Investment Business Act 2003

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Investment Business Act 2003
INVESTMENT BUSINESS ACT 2003

1

BERMUDA
2003 : 20

INVESTMENT BUSINESS ACT 2003

[Date of Assent: 5 December 2003]

[Operative Date: 30 January 2004, except Section 27: 30 April 2004
and Part IV: 15 September 2004]

ARRANGEMENT OF SECTIONS

PART I
PRELIMINARY

1 Short title and
commencement

2 Interpretation
3 Investment and

investment business
4 Carrying on investment

business in or from within
Bermuda

5 Meaning "parent and
subsidiary undertakings"

6 Meaning of "participating
interest"

7 Meaning of "director",
"controller", "senior
executive" and "associate"

PART II
THE AUTHORITY

Functions and duties of the
Authority

8 Functions of the Authority
9 Authority's statement of

principles
10 Codes of conduct
11 Minister to issue

directions to Authority

PART III
REGULATION OF

INVESTMENT PROVIDERS

INVESTMENT BUSINESS ACT 2003

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CHAPTER 1: REQUIREMENTS
FOR A LICENCE AND

EXEMPTIONS

Licensing

12 Restriction on carrying on
investment business
without a licence

Exemptions

13 Exemption from
requirement for a licence

14 Exempted persons may
apply to be licensed

15 Agreements made by or
through unlicensed
persons

16 Application for licence
17 Grant and refusal of

application for a licence
18 Form, display and

registration of licences
19 Fees

CHAPTER 2: SUPERVISION OF
INVESTMENT PROVIDERS

Restrictions, revocations and
directions

20 Restriction of licence
21 Revocation of licence
22 Notice of restriction or

revocation of licence
23 Restriction in cases of

urgency
24 Directions to protect

interests of clients
25 Notification and

confirmation of directions
26 Surrender of licence

Unsolicited calls

27 Unsolicited calls

Objections to controllers

28 Notification of new or
increased control

29 Objection to new or
increased control

30 Objection to existing
controller

31 Contraventions by
controller

32 Restriction on and sale of
shares

CHAPTER 3: APPEAL
TRIBUNALS

33 Rights of appeal
34 Constitution of tribunal
35 Determination of appeals
36 Costs, procedure and

evidence
37 Further appeals on a

point of law

CHAPTER 4: ACCOUNTS AND
AUDIT

38 Duty to prepare annual
financial statements and
accounts

39 Duty to maintain systems
and records

40 Clients' money
41 Appointment of auditors
42 Auditor to communicate

certain matters to
Authority

CHAPTER 5: INFORMATION
GATHERING AND
INVESTIGATION

INVESTMENT BUSINESS ACT 2003

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Information gathering

43 Notification of change of
controller or officer

44 Certificates of compliance
45 Power to obtain

information and reports
46 Power to require

production of documents
47 Right of entry to obtain

information and
documents

48 Communication with
Authority

Investigations

49 Investigations on behalf of
the Authority

50 Investigation of suspected
contraventions

51 Powers of entry
52 Obstruction of

investigations

CHAPTER 6: DISCIPLINARY
MEASURES

53 Public censure
54 Proposal to censure

publicly
55 Terms of statement
56 Warning notices
57 Decision notices
58 Notices of discontinuance
59 Final notices
60 Publication

CHAPTER 7: PROTECTIVE
MEASURES

Winding up and dissolution
61 Winding up or dissolution

on petition from the
Authority

Injunctions and restitutions

62 Injunctions
63 Restitution orders

Administrators

64 Appointment of
administrator by court

PART IV
REGULATION OF

INVESTMENT EXCHANGES
AND CLEARING HOUSES

Recognised investment
exchanges and clearing houses

65 Interpretation
66 Exemption for recognised

investment exchanges
and clearing houses

67 Qualifications for
recognition

68 Application by an
investment exchange

69 Application by a clearing
house

70 Applications:
supplementary

71 Recognition orders
72 Liability in relation to

recognised body's
regulatory functions

73 Notification requirements
74 Modification or waiver of

rules
75 Authority's power to give

directions
76 Revoking recognition
77 Directions and revocation:

procedure

PART V
RESTRICTION ON

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DISCLOSURE OF
INFORMATION

78 Restricted information
79 Disclosure for facilitating

the discharge of functions
of the Authority

80 Disclosure for facilitating
the discharge of functions
by other authorities

81 Information supplied to
the Authority by relevant
overseas authority

PART VI
MISCELLANEOUS AND

SUPPLEMENTAL

82 False documents or
information

83 Offences by companies
84 Notices
85 Service of notice on

Authority
86 Regulations

87 Repeal, savings and
transitional

88 Consequential
amendments

FIRST SCHEDULE
INVESTMENTS AND

INVESTMENT ACTIVITIES

Part 1
Investments

Part 2
Investment Activities

Part 3
Excluded Activities

Part 4
Interpretation

SECOND SCHEDULE

MINIMUM CRITERIA FOR
LICENSING

WHEREAS it is expedient to make new provision for the
regulation of investment business; to make provision for the regulation of
investment exchanges and clearing houses; and for connected matters:

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

PART I

PRELIMINARY

Short title and commencement
1. This Act may be cited as the Investment Business Act 2003 and
shall come into operation on such day as the Minister may appoint by
notice published in the Gazette, and the Minister may appoint different
days for different provisions.

