Investment Business Act 1998

Link to law: http://www.bermudalaws.bm/Laws/Annual%20Laws/1998/Acts/Investment%20Business%20Act%201998.pdf

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Investment Business Act 1998
INVESTMENT BUSINESS ACT 1998

1

BERMUDA
1998 : 34

INVESTMENT BUSINESS ACT 1998

[Date of Assent 17 July 1998]

[Operative Date Repealed by 2003:20 ]

ARRANGEMENT OF SECTIONS

PART I
PRELIMINARY

1 Short title and commencement
2 Meaning of "investment

business"
3 Meaning of "security"
4 Other definitions

PART II
LICENSING

5 Requirement for licence and
exemptions

6 Application for licence
7 Power to grant licence
8 Conditions on licence
9 Form, display and registration
10 Fees and duration
11 Variation

12 Suspension
13 Cancellation and winding up
14 Variation, cancellation and

suspension: supplementary
15 Review Committee

PART III
REGULATION AND SUPERVISION

16 Duty to keep records and
accounts

17 Duty to file financial and other
information

18 Reporting accountants
19 Investigation of affairs
20 Power of Authority to obtain

information
21 Measures to safeguard

interests of clients etc
22 Codes of conduct

INVESTMENT BUSINESS ACT 1998

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23 Directions to ensure
compliance

24 Injunctions and restitution
orders

25 Failure to comply with
statutory requirements

26 Other offences
27 Offences by companies

PART IV
SUPPLEMENTARY

28 Functions of the Bermuda
Monetary Authority

29 Notices
30 Regulations and orders
31 Amendment of Money

Laundering Regulations
32 Transitional provision

SCHEDULE
Exemptions

WHEREAS it is expedient to make provision for regulating
investment business and for connected matters:

Be it enacted by The Queen's Most Excellent Majesty, by and
with the advice and consent of the Senate and the House of Assembly of
Bermuda, and by the authority of the same, as follows:

PART I
PRELIMINARY

Short title and commencement
1 (1) This Act may be cited as the Investment Business Act 1998.

(2) This Act shall come into operation on such day as the
Minister may appoint by notice published in the Gazette.

Meaning of "investment business"
2 (1) In this Act, "investment business" means a business which
includes any of the following activities—

(a) dealing, whether as principal or agent, in securities by
buying, selling, subscribing for, or underwriting,
securities, or offering or agreeing to do any of those
activities, or inducing or attempting to induce any
person to do any of those activities;

(b) arranging deals in securities by making or offering, or
agreeing to make or offer any arrangements with a view
to two or more persons buying, selling, subscribing for
or underwriting, securities;

INVESTMENT BUSINESS ACT 1998

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(c) managing or offering, or agreeing to manage or offer,
securities belonging to another person;

(d) giving or offering, or agreeing to give or offer, to persons
in their capacity as clients or potential clients, advice on
the merits of their purchasing, selling, subscribing for or
underwriting, a security, or exercising any right
conferred by a security to acquire, dispose of, underwrite
or convert such security.

(2) None of the following activities constitute investment
business—

(a) giving general advice on securities—

(i) in a newspaper, journal, magazine or other
periodical publication; or

(ii) in a locally sponsored or produced television
programme or sound broadcast;

if the principal purpose of the publication, programme or
broadcast, taken as a whole and including any
advertisements contained in it, is not to lead persons to
invest in any particular security;

(b) the operation by an employer of employee savings or
share schemes for the benefit of bona fide employees or
former employees, or of their spouses, widows, widowers
or children;

(c) transactions in securities which are entered into by a
person as principal with another person if they are
companies or entities within the same group;

(d) group transactions, being transactions in securities by
an unincorporated association of two or more persons,
each of whom acts as principal, where the profit or loss
arising from such transactions is shared between the
members of that group;

(e) carrying on investment business as principal and
exclusively for one's own account and benefit, issuing or
redeeming one's own securities, carrying on investment
business in the capacity of a liquidator or receiver of a
company, a receiver, executor or administrator of an
estate or a receiver or trustee in bankruptcy;

(f) an activity falling within subsection (1) carried on by a
person who is not otherwise carrying on investment
business in or from within Bermuda, and who is subject

INVESTMENT BUSINESS ACT 1998

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to the supervision of a recognised regulator outside
Bermuda, where—

(i) it is carried on in conjunction with an
investment provider; or

(ii) it was not solicited in any way by that person.

(3) The Minister may by order add paragraphs to subsections
(1) and (2) so as to add to the list of activities which are, and which are
not, investment business.

