The Bahamas has been very careful to ensure that its legislative and administrative frameworks are continually refined, facilitating legislation and products to meet emerging market needs. The Bahamas has a long history of providing asset management and administration services. It has achieved a finely tuned regulatory regime that provides confidence in the quality of supervision while ensuring that the demands of the investment community can be met.
More than 100 broker dealers and investment advisory firms provide investment management services, custodial services, corporate services and registrar and transfer agent services. And, more than 50 fund administrators provide fund administration, corporate services and registrar and transfer agent services for the more than 700 funds licensed in The Bahamas.
The Bahamas is at the forefront of the modern Investment Funds industry. The Investment Funds Act (IFA) positions The Bahamas at the cutting edge of modern investment fund administration. The Act recognises four classes of Funds: The Standard fund, The Professional Fund, the SMART Fund; and The Recognised Foreign Fund.
As a blue chip, well-regulated and cooperative financial centre, The Bahamas always has been mindful of the needs of the marketplace. The IFA retains the ability of local fund administrators with an unrestricted licence (“authorised administrator”) to license professional and SMART investment funds independently of the regulator. This ability to launch new funds based on the due diligence review of the authorised administrator has proven to be a major advantage for The Bahamas.
Bahamas SMART Fund
The Specific Mandate Alternative Regulatory Test Fund (SMART© Fund) was introduced under the Investment Funds Act as an additional style of a collective investment vehicle. It was designed to provide industry with a new private wealth management tool with the flexibility to find application within areas not traditionally associated with investment fund administration. The primary facility offered by the SMART Fund concept is an open architecture which allows practitioners to design innovative structures, akin at times to special purpose vehicles, without reference to inflexible regulatory criteria predefined in legislation.
Where Investment Funds essentially are private arrangements, they can now enjoy a supervisory environment appropriate for the limited, specific nature of the project and need not suffer the ‘broad brush’ regulatory approach. Other jurisdictions only differentiate between public and private funds by criteria such as number of investors or value of minimum investment. Applicants for a SMART Fund licence, however, need only demonstrate to the Regulator that the structure is an appropriate use of an Investment Fund, and in keeping with the best traditions of Bahamas financial services.
The SMART Fund is an innovative, progressive and flexible product designed to attract new business and re-organise existing business to better suit the needs of clients. It allows industry participants to provide clients with innovative structuring solutions via a regulated vehicle, domiciled in a premier international financial centre.
“We offer a financial services platform that serves the needs of private and corporate entities, and that fully supports the success of The Bahamas with the success of those we serve.” Investment Fund Administrator
Key Highlights of The Securities Industry Act, 2011
The Securities Industry Act 2011 (the “Act”) modernizes and updates the law governing the regulation of securities in The Bahamas, enhances the powers of the Securities Commission (“Commission”) and promotes confidence and efficiency in the capital markets of The Bahamas, making them a more attractive prospect to domestic and foreign investors alike.
Definitions: Most notably, the First Schedule of the Act is dedicated to defining securities and the activities giving rise to the obligation to register in specified categories. Part 1 of the First Schedule sets out the definition of “securities”. Part 2 of the First Schedule sets out four types of activities which would constitute “securities business” and includes i) dealings in securities; ii) arranging deals in securities; iii) managing securities; and iv) advising on securities. Part 3 of the First Schedule exempts a number of activities from registration, e.g. trading for one’s own account and Part 4 lists exempt persons, e.g. receivers, executors or lawyers where such activities are incidental to their profession.
Registration of Persons Carrying on a Securities Business: Registered Firms are required to be licensed to undertake specific types of securities business. Furthermore, under the Act an individual may only be registered to carry on a securities activity for which the firm is authorized to undertake. Persons must be registered as a Trading Representative, Discretionary Management Representative or an Advising Representative. Each Registered Firm must also register a Compliance Officer and a Chief Executive Officer.
Physical Presence: While firms which are registered to deal in and/or arrange securities must have a physical presence, a CEO registered in The Bahamas, and a resident director, firms only advising in and/or managing securities may achieve physical presence by appointing a Managing Representative in The Bahamas.
The range of professional investment management services available in The Bahamas is similar to that found in the world’s leading financial centres such as New York, London or Hong Kong.
Detailed information on the Acts referenced above can be obtained from the various Guides, which also provide details on related corporate structures and services.