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Interpretation
2. In this Act —

"Act" includes regulations and orders made thereunder;

"associate" has the meaning given in section 7(9);

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

"business" includes a trade or profession;

"code of conduct" means a code of conduct issued by the
Authority pursuant to section 10;

"company" means a company registered or incorporated in
Bermuda or elsewhere and includes a partnership which is a
body corporate;

"controller" has the meaning given in section 7(3);

"court" means the Supreme Court;

"director" has the meaning given in section 7(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;

"exempted person" means a person exempted from the
requirement to hold a licence by or under an order made
under section 13;

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

"firm" means a partnership, or an unincorporated association of
persons;

"group" in relation to a person ("A"), means A and any person
who is

(a) a parent undertaking of A;

(b) a subsidiary undertaking of A;

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(c) a subsidiary undertaking of a parent undertaking of A;

(d) a parent undertaking of a subsidiary undertaking of A;
or

(e) an undertaking in which A or an undertaking mentioned
in paragraph (a), (b), (c) or (d) has a participating
interest;

"investment" has the meaning given in section 3(1)(a);

"investment activity" has the meaning given in section 3(2);

"investment business" has the meaning given in section 3(1)(b);

"investment provider" means a person licensed under section 17;

"licence" means a licence granted under section 17; and
"licensed" shall be construed accordingly ;

" Minister" means the Minister of Finance;

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

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

"parent undertaking" has the meaning given in section 5;

"participating interest" has the meaning given in section 6;

"partnership" includes a partnership constituted under the law
of any place outside Bermuda but does not include a
partnership which is constituted under the law of any place
outside Bermuda and is a body corporate;

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

"share" except as provided in section 6(6), means a share in the
capital of a company and includes stock;

"shareholder controller" has the meaning given in section 7(5);

"subsidiary undertaking" has the meaning given in section 5;

"undertaking" means a company, a firm or an individual;

"voting power", in relation to an undertaking which does not
have general meetings at which matters are decided by the

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exercise of voting rights, means the right under the
constitution of the undertaking to direct the overall policy of
the undertaking or alter the terms of its constitution.

Investment and investment business
3. (1) In this Act

(a) "investment" means an asset, right or interest specified
in Part 1 of the First Schedule;

(b) "investment business" means engaging in one or more
investment activities by way of business.

(2) An activity is an investment activity if

(a) it is an activity of a kind specified in Part 2 of the First
Schedule or one which falls within a class of activity so
specified; and

(b) it is not excluded by Part 3 of the First Schedule.

(3) The Minister may, after consultation with the Authority, by
order amend the First Schedule by adding new provisions, or by
amending or deleting any of the investments specified in Part 1, or the
investment activities specified in Part 2, or the excluded activities
specified in Part 3, of the First Schedule.

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

Carrying on investment business in or from Bermuda
4. (1) For the purposes of this Act, a person carries on investment
business in or from Bermuda if such person

(a) carries on investment business from a place of business
maintained by such person in Bermuda; or

(b) engages in an investment activity the doing of which
constitutes the carrying on by such person of investment
business in or from Bermuda under an order made
under subsection (2).

(2) The Minister may, after consultation with the Authority,
make an order specifying the circumstances in which a person who
would otherwise not be regarded as carrying on investment business in
or from Bermuda is to be regarded for the purpose of this section as
carrying on investment business in or from Bermuda.

(3) An order under subsection (2) may be made so as to
apply

INVESTMENT BUSINESS ACT 2003

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(a) generally to all investment activities;

(b) in relation to a specified category of investment activity;
or

(c) in relation to a particular investment activity.

(4) An order made under subsection (2) may be made subject
to conditions.

(5) For the purpose of this section a person engages in an
investment activity if he enters or offers to enter into an agreement the
making or performance of which by either party constitutes an
investment activity.

(6) For the purpose of this section, a person maintains a place
of business ('meaning of maintaining a place of business') 

(a) in the case of an individual who is a sole trader, if he
carries on investment business from premises that he
occupies for that purpose;

(b) in any other case, if it carries on investment business
from premises it occupies for that purpose, at which it
employs staff and pays salaries and other expenses in
connection with that business.

(7) The Minister may, after consultation with the Authority,
make an order amending the meaning of maintaining a place of business
for the purposes of this section.

(8) An order made under subsection (7) may include saving
and transitional provisions.

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

Meaning of "parent and subsidiary undertakings"
5. (1) The expressions "parent undertaking" and "subsidiary
undertaking" in this Act shall be construed as follows.