Meaning of "security"
3 (1) In this Act, "security" means any of the following—

(a) shares and stock in the share capital of a company;

(b) debentures, including debenture stock, loan stock,
bonds, certificates of deposit and other instruments
creating or acknowledging indebtedness;

(c) warrants and other instruments entitling the holder to
subscribe for securities falling within paragraph (a) or (b)
above;

(d) certificates of interest or participation in any profit
sharing arrangements, or participatory rights in property
forms, trust certificates, collateralised mortgage
obligations and certificates of deposit;

(e) options to acquire or dispose of—

(i) any security;

(ii) any currency;

(iii) gold or silver;

(iv) an option to dispose of any security;

(v) any group, or index, of securities,

and "security" in this paragraph means a security falling
within any of the other paragraphs of this subsection;

(f) financial and commodity futures;

(g) any right or privilege listed or traded on any securities
exchange;

(h) interests in a limited partnership;

(i) rights under a contract for differences or under any
other contract, the purpose or intended purpose of

INVESTMENT BUSINESS ACT 1998

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which is to secure a profit or avoid a loss by reference to
fluctuations in the value or price of property of any
description or in an index or other factor designated for
that purpose in the contract;

(j) rights under a contract the effecting and carrying out of
which constitutes long-term insurance business;

(k) units in a unit trust scheme;

(l) rights to and interests in any security falling within any
of the preceding paragraphs.

(2) For the purposes of subsection (1)(j), "long-term insurance
business" means contracts of insurance of the following descriptions,
namely life, annuity, marriage, birth, permanent health, and long term
disability coverage, tontines, capital redemption and pension fund
management, including retired lives deposit funds, group permanent,
level premium, permanent insurance used in connection with pension
plans, but does not include contracts under which—

(a) the benefits are payable only on death or in respect of
incapacity due to injury, sickness or infirmity including
credit life and disability insurance;

(b) no benefits are payable under the contract on a death
(other than a death due to accident) unless it occurs
within ten years of the date on which the life of the
person in question was first insured under the contract
or before that person attains a specified age not
exceeding 70 years;

(c) there is no surrender value, or the consideration
consists of a single premium and the surrender value
does not exceed that premium; and

(d) there is no provision for its conversion or extension in a
manner that would result in its ceasing to fall within the
preceding paragraphs.

(3) The Minister may by order add paragraphs to subsection (1)
so as to add to the definition of "security" any description of interest or
instrument (whether issued in Bermuda or elsewhere) and any rights to,
and interest in, such interest or instrument.

Other definitions
4 In this Act—

"application" means an application under section 6, and
"applicant" means a person making an application;

INVESTMENT BUSINESS ACT 1998

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"approved auditor" has the meaning given in section 16(2);

"the Authority" means the Bermuda Monetary Authority
established by the Bermuda Monetary Authority Act 1969;

"company" means a company registered or incorporated under
the Companies Act 1981 or any other Act, and any body
corporate incorporated or registered outside Bermuda;

"court" means the Supreme Court;

"documents" includes information recorded in any form; and in
relation to information recorded otherwise than in legible
form, references to its production include references to
producing a copy of the information in legible form;

"financial year", in relation to an investment business, means
the period not exceeding fifty-three weeks at the end of which
the balance of the accounts is struck or, if no such balance is
struck or a period of more than fifty-three weeks is employed
for that purpose, means a calendar year;

"investment provider" means a person licensed under section 7;

"licence" means a licence granted under section 7;

"licensing criteria" means the criteria set out in section 7(3);

"the Minister" means the Minister of Finance;

"prescribed" means prescribed by regulations made by the
Minister under section 30;

"recognised regulator" means an authority, whether a
governmental or private body, in Bermuda or elsewhere
which the Authority is satisfied exercises functions
corresponding to those of the Authority under this Act;

"recognised securities association" has the meaning given in
section 8(5);

"recognised securities exchange" has the meaning given in
section 8(5);

"senior executive", in relation to an investment business, means
a person, regardless of his official title, who performs or is to
perform the usual functions of any of the following offices—

(a) director;

(b) chief executive;

(c) chief financial officer;

(d) company secretary;

INVESTMENT BUSINESS ACT 1998

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(e) partner in a partnership;

"statutory requirements", in relation to an investment provider,
means—
(a) any condition imposed on his licence;

(b) the licensing criteria; and

(c) any other duty or obligation imposed on him under this
Act.

PART II
LICENSING

Requirement for licence and exemptions
5 (1) A person shall not carry on, or purport to carry on, an
investment business in or from within Bermuda unless that person holds
a licence granted under this Act, or is exempted from holding a licence.

(2) A contract in connection with investment business to which
a person contravening subsection (1) is a party is unenforceable by that
person.

(3) The persons specified in the Schedule are exempted from
the provisions of this Act to the extent there provided.

