Trusts (Regulation of Trust Business) Act 2001.pdf
TRUSTS (REGULATION OF TRUST BUSINESS) ACT 2001




BERMUDA
2001 : 22

TRUSTS (REGULATION OF TRUST BUSINESS) ACT 2001

[Date of Assent: 8 August 2001]

[Operative Date: 25 January 2002]


ARRANGEMENT OF SECTIONS

PRELIMINARY
1 Short title and commencement
2 Interpretation
3 Meaning of "related company"
4 Meaning of "director",

"controller", "senior executive"
and "associate"

5 Annual reports
6 Authority's statement of

principles
7 Codes of practice
8 Minister to issue directions to

Authority

LICENSING
9 Restriction on carrying on

trust business without a
licence

10 Exempted persons
11 Trust licences

12 Grant and refusal of
applications

13 Display and registration of
licence

14 Annual licence fee
15 Restriction of licence
16 Revocation of licence
17 Winding up on petition from

the Authority
18 Notice of restriction or

revocation of licence
19 Restriction in cases of urgency
20 Directions to protect interests

of clients
21 Notification and confirmation

of directions
22 Surrender of licence
23 Transfer of trusts to new

trustees


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OBJECTIONS TO
SHAREHOLDER
CONTROLLERS

24 Notification of new or
increased control

25 Objection to new or increased
control

26 Objection to existing controller
27 Contraventions by controller
28 Restriction on and sale of

shares
29 Rights of appeal
30 Constitution of tribunals
31 Determination of appeals
32 Costs, procedure and evidence
33 Further appeals on a point of

law

INFORMATION
34 Notification of change of

controller or officer
35 Certificate of Compliance
36 Power to obtain information

and reports
37 Power to require production of

documents
38 Right of entry to obtain

information and documents

INVESTIGATIONS
39 Investigations on behalf of the

Authority
40 Investigation of suspected

contraventions
41 Powers of entry
42 Obstruction of investigations

ACCOUNTS AND AUDIT
43 Duty to prepare annual

accounts

44 Appointment of auditors
45 Auditor and accountant to

communicate certain matters
to Authority

46 Auditor's report
47 Communication with Authority

RESTRICTION ON THE
DISCLOSURE OF
INFORMATION

48 Restricted information
49 Disclosure for facilitating the

discharge of functions of the
Authority

50 Disclosure for facilitating the
discharge of functions by other
authorities

51 Information supplied to the
Authority by relevant overseas
authority

MISCELLANEOUS AND
SUPPLEMENTAL

52 False documents or
information

53 Offences by companies
54 Restriction on use of word

"trust"
55 Notices
56 Service of notice on Authority
57 Regulations
58 Repeal
59 Consequential amendments
60 Transitional


FIRST SCHEDULE:
Minimum Criteria for Licensing

SECOND SCHEDULE:
Consequential Amendments



WHEREAS it is expedient to make new provision for regulating
trust business; for the protection of the interests of clients or potential

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clients of persons carrying on trust business; and for purposes
connected with those 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:⎯



PRELIMINARY

Short title and commencement
1. This Act may be cited as the Trusts (Regulation of Trust
Business) Act 2001, and shall come into operation on such day as the
Minister may appoint by notice published in the Gazette.

Interpretation
2. In this Act, unless the context requires otherwise—

"accountant" means a person entitled to practise as a public ac-
countant under the Institute of Chartered Accountants of
Bermuda Act 1973 ;

"Act" includes regulations and orders made thereunder;

"associate" has the meaning given in section 4(9);

"the Authority" means the Bermuda Monetary Authority estab-
lished by the Bermuda Monetary Authority Act 1969;

"code of practice" means a code of practice issued by the
Authority pursuant to section 7;

"client" in relation to a licensed undertaking, means a trust
administered by the undertaking and includes a settlor and a
beneficiary under a trust;

"company" means a body corporate wherever incorporated;

"controller" has the meaning given in section 4(3);

"court" means the Supreme Court;

"director" has the meaning given in section 4(2);

"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 statements" in relation to the business of an
undertaking which is a company, means the statements
specified in subsection (1)(a) and the notes mentioned in
subsection (1A) of section 84 of the Companies Act 1981;

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"financial year" means the period not exceeding fifty-three weeks
at the end of which the balance of an undertaking's accounts
is struck or, if no such balance is struck or a period of more
than fifty-three weeks is employed for that purpose, then
calendar year;

"holding company" has the meaning given in section 86(2) of the
Companies Act 1981;

"licence" means a licence issued by the Authority under this Act
and "licensee" and "licensed" shall be construed accordingly;

"Minister" means the Minister of Finance;

"minimum criteria" means the minimum criteria for licensing
specified in the First Schedule;

"officer", in relation to an undertaking, includes director,
secretary or senior executive of the undertaking by whatever
name called;

"partnership" means a partnership formed under the Partnership
Act 1902;

"related company" has the meaning given in section 3;

"senior executive" has the meaning given in section 4(7);

"share" has the meaning given in section 2 of the Companies Act
1981;

"shareholder controller" has the meaning given in section 4(5);

"subsidiary" has the meaning given in section 86 of the
Companies Act 1981;

"trust" has the meaning given in section 2 of the Trusts (Special
Provisions) Act 1989;

"trust business" has the meaning given in section 9(3);

"undertaking" means ⎯

(a) a company;

(b) a partnership; or

(c) an individual.

Meaning of "related company"
3. (1) In this Act, a "related company" in relation to an
undertaking or the parent company of such undertaking, means a
company (other than a subsidiary company) in which the undertaking or
the parent company, as the case may be, holds a qualifying capital
interest.

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(2) A qualifying capital interest means an interest in relevant
shares of the company which the undertaking or parent company holds
on a long term basis for the purpose of securing a contribution to its own
activities by the exercise of control or influence arising from that interest.

(3) A holding of 20 per cent or more of the nominal value of the
relevant shares of a company shall be presumed to be a qualifying
capital interest unless the contrary is shown.

(4) Relevant shares means shares comprised in the equity
share capital of the company of a class carrying rights to vote in all
circumstances at general meetings of the company.

(5) Equity share capital means the issued share capital of a
company excluding any part of that capital which, neither as respects
dividends nor as respects capital, carries any right to participate beyond
a specified amount in a distribution.

Meaning of "director", "controller", "senior executive" and
"associate"
4. (1) In this Act "director", "controller", "senior executive" and
"associate" shall be construed in accordance with the provisions of this
section.

(2) "Director" in relation to an undertaking, includes⎯

(a) any person who occupies the position of director, by
whatever name called; and

(b) in the case of a partnership, "director" where it is used
in subsections (7) and (8), includes a partner.

(3) "Controller" in relation to an undertaking, means ⎯

(a) a managing director of the undertaking or of another
company of which it is a subsidiary;

(b) in the case of an undertaking which is a partnership, a
partner;

(c) in the case of an undertaking which is neither a
company nor a partnership, a sole proprietor;

(d) a chief executive of the undertaking or of another
company of which it is a subsidiary;

(e) a person who satisfies the requirements of this
paragraph; and

(f) a person in accordance with whose directions or
instructions the directors of the undertaking or of
another company of which it is a subsidiary or persons
who are controllers of the undertaking by virtue of
paragraph (e) (or any of them) are accustomed to act.

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(4) A person satisfies the requirements of subsection (3)(e) in
relation to an undertaking if, either alone or with any associate or
associates⎯

(a) he holds 10 per cent or more of the shares in the
undertaking or another company of which it is a
subsidiary company;

(b) he is entitled to exercise or control the exercise of 10 per
cent or more of the voting power at any general meeting
of the undertaking or another company of which it is
such a subsidiary; or

(c) he is able to exercise a significant influence over the
management of the undertaking or another company of
which it is such a subsidiary by virtue of ⎯

(i) a holding of shares in; or

(ii) an entitlement to exercise, or control the
exercise of, the voting power at any general
meeting of,

the undertaking, or as the case may be, the other
company concerned.

(5) A person who is a controller of an undertaking by virtue of
subsection (3)(e) is in this Act referred to as a "shareholder controller" of
the undertaking; and in this Act "majority shareholder controller" means
a shareholder controller in whose case the percentage referred to in the
relevant paragraph is 50 or more .

(6) In subsection (5), "the relevant paragraph" in relation to a
shareholder controller means whichever one of paragraphs (a) and (b) of
subsection (4) gives the greater percentage in his case.

(7) "Senior executive", in relation to an undertaking, means a
person (other than a chief executive) who, under the immediate authority
of a director or chief executive of the undertaking⎯

(a) exercises managerial functions; or

(b) is responsible for maintaining accounts or other records
of the undertaking.

(8) In this section "chief executive" in relation to an
undertaking, means a person who, either alone or jointly with one or
more persons, is responsible under the immediate authority of the
directors for the conduct of the business of the undertaking.

(9) In this Act "associate" in relation to a person entitled to
exercise or control the exercise of voting power in relation to, or holding
shares in, a company , means⎯

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(a) if that person is an individual⎯

(i) the spouse, child, step-child or parent of that
person;

(ii) the trustees of any settlement under which that
person has a life interest in possession;

(iii) any company of which that person is a director;

(iv) any person who is an employee or partner of
that person;

(b) if that person is a company ⎯

(i) any director of that company;

(ii) any subsidiary of that company ;

(iii) any director or employee of any such subsidiary
company;

(c) if that person has with any other person an agreement
or arrangement with respect to the acquisition, holding
or disposal of shares or other interests in that company
or under which they undertake to act together in
exercising their voting power in relation to it, that other
person.