(2) An undertaking is a parent undertaking in relation to
another undertaking, a subsidiary undertaking, if 

(a) it holds a majority of the voting rights in the
undertaking;

(b) it is a member of the undertaking and has the right to
appoint or remove a majority of its board of directors;

INVESTMENT BUSINESS ACT 2003

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(c) it has the right to exercise a dominant influence over the
undertaking by virtue of provisions contained in the
undertaking's memorandum of association, articles of
association or bye-laws, or by virtue of a control
contract; or

(d) it is a member of the undertaking and controls alone,
pursuant to an agreement with other shareholders or
members, a majority of the voting rights in the
undertaking.

(3) For the purposes of subsection (2) an undertaking shall be
treated as a member of another undertaking

(a) if any of its subsidiary undertakings is a member of that
undertaking; or

b) if any shares in that other undertaking are held by a
person acting on behalf of the undertaking or any of its
subsidiary undertakings.

(4) An undertaking is also a parent undertaking in relation to
another undertaking, a subsidiary undertaking, if it has a participating
interest in the undertaking and 

(a) it actually exercises a dominant influence over it; or

(b) it and the subsidiary undertaking are managed on a
unified basis.

(5) A parent undertaking shall be treated as the parent
undertaking of undertakings in relation to which any of its subsidiary
undertakings are, or are to be treated as, parent undertakings; and
references to its subsidiary undertakings shall be construed accordingly.

(6) In subsections (2)(a) and (d) the references to the voting
rights in an undertaking are to the rights conferred on shareholders in
respect of their shares or, in the case of an undertaking not having a
share capital, on members, to vote at general meetings of the
undertaking on all, or substantially all, matters.

(7) In relation to an undertaking which does not have general
meetings at which matters are decided by the exercise of voting rights,
the references to holding a majority of the voting rights in the
undertaking shall be construed as references to having the right under
the constitution of the undertaking to direct the overall policy of the
undertaking or to alter the terms of its constitution.

(8) In subsection (2)(b) the reference to the right to appoint or
remove a majority of the board of directors is to the right to appoint or

INVESTMENT BUSINESS ACT 2003

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remove directors holding a majority of the voting rights at meetings of the
board on all, or substantially all, matters.

(9) An undertaking shall be treated as having the right to
appoint to a directorship if 

(a) a person's appointment to it follows necessarily from his
appointment as director of the undertaking; or

(b) the directorship is held by the undertaking itself.

(10) A right to appoint or remove which is exercisable only with
the consent or concurrence of another person shall be left out of account
unless no other person has a right to appoint or, as the case may be,
remove in relation to that directorship.

(11) For the purposes of subsection (2)(c) an undertaking shall
not be regarded as having the right to exercise a dominant influence over
another undertaking unless it has a right to give directions with respect
to the operating and financial policies of that other undertaking which its
directors are obliged to comply with whether or not they are for the
benefit of that other undertaking.

(12) A "control contract" means a contract in writing conferring
such a right which 

(a) is of a kind authorised by the memorandum of
association, articles of association or by-laws of the
undertaking in relation to which the right is exercisable;
and

(b) is permitted by the law under which that undertaking is
established.

(13) Subsections (10) and (11) shall not be read as affecting the
construction of the expression "actually exercises a dominant influence"
in subsection (4)(a).

(14) Rights which are exercisable only in certain circumstances
shall be taken into account only—

(a) when the circumstances have arisen, and for so long as
they continue to obtain; or

(b) when the circumstances are within the control of the
person having the rights.

(15) Rights which are normally exercisable but are temporarily
incapable of exercise shall continue to be taken into account.

(16) Rights held by a person in a fiduciary capacity shall be
treated as not held by him.

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(17) Rights held by a person as nominee for another shall be
treated as held by the other.

(18) Rights shall be regarded as held as nominee for another if
they are exercisable only on his instructions or with his consent or
concurrence.

(19) Rights attached to shares held by way of security shall be
treated as held by the person providing the security

(a) where apart from the right to exercise them for the
purpose of preserving the value of the security, or of
realising it, the rights are exercisable only in accordance
with his instructions; and

(b) where the shares are held in connection with the
granting of loans as part of normal business activities
and apart from the right to exercise them for the
purpose of preserving the value of the security, or of
realising it, the rights are exercisable only in his
interests.

(20) Rights shall be treated as held by a parent undertaking if
they are held by any of its subsidiary undertakings.

(21) Nothing in subsection (16), (17), (18) or (19) shall be
construed as requiring rights held by a parent undertaking to be treated
as held by any of its subsidiary undertakings.

(22) For the purposes of subsection (19) rights shall be treated
as being exercisable in accordance with the instructions or in the
interests of an undertaking if they are exercisable in accordance with the
instructions of or, as the case may be, in the interests of any group
undertaking.

(23) The voting rights in an undertaking shall be reduced by any
rights held by the undertaking itself.