(4) The Minister may amend the Schedule by order so as to
exempt any class of persons from the provisions of subsection (1) or from
any other provision of this Act, and any such exemption may be made
subject to such terms and conditions as he may impose.

(5) In making any exemption under subsection (4), and in
imposing any terms and conditions, the Minister shall act in accordance
with any recommendation of the Authority.

Application for licence
6 (1) A person who intends to carry on an investment business in
or from within Bermuda—

(a) shall make an application to the Authority for a licence,
and

(b) shall advertise his application in such manner as may
be prescribed.

(2) An application for a licence—

(a) shall be accompanied by—

INVESTMENT BUSINESS ACT 1998

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(i) a statement setting out the nature and scale of
the investment business which is to be carried
on by the applicant, and particulars of the
arrangements proposed for the operation of that
business;

(ii) an application fee of $250, or such other fee as
may be prescribed under the Government Fees
Act 1965;

(iii) such other information and documents as the
Authority may require for the purpose of
considering the application;

(b) shall be made in such form as may be prescribed;

(c) in any particular case, but in addition to the
requirement in paragraph (b), shall be made in such
manner as the Authority may require.

(3) An application may be withdrawn by notice in writing to the
Authority at any time before it has determined the application, but in
any such case no application fee shall be refundable to the applicant.

(4) A person who is exempted under section 5 from holding a
licence may nevertheless make an application in accordance with this
section; and once a licence has been granted to such a person this Act
shall apply to him as it applies to all other investment providers.

Power to grant licence
7 (1) The Authority may, in accordance with this section, grant
an application for a licence for a specified period or may reject the
application.

(2) The Authority shall not grant a licence unless it is satisfied
that the applicant—

(a) complies with the licensing criteria or is capable of
complying with the licensing criteria before he begins his
investment business; and

(b) will continue to comply with the licensing criteria
throughout the period for which he is granted a licence.

(3) The licensing criteria are—

(a) that the applicant or, in the case of a company or an
unincorporated body, the senior executives who are to
be responsible for the investment business, are fit and
proper persons to carry on the investment business;

INVESTMENT BUSINESS ACT 1998

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(b) that the applicant has sufficient personnel (whether
directly employed or available through other
arrangements) with adequate knowledge, skill and
experience necessary for the conduct of the business;

(c) where the applicant's business involves the holding of
clients' assets, that the applicant has an approved
auditor;

(d) where the applicant is a company, that its objects and
powers include the carrying on of the investment
business of the type proposed by the applicant;

(e) that the applicant has sufficient capital to carry on the
investment business of the nature and scope in respect
of which the application is made;

(f) that the applicant has sufficient record-keeping systems
and controls to carry on the investment business in a
prudential manner;

(g) that the applicant has adequate insurance, in respect of
the business.

(4) After consulting the Authority, the Minister may amend
subsection (3) by order so as to prescribe additional licensing criteria.

(5) Notwithstanding that it is satisfied that the applicant
complies, or is capable of complying, with the licensing criteria, the
Authority shall not grant a licence if it determines that it is not in the
public interest to do so; and in making that determination the Authority
shall, in particular, consider—

(a) whether the applicant proposes to carry on investment
business in Bermuda, or outside Bermuda from a place
of business in Bermuda;

(b) the economic situation in Bermuda;

(c) any advantage or disadvantage that may result for
Bermuda from the application being granted; and

(d) the need to protect investors.

Conditions on licence
8 (1) The Authority may impose conditions on a licence,
including, in particular, conditions—

(a) limiting the nature and scope of the investment business
to be carried on;

INVESTMENT BUSINESS ACT 1998

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(b) specifying whether the investment business is to be
carried on only either in or from within Bermuda, or
both in and from within Bermuda;

(c) requiring that the appointment of any senior executive of
the investment business be subject to the prior approval
of the Authority;

(d) where the holder of a licence is a company, requiring
that the issue or transfer of a controlling interest of its
shares be subject to the prior approval of the Authority;

(e) specifying whether or not the holder of a licence may
hold clients' assets; and

(f) requiring the holder of a licence to acquire and maintain
membership of a recognised securities association or
recognised securities exchange.

(2) The Authority may, by notice in writing to an investment
provider, revoke at any time any condition attached to his licence.

(3) An investment provider shall at all times comply with the
conditions attached to his licence and all other statutory requirements.

(4) For the purposes of subsection (1)(d), a controlling interest
of the shares of a company means shares which entitle the holder to
exercise or control the exercise of 10% or any multiple thereof of the
voting power at any general meeting of the company.