(10) For the purpose of subsection (9), "settlement" includes any
disposition or arrangement under which property is held in trust.

Annual reports
5. The Authority shall as soon as practicable after the end of each
of its financial years, make to the Minister and publish in such manner
as it thinks appropriate a report on its activities under this Act in that
year.

Authority's statement of principles
6. (1) The Authority shall as soon as practicable after the coming
into force of this Act, publish in such manner as it thinks fit a statement
of principles in accordance with which it is acting or proposing to act—

(a) in interpreting the minimum criteria and the grounds for
revocation specified in section 16;

(b) in exercising its power to grant, revoke or restrict a
licence; and

(c) in exercising its power to obtain information, reports and
to require production of documents.

(2) If the Authority makes a material change to the principles it
shall publish a statement of the change or the revised statement of

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principles in the same manner as it published the statement under
subsection (1).

Codes of practice
7. (1) The Authority shall as soon as practicable after the coming
into force of this Act issue codes of practice in connection with the
manner by which licensed undertakings shall carry on trust business.

(2) Without prejudice to the generality of subsection (1), the
Authority may issue codes of practice for the purpose of providing
guidance as to the duties, requirements and standards to be complied
with, and the procedures (whether as to identification, record-keeping,
internal reporting and training or otherwise) and sound principles to be
observed by persons carrying on trust business.

(3) Before issuing a code of practice, the Authority shall
publish a draft of that code in such manner as it thinks fit and shall
consider any representations made to it about the draft.

(4) Every licensed undertaking shall in the conduct of its
business have regard to any code of practice issued by the Authority.

(5) A failure on the part of a licensed undertaking to comply
with the provisions of such a code shall be taken into account by the
Authority in determining whether the business is being conducted in a
prudent manner as required by paragraph 5 of the minimum criteria.

Minister to issue directions to Authority
8. The Minister may from time to time give to the Authority general
policy directions, not inconsistent with the provisions of this Act, as to
the performance of its functions under this Act and the Authority shall
give effect to such directions.

LICENSING

Restriction on carrying on trust business without a licence
9. (1) Subject to section 10, a person shall not carry on trust
business in or from within Bermuda unless that person is for the time
being a licensed undertaking .

(2) A person who contravenes this section is guilty of an offence
and liable⎯

(a) on summary conviction, to a fine of $25,000 or to
imprisonment for one year or to both;

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

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(3) In this section "trust business" means the provision of the
services of a trustee as a business, trade, profession or vocation.

Exempted persons
10. (1) Section 9 shall not apply to any person exempted by or
under an exemption order.

(2) The Minister acting on the advice of the Authority may by
order ("an exemption order") provide for⎯

(a) a specified person;

(b) persons falling within a specified class,

to be exempt from the requirement of section 9.

(3) An exemption order may provide for an exemption to have
effect⎯

(a) only in specified circumstances;

(b) subject to restrictions including restrictions on the
value of the trust assets that may be held or the number
of trusts under management;

(c) subject to conditions.

(4) "Specified" means specified by the exemption order.

(5) An order made under this section is subject to negative
resolution procedure.

Trust licence
11. (1) An application for a licence may be made to the Authority ⎯

(a) by a company for an unlimited trust licence;

(b) by a partnership or an individual for a limited trust
licence.

(2) Without prejudice to section 15, an unlimited trust licence
authorises the licensee to carry on trust business and to solicit business
from the public generally.

(3) A limited trust licence ⎯

(a) authorises the licensee to hold trust assets in an amount
not exceeding the specified amount; and

(b) authorises the licensee to hold trust assets in an
amount exceeding the specified amount if an
undertaking holding an unlimited licence is appointed
by the licensee to manage any assets in excess of the
specified amount; but

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(c) does not authorise the licensee to act as sole trustee to
any trust under his management.

(4) For the purposes of subsection (3)⎯

(a) the specified amount is thirty million dollars or such
other amount as the Minister acting on the advice of the
Authority may specify by Order;

(b) the specified amount shall be calculated by reference to
the average value of the trust assets taken over a period
of six months preceding the end of the undertaking's
financial year.

(5) An order made under subsection (4)(a) is subject to negative
resolution procedure.

(6) An application shall be made in such manner as the
Authority may direct and shall be accompanied with —

(a) a business plan setting out the nature and scale of the
trust business which is to be carried on by the
applicant;

(b) particulars of the applicant's arrangements for the
management of the business;

(c) such other information and documents as the Authority
may reasonably require for the purpose of determining
the application; and

(d) an application fee of such amount as may be prescribed
under the Government Fees Act 1965 .

(7) An application may be withdrawn by notice in writing to the
Authority at any time before it has determined the application.

Grant and refusal of applications
12. (1) Subject to this section, the Authority may on an application
duly made in accordance with section 11, and after being provided with
all such information, documents and reports as it may reasonably
require under that section, grant or refuse the application for a licence.

(2) The Authority shall not grant an application unless it is
satisfied that the minimum criteria are fulfilled with respect to the
applicant.

(3) A licence issued to a partnership shall be issued in the
partnership name, and, without prejudice to sections 15 and 16, shall
not be affected by any change in the name of the partners.

(4) The Minister acting on the advice of the Authority may by
order amend the First Schedule by adding new criteria or by amending
or deleting the criteria for the time being specified in the Schedule.

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(5) An order made under subsection (4) shall be subject to
negative resolution procedure.

Display and registration of licence
13. (1) A licensed undertaking shall at all times keep the licence on
display at its principal place of business in Bermuda.

(2) The Authority shall cause a notice to be published in the
Gazette of every licence issued under this Act.

(3) The Authority shall compile and maintain in such manner
as it thinks fit 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 at the offices of the Authority by any
person upon payment of the fee prescribed under the Government Fees
Act 1965.

Annual licence fee
14. (1) An undertaking shall pay such fee as may be prescribed
under the Government Fees Act 1965⎯

(a) on the grant of a licence; and

(b) on or before 31 January in every year after the year in
which the licence was granted.

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

(3) Where an undertaking fails to pay the prescribed fee as
provided in subsections (1)(a) and (b), it shall pay in addition to such fee
a late penalty fee of an amount equal to ten per cent of the fee due for
every month or part thereof during which the fee remains unpaid.

(4) The Authority may recover any fee and penalty fee due as a
debt owing to it in any court of competent jurisdiction.

Restriction of licence
15. (1) Subject to section 18, the Authority may restrict a licence⎯

(a) if it is satisfied of the matters specified in paragraph (a),
(b), (d) or (e) of section 16 but it appears to it that the
circumstances are not such as to justify revocation;

(b) if it is satisfied that a person has become a controller of
an undertaking in contravention of section 24 or has
become or remains a controller after being given a notice
of objection pursuant to section 25 or 26; or

(c) in connection with the revocation of a licence⎯

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(i) when giving the undertaking notice that it
proposes to revoke its licence; or

(ii) at any time after such notice has been given to
the undertaking; or

(d) at any time after the undertaking has served a notice
surrendering its licence with effect from a later date.

(2) The Authority may restrict a licence by imposing such
conditions as it thinks desirable for the protection of the undertaking's
clients or potential clients, and may in particular⎯

(a) require the undertaking to take certain steps or to
refrain from adopting or pursuing a particular course of
action or to restrict the scope of its business in a
particular way;

(b) impose limitations on the acceptance of trust business;

(c) prohibit the undertaking from soliciting trust business
either generally or from persons who are not already its
clients;

(d) prohibit the undertaking from accepting new trust
business;

(e) prohibit the undertaking from entering into any other
transactions or class of transactions;

(f) require the removal of any officer or controller ;

(g) specify requirements to be fulfilled otherwise than by
action taken by the undertaking.

(3) Any condition imposed under this section may be varied or
withdrawn by the Authority.

(4) The Authority may on the application of an undertaking
vary any condition imposed on its licence.

(5) An undertaking which fails to comply with any requirement
or contravenes any prohibition imposed on it by a condition under this
section shall be guilty of an offence and liable⎯

(a) on summary conviction to a fine of $25,000;

(b) on conviction on indictment to a fine of $75,000.

(6) The fact that a condition imposed under this section has
not been complied with (whether or not constituting an offence under
subsection (5)) shall, where the restriction has been imposed pursuant to
paragraphs (a) or (b) of subsection (1), be a ground for the revocation of
the licence in question but shall not invalidate any transaction.

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Revocation of licence
16. Subject to section 18, the Authority may revoke the licence of an
undertaking if the Authority is satisfied that—

(a) any of the minimum criteria is not or has not been
fulfilled, or may not be or may not have been fulfilled, in
respect of the undertaking;

(b) the undertaking has failed to comply with any obligation
imposed on it by or under this Act or is carrying on
business in a manner not authorised by its licence;

(c) a person has become a majority shareholder controller of
the undertaking in contravention of section 24 or has
become or remains such a controller after being given a
notice of objection pursuant to section 25 or 26;

(d) the Authority has been provided with false, misleading
or inaccurate information by or on behalf of the
undertaking or, in connection with an application for a
licence, by or on behalf of a person who is or is to be an
officer or controller of the undertaking; or

(e) the interests of the clients or potential clients of the
undertaking are in any way threatened.