(24) References in any provision of subsections (16) to (23) to
rights held by a person include rights falling to be treated as held by him
by virtue of any other provision of this section but not rights which by
virtue of any such provision are to be treated as not held by him.

Meaning of "participating interest"
6. (1) In this Act, "participating interest" means an interest held
by an undertaking in the shares of another undertaking which it holds
on a long-term basis for the purpose of securing a contribution to its
activities by the exercise of control or influence arising from or related to
that interest.

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(2) A holding of twenty per cent or more of the shares of an
undertaking shall be presumed to be a participating interest unless the
contrary is shown.

(3) The reference in subsection (1) to an interest in shares
includes 

(a) an interest which is convertible into an interest in
shares; and

(b) an option to acquire shares or any such interest;

and an interest or option falls within paragraph (a) or (b) notwithstanding
that the shares to which it relates are, until the conversion or the
exercise of the option, unissued.

(4) For the purposes of subsection (1) an interest held on behalf
of an undertaking shall be treated as held by it.

(5) For the purposes of subsections (1) to (4) as they apply in
relation to the expression "participating interest" in section 5(4)

(a) there shall be attributed to an undertaking any interests
held by any of its subsidiary undertakings; and

(b) the references in subsection (1) to the purpose and
activities of an undertaking include the purposes and
activities of any of its subsidiary undertakings and of the
group as a whole.

(6) In section 5 and in this section, "shares" in relation to an
undertaking

(a) with a share capital, means allotted shares;

(b) with capital but no share capital, means rights to share
in the capital of the undertaking;

(c) without capital, means interests 

(i) conferring any right to share in the profits, or
liability to contribute to the losses, of the
undertaking; or

(ii) giving rise to an obligation to contribute to the
debts or expenses of the undertaking in the
event of a winding up.

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Meaning of "director", "controller", "senior executive" and
"associate"
7. (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, 

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

(b) where it is used in subsections (7) and (8), includes a
member of a firm.

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

(a) in the case of an undertaking which is a company, a
managing director of the company, or of its parent
undertaking;

(b) in the case of an undertaking which is a firm 

(i) if a partnership, the managing partner;

(i) if an unincorporated association, a member of
the firm;

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

(d) a chief executive of the undertaking or of its parent
undertaking;

(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 its
parent undertaking or persons who are controllers of the
undertaking by virtue of paragraph (e) (or any of them)
are accustomed to act.

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

(a) he holds ten per cent or more of the shares in the
undertaking which is a company or its parent
undertaking;

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(b) he is entitled to exercise or control the exercise of ten per
cent or more of the voting power in the undertaking or in
the parent undertaking; or

(c) he is able to exercise a significant influence over the
management of the undertaking or the parent
undertaking by virtue of the voting power in the
undertaking or the parent undertaking.

(5) A person who is a controller of an undertaking by virtue of
paragraph (e) of subsection (3) is in this Act referred to as a "shareholder
controller" of the undertaking; and in this Act

"ten per cent shareholder controller" means a shareholder
controller in whose case the percentage referred to in the
relevant paragraph is not less than ten; and

"majority shareholder controller" means a shareholder controller
in whose case the percentage referred to in the relevant
paragraph is fifty 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, an undertaking, means

(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;

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(iii) an undertaking of which that person is a
director;

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

(b) if that person is an undertaking which is a company or a
firm

(i) a director of that undertaking;

(ii) a subsidiary undertaking ;

(iii) a director of a subsidiary of that undertaking;

(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
undertaking 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.

PART II

THE AUTHORITY

Functions and duties of the Authority

Functions of the Authority
8. (1) The Authority shall have the powers conferred on it by this
Act and the duty generally to supervise persons carrying on investment
business including investment exchanges and clearing houses.

(2) It shall also be the duty of the Authority to keep under
review the operation of this Act and developments in the field of
investment business which appear to it to be relevant to the exercise of
its powers and the discharge of its duties.

(3) 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.

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Authority's statement of principles
9. (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 of a licence specified in section 21;

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

Codes of conduct
10. (1) The Authority may issue codes of conduct for the purpose of
providing guidance as to the duties, requirements and standards to be
complied with, and the procedures (whether as to client identification,
record-keeping, internal reporting and training or otherwise) and sound
principles to be observed by persons carrying on investment business.

(2) Before issuing a code of conduct, 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.

(3) Every investment provider shall in the conduct of its
business have regard to any code of conduct issued by the Authority.

(4) A failure on the part of a investment provider 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
11. 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.

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PART III

REGULATION OF INVESTMENT PROVIDERS

CHAPTER 1: REQUIREMENTS FOR A LICENCE AND EXEMPTIONS

Licensing

Restriction on carrying on investment business
12. (1) A person shall not carry on, or purport to carry on,
investment business in or from Bermuda unless that person is for the
time being licensed or is exempted by or under an order made under
section 13.