(5) In subsection (1)(f)—

(a) "recognised securities association" means an association
which regulates its members in relation to the conduct of
investment business; and

(b) "recognised securities exchange" means an organisation,
association or group of persons, whether incorporated or
unincorporated, which constitutes, maintains or
provides a market place or facility for the purchase and
sale of securities, or otherwise performs functions
commonly performed by a stock exchange,

which the Authority has declared, by notice published in the Gazette, to
be a recognised association or exchange for the purposes of this Act.

Form, display and registration
9 (1) A licence shall be in such form as may be prescribed.

(2) An investment provider shall, at all times, keep the licence
on display in Bermuda at his principal place of business or at his
registered office.

INVESTMENT BUSINESS ACT 1998

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(3) The Authority shall publish in the Gazette notice of every
grant of a licence.

(4) The Authority shall cause to be compiled and maintained a
register containing, in respect of each licence, such particulars as may
be prescribed; and the register shall, at all reasonable times, be available
for inspection by any person on payment of such fee as may be
prescribed under the Government Fees Act 1965.

Fees and duration
10 (1) An investment provider shall pay such fee as may be
prescribed under the Government Fees Act 1965—

(a) on the grant of his licence; and

(b) on each anniversary of the grant of his licence.

(2) Notwithstanding section 4(1) of the Government Fees Act
1965, all fees payable under this Act shall be paid to the Authority.

(3) A licence shall remain in force until it expires or is
cancelled.

Variation
11 Subject to section 14, the Authority may by notice in writing to
an investment provider vary the conditions attached to his licence—

(a) at the request of the investment provider; or

(b) if the investment provider is—

(i) in breach of any of the statutory requirements;
or

(ii) carrying on business in a manner detrimental to
the interests of any of his creditors or clients, or
in a manner contrary to the public interest.

Suspension
12 (1) Subject to section 14, if an investment provider is in breach
of any of the statutory requirements the Authority may, by notice in
writing to him, suspend his licence—

(a) for a specified period; or

(b) until such breach has been remedied to the satisfaction
of the Authority.

(2) While his licence is suspended, an investment provider—

INVESTMENT BUSINESS ACT 1998

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(a) shall carry on his investment business only in
accordance with directions given by the Authority; or

(b) shall cease to carry on his investment business where
the Authority so directs.

Cancellation and winding up
13 (1) Subject to section 14, the Authority may, by notice in
writing to an investment provider, cancel his licence—

(a) on any ground constituting a breach of any of the
statutory requirements;

(b) if the investment provider has been convicted—

(i) of an offence under this Act; or

(ii) under any other law, in Bermuda or elsewhere,
of an offence involving dishonesty or fraud;

(c) where the investment provider is declared bankrupt or
insolvent;

(d) if the investment provider has ceased to carry on any
investment business and has not otherwise surrendered
his licence to the Authority; or

(e) if the investment provider carries on his business in a
manner which is detrimental to the interests of any of
his clients or creditors, or contrary to the public interest.

(2) An investment business in respect of which a licence is
cancelled or which otherwise ceases to operate as such shall be wound
up or otherwise terminated in such manner as may be prescribed; and
where the business was being carried on by a company, the Authority
may, if it considers such action to be just and equitable, apply to the
court for an order to wind the company up in accordance with the
Companies Act 1981.

Variation, suspension and cancellation: supplementary
14 (1) Before the Authority varies, suspends or cancels a licence
under section 11(b), 12 or 13, the Authority shall—

(a) give the investment provider notice in writing of the
grounds on which it intends to do so;

(b) afford the investment provider an opportunity to make
representations in writing to the Authority within a
period of thirty days after receipt of the notice (or such
longer period as the Authority may allow in his case);
and

INVESTMENT BUSINESS ACT 1998

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(c) take any such representations into consideration.

(2) Where the Authority varies the conditions attached to a
licence, or suspends or cancels a licence, and an investment provider
asks for its reasons within twenty-one days of its decision, the Authority
shall inform him in writing of the reasons within twenty-one days of his
request.

(3) The variation, suspension or cancellation of a licence takes
effect—

(a) if made by the Authority and if no appeal to the Minister
has been lodged within the period referred to in section
15(5), on the expiration of that period;

(b) if pursuant to an appeal to the Minister, on the date on
which the Review Committee gives its decision or the
date on which the appeal is withdrawn or abandoned.

(4) The Authority shall publish in the Gazette, in such form as
it thinks fit, notice of every suspension or cancellation of a licence under
this Act.

Review Committee
15 (1) For the purpose of this Act there shall be a committee ("the
Review Committee") consisting of the Chairman and two other members
selected by the Chairman from a panel of members.

