The Bahamas International Securities Exchange (BISX) was founded with the goal of bringing transparency, price discovery and market efficiency to the Bahamian Capital markets. With this goal in mind, BISX began formal listing and trading of securities in May, 2000 with nine domestic companies listing their ordinary shares on the Exchange resulting in a market capitalization of approximately $820 million. As at December 31, 2013, BISX had 27 securities listed including 17 companies, two closed end real estate funds, one Bahamas Depository Receipt of a NASDAQ listed company, three preference shares and four corporate bonds with a market capitalization of approximately $3 billion.
Over this time Bahamian Capital markets have seen growth in sophistication and investor engagement at all levels as the Exchange, the Securities Commission and the Exchange’s members have engaged in investor education and regulatory initiatives to increase market transparency.
BISX as a crucial part of its business development seeks out those international recognitions that financial services providers and other industry stakeholders consider to be value additive to their business. In this regard, BISX is an Associate Member of IOSCO and the Securities Commission of The Bahamas is an Ordinary Member of IOSCO and a Class A signatory to the IOSCO Multi-lateral Memorandum of Understanding (MMoU).
BISX is recognized as a Designated Offshore Securities Market (DOSM) by the United States Securities and Exchange Commission (US SEC) and designated as a Recognized Stock Exchange by HM Revenue and Customs (UK). These recognitions form a part of the Exchange’s strategy on continuing to demonstrate the stability of BISX’s regulatory environment. Further, The Bahamas has Tax Information Exchange Agreements with more than 30 international jurisdictions to ensure the country is an engaged participant in international financial services.
BISX’s internationally recognized and accepted rules speak to such things as Listing Rules for Companies, Listing Rules for Mutual Funds and Bahamian Depository Receipts, Continuing Obligations for Listed Issuers, Membership Rules and Conduct of Business Rules. To ensure complete transparency in operations, all BISX Rules and amendments to these Rules are widely disseminated within the Bahamian financial services industry before adoption, and are required to be approved by the Securities Commission of The Bahamas. All of the BISX Rules are available on the BISX website to ensure accessibility by all stakeholders including professional and retail investors.
**Mutual funds in The Bahamas**
Mutual funds listed on the Exchange are required to be in compliance with the Investment Funds Act, 2003 (the “Act”) and the attendant regulations and to be registered with the Securities Commission of The Bahamas under the Act. Practitioners further benefit from the fact that the Act contains a wide number of unique designations that allow these mutual fund practitioners to choose a specific fund type that meets their clients’ needs. Funds can be registered as Standard, Professional, a Recognized Foreign Fund, or a SMART Fund.
Standard Funds, includes all funds with a retail focus and thus include the most detailed disclosure and formation requirements. Professional Funds which are tailored to more sophisticated investors and have more restrictive investing thresholds and are able to be licensed under a more streamlined process compared to Standard Funds. Recognized Foreign Funds would include funds licensed or registered in another jurisdiction that still require some form of registration in the Bahamas.
SMART Fund stands for Specific Mandate Alternative Regulatory Test Fund and is a rules template that allows for the creation of regulated wealth management vehicles that combine the flexibility needed by promoters with an appropriate regulatory burden. There are currently seven SMART Fund templates recognized under the SMART Fund Rules, and these templates allow providers to customize their structures to meet the specific needs of their clients. Some examples are the ability to waive the requirement for an annual audit if unanimously approved by fund participants, and the removal of the requirement to file a lengthy offering document.
**Mutual funds on BISX**
The BISX Mutual Fund Listing Facility is separate from the Ordinary Market of the Exchange with specific rules to address the unique needs of mutual funds. The Mutual Fund Listing Facility was created in April 2001, and during the early years, the facility was dominated by domestic mutual funds. However, BISX has developed strategic relationships with key international financial services providers, and this has resulted in new growth in the international mutual funds portion of the Mutual Fund Listing.
From the inception of the Mutual Fund Listing Facility, it was envisioned that this service would be a unique way for Bahamian financial service providers to offer value added services to their clients and to leverage the sovereignty of The Bahamas, as compared to many of the country’s offshore competitors. To assist with this BISX works closely with the Securities Commission of The Bahamas and the Ministry of Financial Services to ensure that BISX remains on the cutting edge of investment funds, listing practices and procedures. The collaborative nature of these relationships allows for a mutually beneficial consultative relationship, with these open lines of communication benefiting the financial services industry.