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

(a) on summary conviction, to a fine of $100,000 or to
imprisonment for a term of two years or to both;

(b) on conviction on indictment, to a fine of $250,000 or to
imprisonment for a term of five years or to both.

(3) In proceedings brought against a person for an offence
under subsection (1), it shall be a defence for such person to prove that
it took all reasonable precautions and exercised all due diligence to avoid
the commission of the offence.

Exemptions

Exemption from requirement for a licence
13. (1) 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 to hold a licence.

(2) An exemption order may provide for an exemption to have
effect

(a) in respect of all investment activities;

(b) in respect of one or more specified investment activities;

(c) only in specified circumstances;

(d) subject to conditions.

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

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

(5) Where in pursuance of this section, a person is exempted
from the requirement to hold a licence but subject to a condition, and
the condition is contravened, the exemption shall not have effect, and
accordingly proceedings may be brought for an offence under section 12.

Exempted persons may apply to be licensed
14. (1) A person falling within a specified class of persons
exempted by or under an order made under section 13 ("exempted
person"), may make application under section 16 for a licence.

(2) Upon the issue of a licence to an exempted person

(a) such person shall cease to be an exempted person; and

(b) the provisions of this Act shall apply to him as a licensed
person.

Agreements made by or through unlicensed persons
15. (1) An agreement to which this section applies which is entered
into by a person in the course of carrying on investment business in
contravention of section 12 shall be enforceable by a party to the
agreement against any other party to the agreement.

(2) This section applies to any agreement the making or
performance of which by the person seeking to enforce it constitutes an
investment activity.

Application for licence
16. (1) Subject to this section, an application for a licence may be
made to the Authority in such manner as the Authority may direct.

(2) An applicant shall publish in the Gazette a notice of his
intention to apply for a licence.

(3) An application for a licence—

(a) shall be accompanied with—

(i) a copy of the notice published in the Gazette
pursuant to subsection (2);

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

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

INVESTMENT BUSINESS ACT 2003

19

(iv) such application fee and such other fee as may
be prescribed under the Bermuda Monetary
Authority Act 1969;

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

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

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

Grant and refusal of application for a licence
17. (1) Subject to this section, the Authority may on an application
duly made in accordance with section 16, 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 under this section may be subject to such
limitations on the scope of the investment activity or the manner of
operating the investment business as the Authority may determine to be
appropriate having regard to the nature and scale of the proposed
business.

(4) The Authority may, on application made by an investment
provider, vary or remove any limitation imposed on the scope of its
licence.

(5) If a firm is licensed

(a) it is licensed to carry on the investment business
concerned in the name of the firm; and

(b) its licensing is not affected by any change in its
membership.

(6) If a licensed firm is dissolved, its licence continues to have
effect in relation to any firm which succeeds to the business of the
dissolved firm.

(7) For the purposes of this section, a firm is to be regarded as
succeeding to the business of another firm only if

(a) the members of the resulting firm are substantially the
same as those of the former firm; and

INVESTMENT BUSINESS ACT 2003

20

(b) succession is to the whole or substantially the whole of
the business of the former firm.

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

(9) An order made under subsection (8) shall be subject to
negative resolution procedure.

Form, display and registration of licences
18. (1) A licence shall be in such form as the Authority may
determine.

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

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

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

Fees
19. An investment provider shall pay such fees as may be prescribed
under the Bermuda Monetary Authority Act 1969 —

(a) on the grant of the licence; and

(b) on or before 30 April in every year after the year in
which the licence was granted;

and different fees may be prescribed having regard to the scope and
nature of the business permitted to be conducted under the licence.

CHAPTER 2: SUPERVISION OF INVESTMENT PROVIDERS

Restrictions, revocations and directions

Restriction of licence
20. (1) Subject to section 22, the Authority may restrict a licence

INVESTMENT BUSINESS ACT 2003

21

(a) if it is satisfied of the matters specified in paragraph (a),
(b), (d) or (e) of section 21 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 investment provider in contravention of section 28 or
has become or remains a controller after being given a
notice of objection pursuant to section 29 or 30; or

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

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

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

(d) at any time after the investment provider 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 investment
provider's clients or potential clients, and may in particular

(a) require the investment provider 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 investment
business;

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

(d) prohibit the investment provider from accepting new
investment business;

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

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

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

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

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22

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

(5) An investment provider 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
paragraph (a) or (b) of subsection (1), be a ground for the revocation of
the licence in question but shall not invalidate any transaction.

Revocation of licence
21. Subject to section 22, the Authority may revoke the licence of an
investment provider 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 investment provider;

(b) the investment provider 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 investment provider in contravention of section 28 or
has become or remains such a controller after being
given a notice of objection pursuant to section 29 or 30;

(d) the Authority has been provided with false, misleading
or inaccurate information by or on behalf of the
investment provider 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 investment
provider; or

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

Notice of restriction or revocation of licence
22. (1) Where the Authority proposes to 

(a) restrict a licence under section 20(1);

INVESTMENT BUSINESS ACT 2003

23

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

(c) revoke a licence under section 21;

the Authority shall give to the investment provider 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.