(2) The Minister shall appoint a barrister and attorney to be
Chairman of the Review Committee and he shall hold office during the
Minister's pleasure.

(3) The Minister shall appoint not fewer than five nor more
than nine members to the panel who shall hold office during the
Minister's pleasure; and the Minister shall ensure that a majority of the
panel are persons whom the Minister considers to have appropriate
experience in investment business or accounting.

(4) An investment provider who is aggrieved—

(a) by the conditions attached to his licence;

(b) by a decision of the Authority to vary, suspend or cancel
his licence;

(c) by the rejection of his application for a licence, where the
investment provider has previously held a licence which
was not cancelled,

may apply to the Minister for a review of the decision and the Minister
shall refer the application to the Review Committee.

INVESTMENT BUSINESS ACT 1998

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(5) An application under this section shall be made in such
form, within such period, and subject to such conditions, as may be
prescribed.

(6) The Review Committee shall conduct reviews under this
section in such manner as it thinks fit.

(7) On the determination of a review under this section the
Review Committee may confirm, vary or revoke the decision appealed
against; but any such variation or revocation shall not affect the previous
operation of the Authority's decision to vary or suspend a licence in a
case falling within section 21(3) or anything duly done or suffered
thereunder.

(8) In Part B of the First Schedule to the Government
Authorities Fees Act 1971, at the appropriate place in alphabetical order
there shall be inserted—

"Review Committee - established by section 15 of the
Investment Business Act 1998."

PART III
REGULATION AND SUPERVISION

Duty to keep records and accounts
16 (1) An investment provider shall maintain—

(a) such systems and records relating to his investment
business as may be prescribed; and

(b) accounts in respect of all transactions and balances
relating to his investment business and shall, in
particular, maintain such accounts for his clients' assets
separately from his own.

(2) Every investment provider who is entitled under his licence
to hold clients' assets shall cause the accounts of his business to be
audited annually by an accountant who is, for the time being, nominated
or approved by the Authority as the investment provider's auditor for the
purposes of this section ("an approved auditor").

Duty to file financial and other information
17 An investment provider shall, within four months after the last
day of each financial year (or such longer period as the Authority may
allow on the request of the investment provider in respect of a particular
financial year) submit to the Authority in relation to that year—

(a) a certificate of a senior executive responsible for the
investment business or, in the case of a corporate

INVESTMENT BUSINESS ACT 1998

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investment provider, a certificate of a director and the
chief executive officer, confirming that the investment
provider has complied with all of the statutory
requirements or indicating any failure to do so; and

(b) where section 16(2) applies—

(i) a certificate of an approved auditor prepared in
accordance with the provisions of that section,
certifying whether the investment provider has
at all times complied with the provisions of
section 16(1)(b); and

(ii) a copy of the auditor's report.

Reporting accountants
18 (1) The Authority may by notice in writing require an
investment provider to provide the Authority with a report by an
accountant nominated or approved by the Authority for the purposes of
this section, on, or on any aspect of, any matter relating to the
investment business.

(2) The Authority may require the accountant's report to be in
such form as may be specified in the notice.

(3) The costs and expenses of and relating to a report under
this section shall be paid by the investment provider.

Investigation of affairs
19 (1) Where the Authority is satisfied that an investigation into
the affairs of an investment provider is required in the interests of his
clients or otherwise in the public interest, it may appoint an inspector to
carry out the investigation and make a report, and shall notify the
investment provider accordingly.

(2) An investment provider in relation to whose affairs an
inspector has been appointed under subsection (1), and any past or
present senior executive, officer, employee or agent of such a person has
a duty—

(a) to produce to the inspector, on request, any documents
relating to the investment business which are in his
possession, custody or power; and

(b) to give the inspector any information and assistance in
connection with the investigation which he is reasonably
able to give.

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(3) An inspector may examine on oath an investment provider
and any of its past or present senior executives, officers, employees or
agents in relation to the investment business, and may administer an
oath accordingly.

(4) An inspector may, if he considers it necessary for the
purposes of his investigation that a person whom he has no power under
subsection (3) to examine on oath should be so examined, make an
application to the court; and the court may, if it thinks fit, order that
person to attend and be examined on oath before the court on any
matter relevant to the investigation.

(5) The expenses of an investigation under this Act shall be
borne by the investment provider, unless the Authority directs otherwise.

(6) The Authority may give a copy of a report made by an
inspector, or any part of such a report, to—

(a) the Minister;

(b) the investment provider in relation to whom the report is
made;

(c) any person whose conduct is adversely referred to in the
report;

(d) any person whose financial interests appear to the
Authority to be adversely affected by the matters dealt
with in the report, whether as a client or a creditor of the
investment provider, or in any other capacity; and

(e) the Bermuda Stock Exchange or the Bermuda
Commodities Exchange where the report deals with an
investment provider who is listed on, or is a member of,
that Exchange.

