is intended to ensure that The Bahamas remains at the cutting edge as a major international centre for investment funds.
Both government and the private sector applaud the legislation as creating a ‘genuine’ regulatory structure, while providing an environment that will not stifle the flexibility and creativity of an industry that is fast moving, with the delicate balance achieved through a process which involved all stakeholders. Likewise, there has been wide consultation on the Regulations.