(3) A notice under subsection (1) shall state the ground or
grounds on which the Authority intends to act and give particulars of the
investment provider'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
minimum criteria 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 investment provider 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 investment
provider's licence, to restrict its licence instead; or

INVESTMENT BUSINESS ACT 2003

24

(d) if the proposed action was to restrict the investment
provider'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 investment provider 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 33.

(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 33(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.

(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 investment
provider 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 investment
provider'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 investment provider.

(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
23. (1) No notice need be given under section 22 in respect of the
imposition or variation of a restriction on an investment provider's

INVESTMENT BUSINESS ACT 2003

25

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
investment provider 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 33.

(4) Section 22(4) shall apply to a notice under subsection (2)
imposing or varying a restriction as it applies to a notice under section
22(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 investment provider 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.

(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 investment provider 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
24. (1) The Authority may give an investment provider 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 investment
provider's clients.

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26

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

(4) An investment provider 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
25. (1) A direction under section 24 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 investment provider
concerned.

(2) A direction under section 24, except one varying a previous
direction with the agreement of the investment provider concerned 

(a) shall state the reasons for which it is given and give
particulars of the investment provider's rights under
subsection (3) and section 33; and

(b) without prejudice to section 24(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 investment provider
concerned.

(3) An investment provider 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
26. (1) An investment provider 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 investment provider may by further written

INVESTMENT BUSINESS ACT 2003

27

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.

Unsolicited calls

Unsolicited calls
27. (1) Except so far as permitted by regulations made by the
Minister, no person shall in the course of or in consequence of an
unsolicited call made on an individual by way of business enter into an
investment agreement with the person on whom the call is made or
procure or endeavour to procure that person to enter into such an
agreement.

(2) Subject to subsection (4)

(a) any investment agreement which is entered into in the
course of or in consequence of the unsolicited call in
contravention of subsection (1) shall not be enforceable
against the person on whom the call was made; and

(b) that person shall be entitled to recover any money or
other property paid or transferred by him under the
agreement, together with compensation for any loss
sustained by him as a result of having parted with it.

(3) The compensation recoverable under subsection (2) shall be
such as the parties may agree or as the court may, on the application of
either party, determine.

(4) The court may allow an agreement to which subsection (2)
applies to be enforced or money and property paid or transferred under it
to be retained if it is satisfied 

(a) that the person on whom the call was made was not
influenced, or not influenced to any material extent, by
anything said or done in the course of or in consequence
of the call;

(b) without prejudice to paragraph (a), that the person on
whom the call was made entered into the agreement

(i) following discussions between the parties of
such a nature and over such a period that his
entering into the agreement can fairly be
regarded as a consequence of those discussions
rather than the call; and

INVESTMENT BUSINESS ACT 2003

28

(ii) was aware of the nature of the agreement and
any risks involved in entering into it; or

(c) that the call was not made by 

(i) the person seeking to enforce the agreement or
to retain the money or property or a person
acting on his behalf ; or

(ii) a person who has received or is to receive, any
commission or other inducement in respect of
the agreement from a person mentioned in sub-
paragraph (i).

(5) Where a person elects not to perform an agreement which
by virtue of this section is unenforceable against him or by virtue of this
section recovers money paid or other property transferred by him under
an agreement he shall repay any money and return any other property
received by him under the agreement.

(6) Where any property transferred under an agreement to
which this section applies has passed to a third party the references to
that property in this section shall be construed as references to its value
at the time of its transfer under the agreement.

(7) In this section 

"unsolicited call" means a personal visit or oral communication
made without express invitation;

"investment agreement" means an agreement within the meaning
of section 15(2).

Objections to controllers

Notification of new or increased control
28. (1) No person shall become a ten per cent or majority
shareholder controller of an investment provider unless

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

(b) either the Authority has, before the end of the period of
ninety days 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 investment
provider, or that period has elapsed without the
Authority having served him under section 29 a written

INVESTMENT BUSINESS ACT 2003

29

notice of objection to his becoming such a controller of
the investment provider.

(2) Subsection (1) applies also in relation to a person becoming
a member of an investment provider which is a firm.

(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
29. (1) The Authority may serve a notice of objection under this
section on a person who has given notice under section 28 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
investment provider;

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

(c) without prejudice to paragraphs (a) and (b), that, having
regard to that person's likely influence on the investment
provider as a controller of the description in question
the minimum criteria would continue to be fulfilled in
the case of the investment provider 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

INVESTMENT BUSINESS ACT 2003

30

(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 33.

(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 28 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 28(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).

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

(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 

INVESTMENT BUSINESS ACT 2003

31

(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 33.

(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
31. (1) Subject to subsection (2), any person who contravenes
section 28 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 29(2);

shall be guilty of an offence.

(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.