Winding up on petition from the Authority
17. (1) On a petition presented by the Authority by virtue of this
section, the court may wind up an undertaking which is a company in
respect of which a licence is revoked, if the court is of the opinion that it
is just and equitable that the undertaking be wound up.

(2) Part XIII (Winding Up) of the Companies Act 1981 shall
apply to the winding up of an undertaking under this section.

Notice of restriction or revocation of licence
18. (1) Where the Authority proposes to ⎯

(a) restrict a licence under section 15(1);

(b) vary a restriction imposed on a licence otherwise than
with the agreement of the undertaking concerned; or

(c) revoke a licence under section 16,

the Authority shall give to the undertaking concerned written notice of its
intention to do so.

(2) If the proposed action is within subsection (1)(a) or (1)(b),
the notice under that subsection shall specify the proposed restriction
or, as the case may be, the proposed variation.

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(3) A notice under subsection (1) shall state the ground or
grounds on which the Authority intends to act and give particulars of the
undertaking's rights under subsection (5).

(4) Where⎯

(a) the ground for a proposal to impose or vary a restriction
or for a proposed revocation is that it appears to the
Authority that the criterion in paragraph 1 of the First
Schedule is not or has not been fulfilled, or may not be
or may not have been fulfilled, in the case of any person;
or

(b) a proposed restriction consists of or includes a condition
requiring the removal of any person as a controller or an
officer,

the Authority shall give that person a copy of the notice mentioned in
subsection (1), together with a statement of his rights under subsection
(5).

(5) An undertaking which is given notice under subsection (1)
and a person who is given a copy of it under subsection (4) may make
representations in writing to the Authority within the period of fourteen
days beginning with the day on which the notice was given (or such other
longer period as the Authority may allow).

(6) After giving a notice under subsection (1) and taking into
account any representations made under subsection (5), the Authority
shall decide whether⎯

(a) to proceed with the action proposed in the notice;

(b) to take no further action;

(c) if the proposed action was to revoke the undertaking's
licence, to restrict its licence instead; or

(d) if the proposed action was to restrict the undertaking's
licence or to vary the restrictions on a licence, to restrict
it or to vary the restrictions in a different manner.

(7) The Authority shall give the undertaking and any such
person as is mentioned in subsection (4), written notice of its decision
and, except where the decision is to take no further action, the notice
shall state the reasons for the decision and give particulars of the rights
conferred by subsection (9) and section 29.

(8) A notice under subsection (7) of a decision to restrict a
licence, to vary the restrictions on a licence or to revoke a licence shall,
subject to sections 29(4) and (5), have the effect of restricting the licence
or varying the restriction in the manner specified in the notice or
revoking the licence.

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(9) Where the decision notified under subsection (7) is to
restrict the licence or to vary the restrictions on a licence otherwise than
as stated in the notice given under subsection (1), the undertaking may
within the period of seven days beginning with the day on which the
notice was given under subsection (7) make written representations to
the Authority with respect to the restrictions and the Authority may,
after taking those representations into account, alter the restrictions.

(10) A notice under subsection (7) shall be given within the
period of twenty-eight days beginning with the day on which the notice
under subsection (1) was given; and if no notice under subsection (7) is
given within that period, the Authority shall be treated as having at the
end of that period given a notice under that subsection to the effect that
no further action is to be taken.

(11) Where the Authority varies a restriction on an undertaking's
licence with its agreement or withdraws a restriction consisting of a
condition, the variation or withdrawal shall be effected by written notice
to the undertaking.

(12) The Authority may omit from the copy given to a person
under subsection (4) and from a notice given to him under subsection (7)
any matter which does not relate to him.

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

Restriction in cases of urgency
19. (1) No notice need be given under section 18 in respect of the
imposition or variation of a restriction on an undertaking's licence in any
case in which the Authority considers that the restriction should be
imposed or varied as a matter of urgency.

(2) In any such case the Authority may by written notice to the
undertaking impose or vary the restriction.

(3) Any such notice shall state the reason for which the
Authority has acted and particulars of the rights conferred by subsection
(5) and section 29.

(4) Section 18(4) shall apply to a notice under subsection (2)
imposing or varying a restriction as it applies to a notice under section
18(1) in respect of a proposal to impose or vary a restriction; but the
Authority may omit from a copy given to a person by virtue of this
subsection any matter which does not relate to him.

(5) An undertaking to which a notice is given under this section
of the imposition or variation of a restriction and a person who is given a
copy of it by virtue of subsection (4) may within the period of fourteen
days beginning with the day on which the notice was given make
representations to the Authority.

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(6) After giving a notice under subsection (2) imposing or
varying a restriction and taking into account any representations made
in accordance with subsection (5) the Authority shall decide whether ⎯

(a) to confirm or rescind its original decision; or

(b) to impose a different restriction or to vary the restriction
in a different manner.

(7) The Authority shall within the period of twenty-eight days
beginning with the day on which the notice was given under subsection
(2) give the undertaking concerned written notice of its decision under
subsection (6) and, except where the decision is to rescind the original
decision, the notice shall state the reason for the decision.

(8) Where the notice under subsection (7) is of a decision to
take the action specified in subsection (6)(b), the notice under subsection
(7) shall have the effect of imposing the restriction or making the
variation specified in the notice and with effect from the date on which it
is given.

Directions to protect interests of clients
20. (1) The Authority may give an undertaking directions under
this section at any time after its licence is revoked or surrendered.

(2) Directions under this section shall be such as appear to the
Authority to be desirable for safeguarding the interests of the
undertaking's clients.

(3) No direction shall be given to an undertaking under this
section after it has ceased to hold or control trust assets; and any such
direction which is in force with respect to an undertaking shall cease to
have effect when the undertaking ceases to hold or control any such
assets.

(4) An undertaking which fails to comply with any requirement
or contravenes any prohibition imposed on it by a direction under this
section shall be guilty of an offence and liable ⎯

(a) on summary conviction to a fine of $25,000;

(b) on conviction on indictment to a fine of $75,000.

Notification and confirmation of directions
21. (1) A direction under section 20 shall be given by notice in
writing and may be varied by a further direction; and a direction may be
revoked by the Authority by a notice in writing to the undertaking
concerned.

(2) A direction under section 20, except one varying a previous
direction with the agreement of the undertaking concerned⎯

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17



(a) shall state the reasons for which it is given and give
particulars of the undertaking's rights under subsection
(3) and section 29; and

(b) without prejudice to section 20(3), shall cease to have
effect at the end of the period of twenty-eight days
beginning with the day on which it is given unless before
the end of that period it is confirmed by a further written
notice given by the Authority to the undertaking
concerned.

(3) An undertaking to which a direction is given which requires
confirmation under subsection (2) may, within the period of fourteen
days beginning with the day on which the direction is given, make
written representations to the Authority; and the Authority shall take
any such representations into account in deciding whether to confirm
the direction.

Surrender of licence
22. (1) An undertaking may surrender its licence by written notice
to the Authority.

(2) A surrender shall take effect on the giving of the notice or, if
a later date is specified in it, on that date; and where a later date is
specified in the notice the undertaking may by further written notice to
the Authority substitute an earlier date, not being earlier than that on
which the first notice was given.

(3) The surrender of a licence shall be irrevocable unless it is
expressed to take effect at a later date and before that date the Authority
by notice in writing allows it to be withdrawn.

Transfer of trusts to new trustees
23. (1) Notwithstanding anything to the contrary in any declaration
of trust, where the Authority is satisfied that in the interests of clients of
a licensed undertaking it is necessary for all or any of the trusts
managed by the undertaking to be transferred to a new trustee for
administration by such trustee, the Authority may petition the court for
that purpose.

(2) In any such case, the court, after hearing representations
from the Authority or any other person appearing to the court to be
affected, may order the transfer of any such trust to a new trustee, and
in that connection may make such supplemental or incidental orders or
give such directions, as the court thinks fit.

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OBJECTIONS TO SHAREHOLDER CONTROLLERS

Notification of new or increased control
24. (1) No person shall become a 10 per cent or majority
shareholder controller of a licensed undertaking which is a company
unless ⎯

(a) he has served on the Authority a written notice stating
that he intends to become such a controller of the
undertaking; and

(b) either the Authority has, before the end of the period of
three months beginning with the date of service of that
notice, notified him in writing that there is no objection
to his becoming such a controller of the undertaking, or
that period has elapsed without the Authority having
served him under section 25 a written notice of
objection to his becoming such a controller of the
undertaking.

(2) Subsection (1) applies also in relation to a person becoming
a partner in a licensed undertaking which is a partnership.

(3) A notice under subsection (1)(a) shall contain such
information as the Authority may direct and the Authority may after
receiving such a notice from any person, by notice in writing require him
to provide such additional information or documents as the Authority
may reasonably require for deciding whether to serve notice of objection.

(4) Where additional information or documents are required
from any person by a notice under subsection (2) the time between the
giving of the notice and the receipt of the information or documents shall
be added to the period mentioned in subsection (1)(b).