**Listing process – General**
To ensure an impartial review of listing applications, the decision on listing matters is made by the BISX Listing Committee. The BISX Listing Committee is a sub-committee of Independent BISX Board Members constituted to make decisions on listing applications.
As a result of this separation of duties, the BISX Executive is able to assist listed issuers with every aspect of the listing process. The BISX Executive is able to provide a mutual fund seeking a listing application with a customized list of documents required for a successful listing based on their regulatory status. Additionally, the BISX Executive is able to review submitted documents to ensure their compliance with BISX Rules. Once a completed application is received and reviewed for completeness by the BISX Executive, a meeting of the BISX Listing Committee is called and the documents are reviewed for approval by the BISX Listing Committee. If approved by the BISX Listing Committee, notice of approval and listing are communicated to the applicant, and a public notice of a new listing is disseminated by the Exchange.
Listing process – Sponsor Member and local representatives
BISX’s Members play an important role in the listing process. BISX Sponsor Members are professional organizations that assist issuers seeking a listing under the BISX Mutual Fund Listing Facility. Sponsor Members must demonstrate an intimate knowledge of the BISX Rules and must identify specific executives who are able to demonstrate the professional capabilities to carry out the responsibilities of BISX Sponsor Members. A part of a Sponsor Member’s responsibilities is to certify that at the time of the fund’s application, the Sponsor Member believes that the fund meets the standards and are suitable to be listed under the BISX Mutual Funds Listing Rules.
In making this declaration, Sponsor Members are required to carry out their own due diligence of funds before their application is received by the Exchange. The involvement of a BISX Sponsor Member allows for funds to be listed in a timely manner as the Sponsor Member would have done their own review of the fund’s eligibility for listing. Additionally, the Sponsor Member allows the applicant fund to benefit from the Member’s detailed knowledge of Bahamian regulation and the BISX Rules.
Funds seeking a listing are also required to have local authorized representatives able to communicate with the Exchange. This requirement is in place to ensure that the Exchange is able to effectively regulate all funds listed on the Exchange. Authorized representatives can be directors or secretaries of the Fund, or a representative of the Sponsor Member.
**Continuing obligations after listing**
Once listed on the Exchange, Funds are required to file financials as required under the Investment Funds Act, 2003 and as detailed in their offering documents. In addition, material changes including changes to auditors, authorized representatives, administrators, custodians or investment managers must be disclosed to the Exchange.
One of the main continuing obligations is the disclosure of the Net Asset Value (NAV). NAVs are required to be distributed to the Exchange in accordance with the manner detailed in the BISX Rules. BISX requires that NAVs be filed at least quarterly unless the fund is specifically exempted from the quarterly filing requirement.
BISX also allows for the cross-listing of funds on other Exchanges. If carrying out cross-listing, one Exchange needs to be designated as the primary Exchange for regulatory purposes.
**The BISX advantage**
The Exchange is continuously evolving to ensure that it is able to offer a value added service to the Bahamian Financial Services industry. In addition to the sovereign jurisdiction, close collaboration with regulators and established legal system, there are several other advantages to listing mutual funds on the Exchange:
• Swift time to listing: BISX has set a business level standard to provide a formal response to complete listing applications within 72 business hours after receipt of the application. This fast turn-around time is in place to allow financial services providers the ability to in turn respond to their clients in a timely manner and reduce the time to market for their products and services.
• Competitive Pricing: BISX continuously compares pricing for its products to those of other offshore financial centres to ensure that the products offered by the Exchange remain competitive. The fees levied by BISX are made up of two separate components, initial fees that are non-refundable and are assessed at the beginning of the listing process, and annual fees charged every year. In addition to being competitive, BISX’s fee schedule is transparent with all changes to the fee schedule required to be approved by the Securities Commission of The Bahamas.
• Access to Exchange decision makers: BISX decision makers are available and accessible to existing and new industry professionals. The ability to meet with decision makers one on one allows for the Exchange to customize products more swiftly to meet the needs of service providers and their clients.
*By Holland Grant, Acting Chief Operating Officer, BISX*
*BISX was established as a private, for-profit company in September 1999 and is the only securities exchange in The Bahamas to be regulated under the Securities Industry Act, 2011.*