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(3) Any person who

(a) before the end of the period mentioned in section 28
(1)(b), becomes a controller of any description to which
that subsection applies after being served with a
preliminary notice under section 29(2);

(b) contravenes section 28 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
32. (1) The powers conferred by this section shall be exercisable
where a person

(a) has contravened section 29 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

(c) continues to be a controller of any description after
being served under section 30 with notice of objection to
his being a controller of that description.

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(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 investment provider 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 29 or 30 —

(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 investment provider of which the
person in question is a controller of the relevant
description which are held by him or any associate of his

INVESTMENT BUSINESS ACT 2003

34

and were not so held immediately before he became
such a controller of the investment provider; 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 investment provider.

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

CHAPTER 3: APPEAL TRIBUNALS

Rights of appeal
33. (1) An investment provider 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 refuse an application, made under section 17(4), to
vary or remove a limitation imposed on its licence under
section 17(3);

(c) to revoke its licence; or

(d) to publish a statement in respect of it pursuant to
section 53;

may appeal against the decision to a tribunal constituted in accordance
with section 34.

(2) Where 

(a) the ground or a ground for a decision within subsection
(1)(a) or (c) is that mentioned in section 22(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 investment provider;

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.

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(3) Any person on whom notice of objection is served under
section 29 or 30 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
31(1), (2) or (3).

(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 investment provider'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 tribunal
34. (1) A tribunal shall consist of a chairman, or, in his absence, a
deputy chairman and two other members.

(2) 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.

(3) 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.

(4) The Minister shall appoint a panel of not less than five
persons with experience of investment business to serve as members of
appeal tribunals.

(5) A person shall not be eligible for appointment as chairman,
deputy chairman or member of a 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 investment
provider.

Determination of appeals
35. (1) Where an appeal is brought under the provisions of this Act
the chairman or as the case may be the deputy chairman shall nominate

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36

two other members from the panel of members, who together with him
shall constitute the tribunal which shall determine the appeal.

(2) On an appeal under sections 33(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.

(3) 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.

(4) 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
36. (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 investment provider and by a person
who is to be a controller or officer of an investment
provider, 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;

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37

(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
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
37. (1) An investment provider 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.

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

CHAPTER 4: ACCOUNTS AND AUDIT

Duty to prepare annual financial statements and accounts
38. (1) Every investment provider shall prepare annual financial
statements or accounts as required by this section in respect of all
transactions and balances relating to his investment business.

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

(3) An investment provider which is not a company shall
prepare annual accounts in such form and containing such particulars
as the Authority may prescribe.

(4) An investment provider where so required by section 41(1)
shall cause the financial statements or the accounts 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 or accounts together
with the auditor's report thereon.

(5) Not later than four months after the close of its financial
year every investment provider shall provide the Authority with a copy of
its financial statements or its accounts for that year, and, where such
statements or accounts have been audited, a report thereon.

Duty to maintain systems and records
39. (1) An investment provider shall maintain such systems and
records relating to its investment business as may be prescribed by
regulations made by the Minister.

(2) Regulations made under subsection (1) shall require an
investment provider to maintain accounts for clients' assets separately
from its own.

Clients' money
40. (1) The Minister may, after consultation with the Authority,
make regulations with respect to money (in this section referred to as
'clients' money') which investment providers hold in such circumstances
as are specified in the regulations.

(2) Without prejudice to the generality of subsection (1),
regulations under this section may

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39

(a) provide that clients' money held by an investment
provider is held on trust;

(b) require clients' money to be paid into an account the
title of which contains the word 'client' and which is with
an institution of a kind specified in the regulations;

(c) make provision with respect to the opening and keeping
of clients' accounts, including provision as to the
circumstances in which money other than clients' money
may be paid into such accounts and the circumstances
in which and the persons to whom money held in such
accounts may be paid out;

(d) require the keeping of accounts and records in respect of
clients' money;

(e) require any such accounts to be examined by an
approved auditor and require such auditor to report to
the Authority whether in his opinion the provisions of
the regulations have been complied with and on such
other matters as may be specified in the regulations;

(f) authorise the retention, to such extent and in such
cases as may be specified in the regulations, of so much
of clients' money as represents interest.

(3) An institution with which an account is kept in pursuance
of regulations made under this section does not incur any liability as
constructive trustee where money is wrongfully paid from the account
unless the institution permits the payment

(a) in the knowledge that it is wrongful to do so; or

(b) having deliberately failed to make enquiries in
circumstances in which a reasonable and honest person
would have done so.

(4) In this section, "institution" means a company carrying on
deposit-taking business within the meaning of the Banks and Deposit
Companies Act 1999 approved by the Authority for the purposes of this
section.

Appointment of auditors
41. (1) Every investment provider which under the terms of its
licence is authorised to hold clients' money shall appoint annually an
approved auditor to audit the financial statements or as the case may be
accounts, of the investment provider.