Objection to new or increased control
25. (1) The Authority may serve a notice of objection under this
section on a person who has given notice under section 24 unless it is
satisfied⎯

(a) that the person concerned is a fit and proper person to
become a controller of the description in question of the
undertaking;

(b) that the interests of clients and potential clients of the
undertaking would not be in any other manner
threatened by that person becoming a controller of that
description of the undertaking; and

(c) without prejudice to paragraphs (a) and (b), that, having
regard to that person's likely influence on the
undertaking as a controller of the description in

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19



question the criteria in the First Schedule would
continue to be fulfilled in the case of the undertaking or,
if any of those criteria is not fulfilled, that that person is
likely to undertake adequate remedial action.

(2) Before serving a notice of objection under this section the
Authority shall serve the person concerned with a preliminary written
notice stating that the Authority is considering service on that person of
a notice of objection and that notice ⎯

(a) shall specify which of the matters mentioned in
subsection (1) the Authority is not satisfied about and,
subject to subsection (5), the reasons for which it is not
satisfied; and

(b) shall give particulars of the rights conferred by
subsection (3).

(3) A person served with a notice under subsection (2) may,
within a period of twenty-eight days beginning with the day on which the
notice is served, make written representations to the Authority; and
where such representations are made the Authority shall take them into
account in deciding whether to serve a notice of objection.

(4) A notice of objection under this section shall⎯

(a) specify which of the matters mentioned in subsection (1)
the Authority is not satisfied about and, subject to
subsection (5), the reasons for which it is not satisfied;
and

(b) give particulars of the rights conferred by section 29.

(5) Subsections (2)(a) and (4)(a) shall not require the Authority
to specify any reason which would in its opinion involve the disclosure of
confidential information the disclosure of which would be prejudicial to a
third party.

(6) Where a person required to give a notice under section 24 in
relation to becoming a controller of any description becomes a
controller of that description without having given the notice, the
Authority may serve him with notice of objection under this section at
any time within three months after becoming aware of his having done so
and may, for the purpose of deciding whether to serve him with such a
notice, require him by notice in writing to provide such information or
documents as the Authority may reasonably require.

(7) The period mentioned in section 24(1)(b) (with any extension
under subsection (4) of that section) and the period mentioned in
subsection (6) shall not expire, if it would otherwise do so, until fourteen
days after the end of the period within which representations can be
made under subsection (3).

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Objection to existing controller
26. (1) Where it appears to the Authority that a person who is a
controller of any description of a licensed undertaking is not or is no
longer a fit and proper person to be such a controller of the undertaking
it may serve him with a written notice of objection to his being such a
controller of the undertaking.

(2) Before serving a notice of objection under this section the
Authority shall serve the person concerned with a preliminary written
notice stating that the Authority is considering service on that person of
a notice of objection and that notice shall ⎯

(a) subject to subsection (5), specify the reasons for which it
appears to the Authority that the person in question is
not or is no longer a fit and proper person as mentioned
in subsection (1); and

(b) give particulars of the rights conferred by subsection (3).

(3) A person served with a notice under subsection (2) may,
within a period of twenty-eight days beginning with the day on which the
notice is served, make written representations to the Authority; and
where such representations are made the Authority shall take them into
account in deciding whether to serve a notice of objection.

(4) A notice of objection under this section shall⎯

(a) subject to subsection (5), specify the reasons for which it
appears to the Authority that the person in question is
not or is no longer a fit and proper person as mentioned
in subsection (1); and

(b) give particulars of the rights conferred by section 29.

(5) Subsections (2)(a) and (4)(a) shall not require the Authority
to specify any reason which would in its opinion involve the disclosure of
confidential information the disclosure of which would be prejudicial to a
third party.

Contraventions by controller
27. (1) Subject to subsection (2), any person who contravenes
section 24 by⎯

(a) failing to give the notice required by subsection (1)(a) of
that section; or

(b) becoming a controller of any description to which that
section applies before the end of the period mentioned in
subsection (1)(b) of that section in a case where the
Authority has not served him with a preliminary notice
under section 25(2),

shall be guilty of an offence.

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(2) A person shall not be guilty of an offence under subsection
(1) if he shows that he did not know of the acts or circumstances by
virtue of which he became a controller of the relevant description; but
where any person becomes a controller of any such description without
such knowledge and subsequently becomes aware of the fact that he has
become such a controller he shall be guilty of an offence unless he gives
the Authority written notice of the fact that he has become such a
controller within fourteen days of becoming aware of the fact.

(3) Any person who ⎯

(a) before the end of the period mentioned in section 24
(1)(b), becomes a controller of any description to which
that subsection applies after being served with a
preliminary notice under section 25(2);

(b) contravenes section 24 by becoming a controller of any
description after being served with a notice of objection
to his becoming a controller of that description; or

(c) having become a controller of any description in
contravention of that section (whether before or after
being served with such notice of objection) continues to
be such a controller after such a notice has been served
on him;

shall be guilty of an offence.

(4) A person guilty of an offence under subsection (1) or (2)
shall be liable on summary conviction to a fine of $25,000.

(5) A person guilty of an offence under subsection (3) shall be
liable⎯

(a) on summary conviction to a fine of $25,000 and in
respect of an offence under paragraph (c) of that
subsection, to a fine of $500 for each day on which the
offence has continued;

(b) on conviction on indictment to a fine of
$50,000 or to imprisonment for two years or to both.

Restriction on and sale of shares
28. (1) The powers conferred by this section shall be exercisable
where a person ⎯

(a) has contravened section 25 by becoming a controller of
any description after being served with a notice of
objection to his becoming a controller of that description;

(b) having become a controller of any description in
contravention of that section continues to be one after
such a notice has been served on him; or

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22



(c) continues to be a controller of any description after
being served under section 26 with notice of objection to
his being a controller of that description.

(2) The Authority may by notice in writing served on the person
concerned direct that any specified shares to which this section applies
shall, until further notice, be subject to one or more of the following
restrictions—

(a) any transfer of, or agreement to transfer, those shares
or, in the case of unissued shares, any transfer of or an
agreement to transfer the right to be issued with them,
shall be void;

(b) no voting rights shall be exercisable in respect of the
shares;

(c) no further shares shall be issued in right of them or in
pursuance of any offer made to their holder; or

(d) except in liquidation, no payment shall be made of any
sums due from the undertaking on the shares, whether
in respect of capital or otherwise.

(3) The court may, on the application of the Authority, order
the sale of any specified shares to which this section applies and, if they
are for the time being subject to any restrictions under subsection (2),
that they shall cease to be subject to those restrictions.

(4) No order shall be made under subsection (3) in a case
where the notice of objection was served under section 25 or 26 —

(a) until the end of the period within which an appeal can
be brought against the notice of objection;

(b) if such an appeal is brought, until it has been
determined or withdrawn.

(5) Where an order has been made under subsection (3) the
court may, on the application of the Authority, make such further order
relating to the sale or transfer of the shares as it thinks fit.

(6) Where shares are sold in pursuance of an order under this
section the proceeds of sale, less the costs of the sale, shall be paid into
court for the benefit of the persons beneficially interested in them; and
any such person may apply to the court for the whole or part of the
proceeds to be paid to him.

(7) This section applies—

(a) to all the shares in the undertaking of which the person
in question is a controller of the relevant description
which are held by him or any associate of his and were

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23



not so held immediately before he became such a
controller of the undertaking; and

(b) where the person in question became a controller of the
relevant description as a result of the acquisition by him
or any associate of his of shares in another company, to
all the shares in that company which are held by him or
any associate of his and were not so held before he
became such a controller of that undertaking.

(8) A copy of the notice served on the person concerned under
subsection (2) shall be served on the undertaking or company to whose
shares it relates and, if it relates to shares held by an associate of that
person, on that associate.

Rights of appeal
29. (1) An undertaking which is aggrieved by a decision of the
Authority ⎯

(a) to restrict its licence, to restrict it in a particular manner
or to vary any restrictions of its licence;

(b) to revoke its licence; or

(c) to refuse an application for a licence made under section
60(3)(b),

may appeal against the decision to a tribunal constituted in accordance
with section 30.

(2) Where ⎯

(a) the ground or a ground for a decision within subsection
(1)(a) or (b) is that mentioned in section 18(4)(a); or

(b) the effect of a decision within subsection (1)(a) is to
require the removal of a person as a controller or officer
of an undertaking,

the controller or officer to whom the ground relates or whose removal is
required may appeal to a tribunal constituted as aforesaid against the
finding that there is such a ground for the decision or, as the case may
be, against the decision to require his removal.

(3) Any person on whom notice of objection is served under
section 25 or 26 may appeal to a tribunal constituted as aforesaid
against the decision of the Authority to serve the notice; but this
subsection does not apply to a person in any case in which he has failed
to give a notice or become or continued to be a controller in
circumstances in which his doing so constitutes an offence under section
27(1), (2) or (3).

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(4) The tribunal may suspend the operation of a restriction or
a variation of a restriction pending the determination of an appeal in
respect of the decision imposing or varying the restriction.

(5) The revocation of an undertaking's licence pursuant to a
decision against which there is a right of appeal under this section shall
not have effect⎯

(a) until the end of the period within which the appeal can
be brought; and

(b) if such an appeal is brought, until it is determined or
withdrawn.

Constitution of tribunals
30. (1) Where an appeal is brought under section 29 a tribunal to
determine the appeal shall be constituted in accordance with this
section.

(2) The tribunal shall consist of a chairman, or, in his absence,
a deputy chairman and two other members.

(3) The chairman and the deputy chairman shall be appointed
by the Minister for a term not exceeding three years, and shall be
barristers and attorneys of at least seven years' standing.