(7) In any legal proceedings, a copy of a report of an inspector,
certified by him to be a true copy, is admissible as evidence of any fact
stated therein or of the opinion of the inspector in relation to any matter
contained in the report.

Power of Authority to obtain information
20 The Authority may, in writing, direct any person who is, or has
at any time been a senior executive, officer, employee or agent of an
investment provider to produce to the Authority any document or
information relating to the investment business which is in that person's
possession, custody or power and which the Authority reasonably
requires for the purposes of this Act.

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Measures to safeguard interests of clients, creditors etc
21 (1) If the Authority considers that an investment provider or
any of his senior executives, officers, employees or agents—

(a) knowingly and wilfully is doing or has done anything in
breach of any of the statutory requirements; or

(b) is, or has been, carrying on the affairs of the investment
business in a manner detrimental to the interests of the
investment provider's clients or creditors or contrary to
the public interest,

the Authority may take any of the steps mentioned in subsection (2).

(2) The steps which the Authority may take are—

(a) to require, by notice in writing, the investment provider
to take such measures as the Authority considers
necessary within such period as the Authority may
specify—

(i) to cease or remedy the contravention;

(ii) to comply with the requirement; or

(iii) to rectify the affairs of the investment business;

(b) to vary, suspend or cancel the licence of the investment
provider under section 11(b), 12 or 13; and

(c) to appoint a custodian manager to manage the
investment business and carry out the functions of the
executive officers so as to protect the interests of its
clients or creditors and to safeguard its assets.

(3) Where the Authority varies or suspends the licence of an
investment provider by virtue of subsection (2)(b), the variation or
suspension may take effect immediately, notwithstanding section 14,
where the Authority considers that any delay would be severely
detrimental to the interests of the investment provider's clients or
creditors or contrary to the public interest.

(4) In any case where the licence of an investment provider is
varied, suspended or cancelled under this Act, the Authority may order
that the books of account and any other documents relating to the
investment business be preserved and not be disposed of.

Codes of conduct
22 (1) The Authority may, after consultation with the Minister and
such persons as the Authority considers representative of investment
providers, issue codes of conduct relating to investment business.

INVESTMENT BUSINESS ACT 1998

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(2) Any such code of conduct may in particular—

(a) specify standards regulating the form and content of
advertisements—

(i) which invite persons to acquire or dispose of
securities, or

(ii) which contain information calculated to lead
directly or indirectly to persons doing so;

(b) impose obligations on an investment provider to make
full and proper disclosure to clients of the capacity in
which he is acting in relation to a particular transaction
and whether the transaction is being effected for his own
account or for the account of any person other than the
client;

(c) provide for the prohibition against the making, by
investment providers, of untrue statements of material
facts or the omission of material facts necessary to
ensure that such statements or omissions are not
misleading.

(3) The Authority shall publish notice in the Gazette of every
code of conduct issued under this section which shall indicate—

(a) the date on which the code comes into effect;

(b) the types of investment business to which it applies; and

(c) whether it supersedes any previous code of conduct;

and codes of conduct shall be available for inspection at the offices of the
Authority during normal working hours.

Directions to ensure compliance
23 Without prejudice to any other action that may be instituted or
taken against an investment provider, if at any time it appears to the
Authority that an investment provider has failed to comply with—

(a) any of the statutory requirements, or

(b) any provision of a code of conduct issued under section
22 relating to the kind of investment business for which
he holds a licence,

the Authority may by written notice direct the investment provider to
ensure that the requirement is complied with within such period and on
such terms and conditions as the Authority may specify, and the
investment provider shall comply with the notice.

INVESTMENT BUSINESS ACT 1998

19

Injunctions and restitution orders
24 (1) If, on the application of the Authority, the court is
satisfied—

(a) that there is a reasonable likelihood that a person will
contravene section 5 or that an investment provider will
contravene any of the statutory requirements;

(b) that a person has contravened section 5 or that an
investment provider has contravened any of the
statutory requirements and that there is a reasonable
likelihood that the contravention will continue or be
repeated; or

(c) that an investment provider has done any fraudulent act
in relation to his investment business,

it may grant an injunction restraining the contravention or the
fraudulent act.

(2) If, on the application of the Authority, the court is satisfied
that a person has entered into any transaction in contravention of
section 5 or any statutory requirement, the court may order that person
and any other person who appears to the court to have been knowingly
concerned in the contravention to take such steps as the court may
direct for restoring the parties to the position in which they were before
the transaction was entered into.