(4) The two other members of the tribunal shall be selected by
the chairman, or, in his absence, the deputy chairman, from a panel of
members appointed by the Minister, who shall be persons appearing to
the chairman or, as the case may be, the deputy chairman, to have
experience of trust business.

(5) During any period of time when the chairman or deputy
chairman is absent from Bermuda or is for any other reason unable to
act, the Minister may appoint another person to act in his place for the
period of his absence or inability to act.

(6) The Minister shall appoint a panel of not less than nine
persons with experience of trust business to serve as members of appeal
tribunals.

(7) A person shall not be eligible for appointment as chairman,
deputy chairman or member of the tribunal if he is or has at any time
during the period of two years ending with the date of his appointment
been an officer, servant or agent of the Authority or of any licensed
undertaking.

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

"appeal tribunal constituted in accordance with section 30 of the
Trusts (Regulation of Trust Business) Act 2001."

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Determination of appeals
31. (1) On an appeal under section 29(1) and (2) the question for
the determination of the tribunal shall be whether, for the reasons
adduced by the appellant, the decision was unlawful or not justified by
the evidence on which it was based.

(2) On any such appeal the tribunal may confirm or reverse the
decision which is the subject of the appeal but shall not have power to
vary it except that ⎯

(a) where the decision was to impose or vary any restriction
the tribunal may direct the Authority to impose different
restrictions or to vary them in a different way; or

(b) where the decision was to revoke a licence the tribunal
may direct the Authority to restrict it instead.

(3) Notice of a tribunal's determination, together with a
statement of its reasons, shall be given to the appellant and to the
Authority; and, unless the tribunal otherwise directs, the determination
shall come into operation when the notice is given to the appellant and to
the Authority.

Costs, procedure and evidence
32. (1) A tribunal may give such directions as it thinks fit for the
payment of costs or expenses by any party to the appeal.

(2) The Minister may make regulations with respect to appeals
and those regulations may in particular make provision⎯

(a) as to the period within which and the manner in which
such appeals are to be brought;

(b) as to the manner in which such appeals are to be
conducted, including provision for any hearing to be
held in private and as to the persons entitled to appear
on behalf of the parties;

(c) as to the procedure to be adopted where appeals are
brought both by an undertaking and by a person who is
to be a controller or officer of an undertaking, including
provision for the hearing of the appeals together and for
the mutual disclosure of information;

(d) for requiring an appellant or the Authority to disclose or
allow the inspection of documents in his or its custody
or under his or its control;

(e) for requiring any person, on tender of the necessary
expenses of his attendance, to attend and give evidence
or produce documents in his custody or under his

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26



control and for authorising the administration of oaths
to witnesses;

(f) for enabling an appellant to withdraw an appeal or the
Authority to withdraw its opposition to an appeal and for
the consequences of any such withdrawal;

(g) for taxing or otherwise settling any costs or expenses
which the tribunal directs to be paid and for the
enforcement of any such direction;

(h) for enabling any preliminary or incidental functions in
relation to an appeal to be discharged by the chairman
or, as the case may be, the deputy chairman of the
tribunal; and

(i) as to any other matter connected with such appeals.

(3) Regulations made under subsection (2) shall be subject to
negative resolution procedure.

(4) A person who, having been required in accordance with
regulations made under this section to attend and give evidence, fails
without reasonable excuse to attend or give evidence, shall be guilty of
an offence and liable on summary conviction to a fine of $10,000.

(5) A person who without reasonable excuse alters, suppresses,
conceals, destroys or refuses to produce any document which he has
been required to produce in accordance with regulations under this
section, or which he is liable to be so required to produce, shall be guilty
of an offence and liable⎯

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

(b) on conviction on indictment to a fine of
$50,000 or to imprisonment for two years or to both.

Further appeals on a point of law
33. (1) An undertaking or other person who has appealed to a
tribunal may appeal to the court on any question of law arising from the
decision of the appeal by the tribunal and an appeal on any such
question shall also lie at the instance of the Authority; and if the court is
of the opinion that the decision was erroneous in point of law it shall
remit the matter to the tribunal for re-hearing and determination by it.

(2) No appeal to the Court of Appeal shall be brought from a
decision under subsection (1) except with leave of that court.

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27



INFORMATION

Notification of change of controller or officer
34. (1) A licensed undertaking shall give written notice to the
Authority of the fact that any person has become or ceased to be a
controller or officer of the undertaking.

(2) A notice required to be given under subsection (1) shall be
given before the end of the period of fourteen days beginning with the
day on which the undertaking becomes aware of the relevant facts.

(3) An undertaking which fails to give a notice required by this
section shall be guilty of an offence and liable on summary conviction to
a fine of $10,000.

Certificates of Compliance
35. (1) Every licensed undertaking shall, within four months from
the end of its financial year, deliver to the Authority a certificate of
compliance, signed by an officer of the undertaking, made up to the end
of its financial year, certifying that the undertaking has complied with
the minimum criteria, codes of conduct and, in the case of an
undertaking which is not a company, the limitations imposed by section
11(3).

(2) An undertaking that fails to deliver a certificate as required
by subsection (1) or delivers such a certificate after the end of the period
specified in subsection (1) commits an offence and is liable on summary
conviction to a fine of $10,000.

Power to obtain information and reports
36. (1) The Authority may by notice in writing served on a licensed
undertaking—

(a) require the undertaking to provide the Authority (or
such person acting on behalf of the Authority as may be
specified in the notice), at such time or times or at such
intervals or in respect of such period or periods as may
be so specified, with such information as the Authority
may reasonably require for ensuring that the
undertaking is complying with the provisions of this Act
and any code of practice, and for safeguarding the
interests of clients and potential clients of the
undertaking;

(b) require the undertaking to provide the Authority with a
report, in such form as may be specified in the notice, by
the undertaking's auditor or by an accountant or other
person with relevant professional skill on, or on any
aspect of, any matter about which the Authority has

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28



required or could require the undertaking to provide
information under paragraph (a).

(2) The person appointed by an undertaking to make any
report required under subsection (1)(b) shall forthwith give written notice
to the Authority of any fact or matter of which he becomes aware which
indicates to him⎯

(a) that any of the minimum criteria is not or has not been
fulfilled, or may not be or may not have been fulfilled, in
respect of the undertaking; and

(b) that the matters are likely to be of material significance
for the exercise, in relation to such an undertaking, of
the Authority's functions under this Act or Regulations.

Power to require production of documents
37. (1) The Authority may by notice in writing served on a licensed
undertaking—

(a) require it to produce, within such time and at such place
as may be specified in the notice, such document or
documents of such description as may be so specified;

(b) require it to provide to an officer, servant or agent of the
Authority such information, or to produce to him such
documents, as he may specify;

being such information or documents as the Authority may reasonably
require for ensuring that the undertaking is complying with the
provisions of this Act and any code of practice, and for safeguarding the
interests of clients and potential clients of the undertaking.

(2) Where, by virtue of subsection (1), the Authority or any
officer, servant or agent of the Authority has power to require the
production of any documents from an undertaking, the Authority or that
officer, servant or agent shall have the like power to require the
production of those documents from any person who appears to be in
possession of them; but where any person from whom such production is
required claims a lien on documents produced by him, the production
shall be without prejudice to the lien.

(3) The power under this section to require an undertaking or
other person to produce any documents includes power—

(a) if the documents are produced, to take copies of them or
extracts from them and to require that undertaking or
person, or any other person who is a present or past
controller or officer of, or is or was at any time employed
by or acting as an employee of, the undertaking in
question, to provide an explanation of any of them; and

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29



(b) if the documents are not produced, to require the person
who was required to produce them to state, to the best
of his knowledge and belief, where they are.

(4) If it appears to the Authority to be desirable in the interests
of the clients or potential clients of a licensed undertaking which is a
company to do so, it may also exercise the powers conferred by section
36 and subsection (1) of this section in relation to any company which is
or has at any relevant time been—

(a) a parent company, subsidiary company or related
company of that undertaking;

(b) a subsidiary company of a parent company of that
undertaking;

(c) a parent company of a subsidiary company of that
undertaking; or

(d) a company in the case of which a shareholder controller
of that undertaking, either alone or with any associate or
associates, holds 50 per cent or more of the shares or is
entitled to exercise, or control the exercise of more than
50 per cent of the voting power at a general meeting.

(5) The Authority may by notice in writing served on any
person who is or is to be a controller or officer of a licensed undertaking
require him to provide the Authority, within such time as may be
specified in the notice, with such information or documents as the
Authority may reasonably require for determining whether he is a fit and
proper person to hold the particular position which he holds or is to
hold.

(6) Any person who without reasonable excuse fails to comply
with a requirement imposed on him under this section shall be guilty of
an offence and liable on summary conviction to a fine of
$10,000 or to imprisonment for six months or to both.

(7) Nothing in this section shall require the disclosure or
production by a person of information or documents which he would be
entitled to refuse to disclose or produce on the grounds of legal
professional privilege in proceedings in Bermuda.

Right of entry to obtain information and documents
38. (1) Any officer, servant or agent of the Authority may, on
producing if required evidence of his authority, enter any premises
occupied by a person on whom a notice has been served under sections
36(1) and 37(1) for the purpose of obtaining there the information or
documents required by that notice and of exercising the powers
conferred by section 37(3).