(3) The court may, on the application of the Authority, make an
order under subsection (4) if satisfied that a person has been carrying on
investment business in contravention of section 5 or any of the statutory
requirements and—

(a) that profits have accrued to that person as a result of his
carrying on that business; or

(b) that one or more clients have suffered loss or been
otherwise adversely affected as a result of his
contravention of any of the statutory requirements.

(4) The court may under this subsection order the person
concerned to pay into court, or appoint a receiver to recover from him,
such sum as appears to the court to be just having regard—

(a) in a case within paragraph (a) of subsection (3), to the
profits appearing to the court to have accrued;

(b) in a case within paragraph (b) of subsection (3), to the
extent of the loss or other adverse effect; or

INVESTMENT BUSINESS ACT 1998

20

(c) in a case within both paragraphs (a) and (b) of
subsection (3), to the profits and to the extent of the loss
or other adverse effect.

(5) Any amount paid into court by, or recovered from, a person
in pursuance of an order under subsection (4) shall be distributed, as
the court may direct, among those who appear to the court to have
entered into transactions with that person as a result of which the profits
mentioned in paragraph (a) of subsection (3) have accrued to him, or the
loss or other adverse effect mentioned in paragraph (b) of subsection (3)
has been suffered.

(6) On an application under subsection (3) the court may
require the person concerned to furnish it with such accounts or other
information as it may require for establishing whether any and, if so,
what profits have accrued to him as mentioned in paragraph (a) of that
subsection and for determining how any amounts are to be distributed
under subsection (5); and the court may require any such accounts or
other information to be verified in such manner as it may direct.

(7) Nothing in this section affects the right of any person other
than the Authority to bring proceedings in respect of any of the matters
to which this section applies.

Failure to comply with statutory requirements
25 (1) An investment provider who fails to comply with any of the
statutory requirements shall be guilty of an offence and liable on
summary conviction to a fine of $5000.

(2) Where the Authority is satisfied that an investment provider
is guilty of an offence under subsection (1), it may, with the consent of
the investment provider accept from him a sum not exceeding $5000 and
no proceedings shall be brought for that offence.

(3) Any sum accepted from an investment provider under
subsection (2) shall be paid into the Consolidated Fund.

Other offences
26 (1) A person who, without a licence or without being exempt
from holding a licence—

(a) carries on an investment business; or

(b) purports to be an investment provider,

shall be guilty of an offence.

(2) An investment provider who carries on an investment
business in breach of directions given under section 12(2) at any time
while his licence is suspended, shall be guilty of an offence.

INVESTMENT BUSINESS ACT 1998

21

(3) A person who, in relation to an application for a licence or
in purported compliance with a statutory requirement, makes a
statement or issues a document which he knows to be false or
misleading in a material particular, or recklessly makes a statement or
issues a document which is false or misleading in a material particular,
shall be guilty of an offence.

(4) A person—

(a) who knows or suspects that an investigation under
section 19 is being or is likely to be carried out; and

(b) who falsifies, conceals, destroys or otherwise disposes of,
or permits the falsification, concealment, destruction or
disposal of, documents which he knows or suspects are
or would be relevant to an investigation,

shall be guilty of an offence, unless he proves that he had no intention of
concealing from the inspector the facts disclosed by the documents.

(5) A person who is guilty of an offence under this section shall
be liable—

(a) on summary conviction to a fine of $25,000 or to
imprisonment for a period of twelve months or to both;
or

(b) on conviction on indictment, to imprisonment for a
period of five years or to a fine of $100,000 or to both.

Offences by companies
27 Where a company is guilty of an offence under this Act and the
offence is proved to have been committed with the consent or connivance
of, or to be attributable to neglect on the part of, a senior executive,
manager or other similar officer of the company, or a person who
purported to act in any such capacity, he as well as the company, shall
be guilty of that offence and is liable to be proceeded against and
punished accordingly.

PART IV
SUPPLEMENTARY

Functions of the Bermuda Monetary Authority
28 (1) The Authority has, in addition to its functions under the
Bermuda Monetary Authority Act 1969 in relation to financial
institutions, the functions conferred on the Authority by this Act.

INVESTMENT BUSINESS ACT 1998

22

(2) The Authority shall make a report to the Minister annually
in relation to the carrying out of its functions under this Act; and, for the
purpose of such reports, the Authority may disclose to the Minister any
information which is relevant to the making of the report.

(3) The Authority may from time to time issue guidance to
investment providers as to compliance with this Act and regulations
made under this Act.

(4) Neither the Authority nor any officer, employee or agent of
the Authority shall be liable in damages for anything done or omitted in
the discharge or purported discharge of the Authority's functions under
this Act, unless the act or omission was in bad faith.