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(2) Any person who intentionally obstructs a person
exercising rights conferred by this section shall be guilty of an offence
and liable on summary conviction to a fine of $10,000 or to
imprisonment for six months or to both.

INVESTIGATIONS

Investigations on behalf of the Authority
39. (1) If it appears to the Authority desirable to do so in the
interests of the clients or potential clients of a licensed undertaking the
Authority may appoint one or more competent persons to investigate and
report to the Authority on—

(a) the nature, conduct or state of the undertaking's
business or any particular aspect of it; or

(b) the ownership or control of the undertaking;

and the Authority shall give written notice of any such appointment to
the undertaking concerned.

(2) If a person appointed under subsection (1) thinks it
necessary for the purposes of his investigation, he may also investigate
the business of any company which is or has at any relevant time been—

(a) a parent company, subsidiary company or related
company of the undertaking under investigation;

(b) a subsidiary company or related company of a parent
company of that undertaking;

(c) a parent company of a subsidiary company of that
undertaking; or

(d) a company in the case of which a shareholder controller
of that undertaking, either alone or with any associate or
associates, holds 50 per cent or more of the shares or is
entitled to exercise, or control the exercise of more than
50 per cent of the voting power at a general meeting.

(3) Where a person appointed under subsection (1) decides to
investigate the business of any company by virtue of subsection (2) he
shall give it written notice to that effect.

(4) It shall be the duty of every person who is or was a
controller, officer, employee, agent, banker, auditor or barrister and
attorney of an undertaking which is under investigation (whether by
virtue of subsection (1) or (2)), or any person appointed to make a report
in respect of that undertaking under section 36(1)(b)—

(a) to produce to the persons appointed under subsection
(1), within such time and at such place as they may

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31



require, all documents relating to the company
concerned which are in his custody or power;

(b) to attend before the persons so appointed at such time
and place as they may require; and

(c) otherwise to give those persons all assistance in
connection with the investigation which he is reasonably
able to give;

and those persons may take copies of or extracts from any documents
produced to them under paragraph (a).

(5) For the purpose of exercising his powers under this section,
a person appointed under subsection (1) may enter any premises
occupied by an undertaking which is being investigated by him under
this section; but he shall not do so without prior notice in writing .

(6) A person exercising powers by virtue of an appointment
under this section shall, if so required, produce evidence of his authority.

(7) Any person who—

(a) without reasonable excuse fails to produce any
documents which it is his duty to produce under
subsection (4) ;

(b) without reasonable excuse fails to attend before the
persons appointed under subsection (1) when required
to do so;

(c) without reasonable excuse fails to answer any question
which is put to him by persons so appointed with
respect to an undertaking which is under investigation
or a company which is being investigated by virtue of
subsection (2); or

(d) intentionally obstructs a person in the exercise of the
rights conferred by subsection (5),

shall be guilty of an offence and liable on summary conviction to a fine of
$10,000 or to imprisonment for six months or to both.

(8) A statement made by a person in compliance with a
requirement imposed by virtue of this section shall not be used in
evidence against him.

(9) Nothing in this section shall require the disclosure or
production by a person of information or documents which he would be
entitled to refuse to disclose or produce on the grounds of legal
professional privilege in proceedings in Bermuda.

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Investigation of suspected contraventions
40. (1) Where the Authority has reasonable grounds for suspecting
that⎯

(a) a person has contravened section 9; or

(b) an exempted person has contravened any restriction or
condition of an exemption order made under section 10;

the Authority or any duly authorised officer, servant or agent of the
Authority may by notice in writing require that or any other person—

(c) to provide, at such place as may be specified in the
notice and either forthwith or at such time as may be so
specified, such information as the Authority may
reasonably require for the purpose of investigating the
suspected contravention;

(d) to produce, at such place as may be specified in the
notice and either forthwith or at such time as may be so
specified, such documents, or documents of such
description, as may be specified, being documents the
production of which may be reasonably required by the
Authority for that purpose;

(e) to attend at such place and time as may be specified in
the notice and answer questions relevant for determining
whether such a contravention has occurred.

(2) The Authority or a duly authorised officer, servant or agent
of the Authority may take copies of or extracts from any documents
produced under this section.

(3) Any officer, servant or agent of the Authority may, on
producing if required evidence of his authority, enter any premises
occupied by a person on whom a notice has been served under
subsection (1) for the purpose of obtaining there the information or
documents required by the notice, putting the questions referred to in
paragraph (c) of that subsection or exercising the powers conferred by
subsection (2).

(4) Any person who without reasonable excuse fails to comply
with a requirement imposed on him under this section or intentionally
obstructs a person in the exercise of the rights conferred by subsection
(3) shall be guilty of an offence and liable on summary conviction to a
fine of $10,000 or to imprisonment for six months or to both.

(5) A statement made by a person in compliance with a
requirement imposed by virtue of this section shall not be used in
evidence against him.

(6) Nothing in this section shall require the disclosure or
production by a person of information or documents which he would be

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33



entitled to refuse to disclose or produce on the grounds of legal
professional privilege in proceedings in Bermuda.

Powers of entry
41. (1) A magistrate may issue a warrant under this section if
satisfied on information on oath laid by an officer of the Authority or laid
under the Authority's authority ⎯

(a) for the purpose of obtaining in any premises occupied by
a licensed undertaking such documents as are specified
in the authority (being such documents as the Authority
may reasonably require for the purposes of its functions
under the Act), but the Magistrate shall not issue a
warrant unless he is satisfied that on information on
oath laid by such officer or authority that there are
reasonable grounds to believe that if such warrant were
not issued documents to which it would relate would be
removed, tampered with or destroyed; or

(b) that there are reasonable grounds for suspecting that a
person is guilty of such a contravention as is mentioned
in section 40 and—

(i) that that person has failed to comply with a
notice served on him under that section;

(ii) that there are reasonable grounds for suspecting
the completeness of any information provided or
documents produced by him in response to such
a notice; or

(iii) that there are reasonable grounds for suspecting
that if a notice were served on him under that
section it would not be complied with or that any
documents to which it would relate would be
removed, tampered with or destroyed.

(2) A warrant under this section shall authorise any police
officer not below the rank of inspector, together with any other person
named in the warrant and any other police officers—

(a) to enter any premises occupied by the person mentioned
in subsection (1) which are specified in the warrant,
using such force as is reasonably necessary for the
purpose;

(b) to search the premises and take possession of any
documents appearing to be such documents as are
mentioned in subsections (1)(a) and (b) or to take, in
relation to any such documents, any other steps which
may appear to be necessary for preserving them or
preventing interference with them;

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34



(c) to take copies of or extracts from any such documents;

(d) to require any person named in the warrant to answer
questions relevant for determining whether that person
is guilty of any such contravention as is mentioned in
section 40.

(3) A warrant under this section shall continue in force until
the end of the period of one month beginning with the day on which it is
issued.

(4) Any documents of which possession is taken under this
section may be retained—

(a) for a period of three months; or

(b) if within that period proceedings to which the documents
are relevant are commenced against any person for any
such contravention as is mentioned in section 40, until
the conclusion of those proceedings.

(5) Any person who intentionally obstructs the exercise of any
right conferred by a warrant issued under this section or fails without
reasonable excuse to comply with any requirement imposed in
accordance with subsection (2)(d) shall be guilty of an offence and
liable—

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

(b) on conviction on indictment, to a fine of $50,000 or to
imprisonment for two years or to both.

Obstruction of investigations
42. (1) A person who knows or suspects that an investigation is
being or is likely to be carried out—

(a) into a suspected contravention of section 9, or a term or
condition of an exemption order made under section 10;
or

(b) under section 39,

shall be guilty of an offence if he falsifies, conceals, destroys or otherwise
disposes of, or causes or permits the falsification, concealment,
destruction or disposal of, documents which he knows or suspects are or
would be relevant to such an investigation unless he proves that he had
no intention of concealing facts disclosed by the documents from persons
carrying out such an investigation.

(2) A person guilty of an offence under this section shall be
liable—

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35



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

(b) on conviction on indictment, to a fine of
$50,000 or to imprisonment for two years or to both.

ACCOUNTS AND AUDIT

Duty to prepare annual accounts
43. (1) Notwithstanding anything to the contrary in any other Act,
every licensed undertaking shall prepare annual accounts as required by
this section.

(2) An undertaking which is a company shall prepare annual
financial statements of its business, and shall cause copies of those
statements to be laid before the undertaking in general meeting.

(3) Such an undertaking shall cause the financial statements of
its business to be audited annually and shall at each of its offices in
Bermuda keep a copy of its most recent audited financial statements
together with the auditor's report on the financial statements.

(4) An undertaking which is not a company shall prepare
annual accounts in such form and containing such particulars as the
Minister may prescribe.

(5) An undertaking shall provide the Authority with a copy of
the audited financial statements and report or its accounts as the case
may be, not later than four months after the close of each financial year
of the undertaking.

(6) An undertaking which fails to⎯

(a) prepare annual financial statements as required by
subsection (2) or accounts as required by subsection (4);

(b) cause financial statements to be audited annually as
required by subsection (3);

(c) keep a copy of its financial statements and report at its
offices as required by subsection (3); or

(d) provide the Authority with a copy of the financial
statements and report or the accounts as the case may
be, within the time specified in subsection (5),

shall be guilty of an offence and liable on summary conviction to a fine of
$50,000.

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Appointment of auditors
44. (1) Every licensed undertaking which is a company shall
appoint annually an approved auditor to audit the financial statements
of the undertaking.

(2) If a licensed undertaking fails to appoint an approved
auditor under subsection (1) or, at any time, fails to fill a vacancy for
such auditor, the Authority may appoint an approved auditor and shall
fix the remuneration to be paid by that undertaking to such auditor.

(3) A licensed undertaking shall forthwith give written notice to
the Authority if it⎯

(a) proposes to remove an auditor before the expiration of
his term of office; or

(b) proposes to replace an auditor at the expiration of the
term of his office with a different auditor.

(4) An undertaking which fails to comply with this section shall
be guilty of an offence and shall be liable on summary conviction to a
fine of $25,000.

(5) For the purposes of this section "approved auditor" means a
person who is a member of a professional body for the time being
declared by the Minister by notice published in the Gazette to be
approved for the purposes of this Act.

(6) No person having an interest in any undertaking otherwise
than as a client, and no officer, servant or agent of any undertaking shall
be eligible for appointment as an approved auditor for that undertaking;
and any person appointed as such auditor to any undertaking who
subsequently acquires such interest or becomes an officer, servant or
agent of that undertaking shall cease to be an approved auditor.

Auditor and accountant to communicate certain matters to
Authority
45. (1) An auditor of a licensed undertaking shall in the
circumstances specified in subsection (2) forthwith give written notice to
the Authority of those matters.

(2) The circumstances referred to in subsection (1) are⎯

(a) his resignation before the expiration of his term of office;

(b) his intention not to seek to be re-appointed;

(c) a decision to include a modification of his report on the
undertaking's financial statements and in particular, a
qualification or denial of his opinion, or the statement of
an adverse opinion;

(d) if he has reasonable cause to believe⎯

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37



(i) that any of the minimum criteria is not or has
not been fulfilled, or may not be or may not have
been fulfilled, in respect of the undertaking of
which he is an auditor ; and

(ii) that the matters are likely to be of material
significance for the exercise, in relation to such
an undertaking, of the Authority's functions
under the Act or Regulations.

(3) Subsection (1) shall, in the circumstances specified in
subsection (2)(d), apply to an accountant of a licensed undertaking which
is not a company as it applies to an auditor.

(4) An auditor or accountant, as the case may be, who fails to
comply with this section shall be guilty of an offence and shall be liable
on summary conviction to a fine of $25,000.

Auditor's report
46. (1) An approved auditor of a licensed undertaking which is a
company shall make a report to the undertaking's members on all
annual financial statements of the undertaking of which copies are to be
laid before the undertaking in general meeting during his tenure of office.

(2) The auditor shall conduct his audit and prepare his report
pursuant to the provisions of section 90 of the Companies Act 1981.

Communication with Authority
47. (1) No duty to which⎯

(a) an auditor or accountant of a licensed undertaking;

(b) a person appointed to make a report under section
36(1)(b),

may be subject shall be regarded as contravened by reason of his
communicating in good faith to the Authority, whether or not in response
to a request made by the Authority, any information or opinion on a
matter to which this section applies and which is relevant to any
function of the Authority under this Act.

(2) In relation to an auditor or accountant of an undertaking
this section applies to any matter of which he becomes aware in his
capacity as auditor or accountant, as the case may be, and which relates
to the business or affairs of the undertaking or any associated company.

(3) In relation to a person appointed to make a report under
section 36(1)(b) this section applies to any matter of which he becomes
aware in his capacity as the person making the report and which⎯

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38



(a) relates to the business or affairs of the undertaking in
relation to which his report is made or any associated
company of that undertaking;

(b) if by virtue of section 37(4) the report relates to an
associated company of an undertaking, to the business
or affairs of that company.

(4) In this section "associated company" , in relation to an
undertaking, means any such company as is mentioned in section 37(4).

RESTRICTION ON DISCLOSURE OF INFORMATION

Restricted information
48. (1) Except as provided by sections 49, 50 and 51⎯

(a) no person who under or for the purposes of this Act
receives information relating to the business or other
affairs of any person; and

(b) no person who obtains such information directly or
indirectly from a person who has received it as aforesaid,

shall disclose the information without the consent of the person to whom
it relates and (if different) the person from whom it was received as
aforesaid.

(2) This section does not apply to information which at the time
of the disclosure is or has already been made available to the public from
other sources or to information in the form of a summary or collection of
information so framed as not to enable information relating to any
particular person to be ascertained from it.

(3) Any person who discloses information in contravention of
this section commits an offence and is liable ⎯

(a) on summary conviction to a fine of $50,000 and to
imprisonment for two years or to both;

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

Disclosure for facilitating the discharge of functions of the
Authority
49. (1) Section 48 does not preclude the disclosure of information
in any case in which disclosure is for the purpose of enabling or assisting
the Authority to discharge ⎯

(a) its functions under this Act; and

(b) its functions under the Bermuda Monetary Authority Act
1969.

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39



(2) Without prejudice to the generality of subsection (1), section
48 does not preclude the disclosure of information by the Authority to
the auditor or accountant of a licensed undertaking, or the person
appointed to make a report under section 36(1)(b) if it appears to the
Authority that disclosing the information would enable or assist the
Authority to discharge the functions mentioned in that subsection or
would otherwise be in the interests of the clients or potential clients.

Disclosure for facilitating the discharge of functions by other
authorities
50. (1) Except as provided in subsection (4), section 48 does not
preclude the disclosure of information to the Minister or other authority
in Bermuda in any case in which the disclosure is for the purpose of
enabling or assisting him to discharge his regulatory functions.

(2) Except as provided in subsection (4), section 48 does not
preclude the disclosure of information for the purpose of enabling or
assisting an authority in a country or territory outside Bermuda to
exercise functions corresponding to the functions of the Authority under
this Act.

(3) Subsection (2) does not apply in relation to disclosures to
an authority unless the Authority is satisfied that the authority is
subject to restrictions on further disclosure at least equivalent to those
imposed by sections 48, 49 and this section.

(4) Subsections (1) and (2) do not apply in relation to the
disclosure of information on settlors and beneficiaries of any trust
administered by an undertaking.

(5) Section 48 does not preclude the disclosure of information⎯

(a) for the purpose of enabling or assisting a person to do
anything which he is required to do in pursuance of a
requirement imposed under section 36(1)(b);

(b) with a view to the undertaking of, or otherwise for the
purposes of , any criminal proceedings, whether under
this Act or any other Act;

(c) in connection with any other proceedings arising out of
this Act.

(6) Section 48 does not preclude the disclosure by the
Authority to the Director of Public Prosecutions or a police officer not
below the rank of inspector of information obtained pursuant to section
39, 40 or 41 or of information in the possession of the Authority as to
any suspected contravention in relation to which the powers conferred by
those sections are exercisable.

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40



(7) Information which is disclosed to a person in pursuance of
this section shall not be used otherwise than for the purpose mentioned
in this section.

Information supplied to the Authority by relevant overseas
authority
51. (1) Section 48 applies to information which has been supplied
to the Authority for the purposes of any relevant functions by the
relevant supervisory authority in a country or territory outside Bermuda.

(2) Information supplied to the Authority as mentioned in
subsection (1) shall not be disclosed except as provided by section 48⎯

(a) for the purpose of enabling or assisting the Authority to
discharge its functions under this Act; or

(b) with a view to the undertaking of, or otherwise for the
purpose of, criminal proceedings, whether under this Act
or any other Act.

(3) In this section⎯

"relevant functions" in relation to the Authority means its
functions under this Act;

"relevant supervisory authority" means the authority
discharging in that country or territory functions
corresponding to those of the Authority under this Act.

MISCELLANEOUS AND SUPPLEMENTAL

False documents or information
52. (1) Any person who, for any purposes of this Act—

(a) issues a document, or supplies information, which is
false or misleading in a material respect; or

(b) signs a document which is false or misleading in a ma-
terial respect; or

(c) takes part in the preparation or issue of a document, or
the supplying of information, which is false in a material
respect,

commits an offence and is liable ⎯

(i) on summary conviction to a fine of $25,000 or to
imprisonment for two years or to both;

(ii) on conviction on indictment to a fine of $50,000 or to
imprisonment for four years or to both.

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(2) It shall be a defence for a person charged with an offence
under subsection (1) to prove⎯

(a) if an individual, that he had no knowledge of the falsity
or misleading character of the document or information,
and took every reasonable precaution to ensure its
accuracy; and

(b) if not an individual, that every person acting on his
behalf had no such knowledge, and took every such rea-
sonable precaution, as aforesaid.

Offences by companies
53. (1) Where an offence under this Act committed by a company is
proved to have been committed with the consent or connivance of, or to
be attributable to neglect on the part of, any officer of the company, or
any person who was purporting to act in any such capacity, he, as well
as the company, shall be guilty of that offence and be liable to be
proceeded against and punished accordingly unless such person shows
that he took all reasonable steps to avoid the commission of an offence.

(2) Where the affairs of a company are managed by its
members, subsection (1) shall apply in relation to the acts and defaults
of a member in connection with his functions of management as if he
were a director of the company.

Restriction on use of word "trust"
54. (1) No person carrying on business in or from Bermuda shall
use any name which indicates or may reasonably be understood to
indicate (whether in English or in any other language) that it is carrying
on trust business unless it is a licensed undertaking or is exempted
under section 10.