(5) Section 31(1B) of the Bermuda Monetary Authority Act
1969 (disclosure of information for purpose of assisting corresponding
authority outside Bermuda) shall apply to recognised regulators,
including recognised regulators in Bermuda.

(6) The Third Schedule to the Bermuda Monetary Authority Act
1969 (financial institutions subject to supervision) is amended by
adding—

"An investment provider licensed under the Investment
Business Act 1998."

Notices
29 Any notice which the Authority is required to serve on any
person under this Act may be served—

(a) by delivering it to that person or, where that person is a
company, by delivering it to any senior executive of that
person;

(b) by leaving it at that person's principal place of business
or registered office in Bermuda; or

(c) by sending it by registered post addressed to that person
at his principal place of business (whether or not in
Bermuda).

Regulations and orders
30 (1) The Minister may, after consultation with the Authority,
make regulations prescribing anything which may be prescribed under
this Act and generally for the implementation of this Act.

(2) Without prejudice to the generality of subsection (1),
regulations may in particular—

(a) regulate the conduct of investment business;

INVESTMENT BUSINESS ACT 1998

23

(b) prescribe the standards of operational capability and
qualifications for any person conducting investment
business;

(c) prescribe forms, fees and charges;

(d) provide for the discipline and control of investment
providers or any person employed by or acting on behalf
of an investment provider;

(e) prescribe the manner in which clients' assets are to be
held on trust and preserved by an investment provider;

(f) prescribe capital and liquidity requirements for any
person conducting investment business;

(g) prescribe systems for maintaining the records, and
controlling the operations, of an investment business;

(h) prescribe systems for clearing and settling securities
transactions; and

(i) regulate advertising and the solicitation of business by
whatever means (including electronic solicitation).

(3) Regulations made under this Act shall be subject to the
negative resolution procedure.

(4) Orders made under sections 2(3), 3(3), 5(4) and 7(4) and
paragraph 2 of the Schedule shall be subject to the negative resolution
procedure.

Amendment of Money Laundering Regulations
31 In regulation 2(a) of the Proceeds of Crime (Money Laundering)
Regulations 1998 (meaning of regulated institution) after paragraph (ii)
there shall be inserted—

"(iia) an investment provider licensed under the
Investment Business Act 1998;".

Transitional provision
32 (1) In this section—

"commencement day" means the day on which this Act
comes into operation;

"existing investment business" means an investment
business which was being carried on immediately before
the commencement day;

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24

"the transitional period" means the period of six months
beginning with the commencement day.

(2) A person who is carrying on an existing investment
business after the commencement day shall apply for a licence during
the transitional period; and, in relation to such an application, section 6
shall be modified as follows—

(a) subsection (1)(b) shall not apply; and

(b) for subsection (2)(a)(i) there shall be substituted—

"(i) a statement setting out the nature and scale of
the existing investment business and particulars
of the arrangements in existence for the
operation of that business;".

(3) This Act, apart from this section and the provisions relating
to the application for a licence and its grant or rejection, shall not apply
to an existing investment business at any time during the transitional
period before the application for a licence in respect of that business has
been granted or rejected.

(4) Where the Authority rejects an application for a licence in
relation to an existing investment business—

(a) the Authority shall, if the applicant asks for its reasons
within twenty-one days of the rejection, inform him in
writing of the reasons within twenty-one days of his
request; and

(b) the applicant may apply to the Minister for a review of
the Authority's decision, and section 15 shall apply
accordingly.

INVESTMENT BUSINESS ACT 1998

25

SCHEDULE (section 5)

EXEMPTIONS

1 The following are exempt from all the provisions of this Act—

(a) the Government of Bermuda;

(b) the Bermuda Monetary Authority;

(c) the Bermuda Stock Exchange;

(d) the Bermuda Commodities Exchange;

(e) the Bermuda Commodities Exchange Clearing House;

(f) every public authority.

2 (1) A person carrying on an investment business is exempt
from all the provisions of this Act if he does not solicit business from,
and his clients do not include, any of the following persons—

(a) individuals who are—

(i) ordinarily resident in Bermuda, or

(ii) employed in Bermuda,

and the spouses and dependants of such persons;

(b) local companies, as defined by the Companies Act 1981;

(c) partnerships formed in Bermuda, except those registered
under the Exempted Partnerships Act 1992;

(d) unincorporated associations formed in Bermuda.

(2) The trustees of a trust or settlement established or made by
a person who is not resident in Bermuda shall, in their capacity as
trustees, be deemed not to fall within subparagraph (1)(a).

(3) The Minister may amend this paragraph by order so as to
add to the categories of person listed in subparagraph (1).