(2) Any person using a name in contravention of subsection (1)
commits an offence and is liable on summary conviction to a fine of
$5,000.

Notices
55. (1) This section has effect in relation to any notice, direction or
other document required or authorised by or under this Act to be given
to or served on any person other than the Authority.

(2) Any such document may be given to or served on the
person in question ⎯

(a) by delivering it to him;

(b) by leaving it at his principal place of business; or

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42



(c) by sending it to him at that address by facsimile or other
similar means which produce a document containing the
text of the communication.

(3) Any such document may in the case of a company be given
to or served ⎯

(a) by delivering it to the company's principal place of
business or registered office in Bermuda; or

(b) by sending it by registered post addressed to the
company's principal place of business.

Service of notice on Authority
56. (1) No notice required by this Act to be given or served on the
Authority shall be regarded as given or served until it is received.

(2) Subject to subsection (1), such notice may be given by
facsimile or other similar means which produce a document containing
the text of the communication.

Regulations
57. (1) The Minister acting on the advice of the Authority, may
make regulations prescribing anything which may be prescribed under
this Act and generally for the implementation of this Act, and may
prescribe penalties not exceeding $10,000 for any breach of the
regulations.

(2) Regulations made under this section are subject to negative
resolution procedure.

Repeal
58. The Trust Companies Act 1991 is repealed ("the repealed
enactment").

Consequential amendments
59. The Second Schedule, which makes consequential amendments,
has effect.

Transitional
60. (1) This section applies to a company which on the
commencement of this Act is a company carrying on trust business
under a licence issued by the Minister under the repealed enactment.

(2) On the commencement of this Act the Authority shall issue
to a company to which this section applies an unlimited licence, and
thereupon the provisions of this Act shall apply to the company as if
such licence were issued pursuant to an application made under section
11.

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(3) An individual who, or a partnership which, on the
commencement of this Act is carrying on trust business may continue to
carry on trust business without a licence under this Act ⎯

(a) during the period of six months beginning with that
date; and

(b) if within that period application is made for a licence,
until that application is finally disposed of or withdrawn,
and if the application is refused and an appeal is
brought against the refusal, until it has been determined
or withdrawn.



FIRST SCHEDULE (section 12(2))

MINIMUM CRITERIA FOR LICENSING

Controllers and officers to be fit and proper persons

1 (1) Every person who is, or is to be, a controller or officer of the
undertaking is a fit and proper person to hold the particular position
which he holds or is to hold.

(2) In determining whether a person is a fit and proper person
to hold any particular position, regard shall be had to his probity, to his
competence and soundness of judgement for fulfilling the responsibilities
of that position, to the diligence with which he is fulfilling or likely to
fulfill those responsibilities and to whether the interests of clients or
potential clients of the undertaking are, or are likely to be, in any way
threatened by his holding that position.

(3) Without prejudice to the generality of the foregoing
provisions, regard may be had to the previous conduct and activities in
business or financial matters of the person in question and, in
particular, to any evidence that he has—

(a) committed an offence involving fraud or other dishonesty
or violence;

(b) contravened any provision made by or under any
enactment appearing to the Authority to be designed for
protecting members of the public against financial loss
due to dishonesty, incompetence or malpractice by
persons concerned in the provision of banking,
insurance, investment or other financial services or the
management of companies or against financial loss due
to the conduct of discharged or undischarged bankrupts;

(c) engaged in any business practices appearing to the
Authority to be deceitful or oppressive or otherwise

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44



improper (whether lawful or not) or which otherwise
reflect discredit on his method of conducting business;

(d) engaged in or has been associated with any other
business practices or otherwise conducted himself in
such a way as to cast doubt on his competence and
soundness of judgement.

Business to be directed by at least two individuals

2 In the case of an undertaking which is a company or a
partnership, at least two individuals must effectively direct the business
of the undertaking.

3 In any other case, one person may direct the business if so
approved by the Authority having regard to the circumstances of the
undertaking and the nature and scale of its operations.

Composition of board of directors

4 In an undertaking which is a company, the directors include
such number (if any) of directors without executive responsibility for the
management of its business as the Authority considers appropriate
having regard to the circumstances of the undertaking and the nature
and scale of its operations.

Business to be conducted in prudent manner

5 (1) The undertaking conducts, or, in the case of an undertaking
which is not yet carrying on trust business, will conduct its business in a
prudent manner.

(2) In determining whether an undertaking is conducting its
business in a prudent manner, the Authority shall take into account any
failure by the undertaking to comply with the provisions of this Act,
other provisions of law and any code of practice.

(3) An undertaking shall not be regarded as conducting its
business in a prudent manner unless it maintains or, as the case may
be, will maintain minimum net assets ⎯

(a) amounting to $250,000 in the case of an undertaking
which is a company; and

(b) $25,000 in any other case;

or such larger amount as the Authority may require for any particular
undertaking.

(4) An undertaking shall not be regarded as conducting its
business in a prudent manner unless it makes or, as the case may be,

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45



will maintain adequate accounting and other records of its business and
adequate systems of control of its business and records.

(5) Those records and systems shall not be regarded as
adequate unless they are such as to enable the business of the
undertaking to be prudently managed and the undertaking to comply
with the duties imposed on it by or under this Act or other provision of
law; and in determining whether those systems are adequate the
Authority shall have regard to the functions and responsibilities in
respect of them of any such directors of the undertaking as are
mentioned in paragraph 4 .

(6) An undertaking shall not be regarded as conducting its
business in a prudent manner unless it has effected a policy of
insurance to cover risks inherent in the operation of its business of an
amount commensurate with the nature and scale of the undertaking's
operations.

(7) Subparagraphs (2) to (6) are without prejudice to the
generality of subparagraph (1) .

Consolidated supervision

6 The position of the undertaking within the structure of any
group to which it may belong or its links with any related companies
shall be such that it will not obstruct the conduct of effective
consolidated supervision.

Integrity and skill

7 The business of the undertaking is or, in the case of an
undertaking which is not yet carrying on trust business, will be carried
on with integrity and the professional skills appropriate to the nature
and scale of its activities.



SECOND SCHEDULE (section 59)

CONSEQUENTIAL AMENDMENTS

1. BERMUDA MONETARY AUTHORITY ACT 1969

The Third Schedule is amended by deleting "Trust Company as defined
in the Trust Companies Act 1991" and substituting "Undertaking
licensed under the Trusts (Regulation of Trust Business) Act 2001".

2. ADMINISTRATION OF ESTATES ACT 1974

Section 1(1) is amended by deleting paragraph (a) of the definition of
"Trust Corporation" and substituting the following ⎯

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46



"(a) a corporation either appointed by the Court in any
particular case to be a trustee or holding an unlimited
trust licence issued under the Trusts (Regulation of
Trusts Business) Act 2001;".

3. TRUSTEE ACT 1975

Section 1 is amended by deleting paragraph (a) of the definition of "trust
corporation" and substituting the following ⎯

"(a) a corporation either appointed by the Court in any
particular case to be a trustee or holding an unlimited
trust licence issued under the Trusts (Regulation of
Trusts Business) Act 2001;".

4. TAXES MANAGEMENT ACT 1976

Section 44(7) is repealed and the following subsection is substituted⎯

" (7) Nothing in this section shall authorise the Collector
or any public officer to inspect any book, record or other
document in the possession of a bank or deposit company of a
kind referred to in section 13(4) or an undertaking licensed
under the Trusts (Regulation of Trust Business) Act 2001, for the
purpose of obtaining information as to the business affairs of
any customer of such bank, deposit company or undertaking,
except on the authority of an order of the Supreme Court or a
judge.".

5. FOREIGN CURRENCY PURCHASE TAX ACT 1975

The Second Schedule is amended by deleting paragraph 1(g) and
substituting the following⎯

"(g) a company holding an unlimited trust licence issued
under the Trusts (Regulation of Trust Business) Act
2001;".

6. COMPANIES ACT 1981

(1) Section 120(2) is amended by deleting "where a local
company is licensed under the Trust Companies Act 1981" and
substituting "where a local company holds an unlimited trust licence
issued under the Trusts (Regulation of Trust Business) Act 2001;".

(2) Section 129A (4) is amended by deleting paragraph (b) and
substituting the following⎯

"(b) trust business as defined in the Trusts (Regulation of Trust
Business) Act 2001 if⎯

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47



(i) the exempted company holds an unlimited trust licence
issued under the Trusts (Regulation of Trust Business)
Act 2001; and

(ii) the settlor of the trust which is managed or administered
in Bermuda by the exempted company is not ordinarily
resident in Bermuda at the date of creation of the
settlement.".

7. PROCEEDS OF CRIME ( MONEY LAUNDERING REGULATIONS) 1998

Regulation 2 is amended by deleting paragraph (2)(iii) and substituting
the following⎯

"(iii) any person carrying on trust business (as defined in the
Trusts (Regulation of Trust Business) Act 2001) in or
from within Bermuda;".

8. NATIONAL PENSION SCHEME (OCCUPATIONAL PENSIONS) ACT 1998

Section 2(1) is amended by deleting paragraph (c) of the definition of
"financial institution" and substituting the following⎯

"(c) a local trust company holding an unlimited trust licence issued
under the Trusts (Regulation of Trust Business) Act 2001; or".