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(2) If an investment provider fails to appoint an approved
auditor as required by 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 investment
provider to such auditor.

(3) An investment provider 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 investment provider 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
an auditor who is a person entitled to practice as a public accountant
and is a member of a professional body approved by the Authority for the
purposes of this Act.

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

Auditor to communicate certain matters to Authority
42. (1) An auditor of an investment provider 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
investment provider'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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41

(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 investment
provider 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 investment provider, of the Authority's
functions under this Act.

(3) An auditor 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.

CHAPTER 5: INFORMATION GATHERING AND INVESTIGATION

Information gathering

Notification of change of controller or officer
43. (1) An investment provider 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 investment provider.

(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 investment provider becomes aware of the relevant
facts.

(3) An investment provider 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
44. (1) Every investment provider shall, within four months from
the end of its financial year, deliver to the Authority a certificate signed
by an officer of the investment provider, certifying that the investment
provider has, with respect to the preceding financial year 

(a) complied with the minimum criteria;

(b) failed to comply with the minimum criteria;

(c) where the licence is issued subject to limitations
imposed pursuant to section 17(3), observed such
limitations.

(2) Where an investment provider delivers to the Authority a
certificate in the terms of subsection (1)(b), it shall, at the time of such
delivery, give the Authority particulars of such failure in writing.

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(3) An investment provider which fails to deliver a certificate as
required by subsection (1) or delivers such a certificate after the end of
the period specified therein or fails to give the particulars required by
subsection (2), is guilty of an offence and is liable on summary conviction
to a fine of $10,000.

Power to obtain information and reports
45. (1) The Authority may by notice in writing served on an
investment provider—

(a) require the investment provider 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 the performance of
its functions under this Act;

(b) require the investment provider to provide the Authority
with a report, in such form as may be specified in the
notice, by the investment provider'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 required or could require the investment
provider to provide information under paragraph (a).

(2) The person appointed by an investment provider to make
the 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 investment provider; and

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

Power to require production of documents
46. (1) The Authority may

(a) by notice in writing served on an investment provider
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;

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43

(b) authorise an officer, servant or agent of the Authority on
producing such evidence of his authority, to require an
investment provider to provide him forthwith with 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 the performance of its functions under this Act.

(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 investment provider, 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 investment
provider 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 investment
provider 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 investment
provider in question, to provide an explanation of any of
them; and

(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 an investment provider ("A") to do so,
it may also exercise the powers conferred by section 45 and subsection
(1) of this section in relation to an undertaking which is or has at any
relevant time been —

(a) a member of A's group;

(b) a controller of A; or

(c) any other member of a partnership of which A is a
member.

(5) The Authority may by notice in writing served on any
person who is or is to be a controller or officer of an investment provider
require him to provide the Authority, within such time as may be
specified in the notice, with such information or documents as the

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44

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
47. (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
45(1) and 46(1) for the purpose of obtaining there the information or
documents required by that notice and of exercising the powers
conferred by section 46(3).

(2) Any officer, servant or agent of the Authority may, on
producing if required evidence of his authority, enter any premises
occupied by any person on whom a notice could be served under
sections 45(1) and 46(1) for the purpose of obtaining there such
information or documents as are specified in the authority, but the
Authority shall not authorise any person to act under this subsection
unless it has reasonable cause to believe that if such a notice were
served it would not be complied with or that any documents to which it
would relate would be removed, tampered with or destroyed.

(3) 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.

Communication with Authority
48. (1) No duty to which 

(a) an auditor of an investment provider;

(b) an auditor, accountant or other person appointed to
make a report under section 45(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

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45

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 of an investment provider this
section applies to any matter of which he becomes aware in his capacity
as auditor and which relates to the business or affairs of the investment
provider or any connected person.

(3) In relation to a person appointed to make a report under
section 45(1)(b) this section applies to any matter of which he becomes
aware in his capacity as the person making the report and which

(a) relates to the business or affairs of the investment
provider in relation to which his report is made or any
connected person of that investment provider;

(b) if by virtue of section 46(4) the report relates to a
connected person of an investment provider, to the
business or affairs of that person.

(4) In this section "connected person", in relation to an
investment provider ("A"), means any such person as is mentioned in
sections 46(4)(a) to (c).

Investigations

Investigations on behalf of the Authority
49. (1) If it appears to the Authority desirable to do so in the
interests of the clients or potential clients of an investment provider 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 investment provider's
business or any particular aspect of it; or

(b) the ownership or control of the investment provider;

and the Authority shall give written notice of any such appointment to
the investment provider 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 a person who is or has at any relevant time been a
member of the group of which the person under investigation ("A") is
part; or a partnership of which A is a member.

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

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(4) It shall be the duty of every person who is or was a
controller, officer, employee, agent, banker, auditor, accountant or
barrister and attorney of an investment provider which is under
investigation by virtue of subsection (1) or a person who is under
investigation under subsection (2) or any person appointed to make a
report in respect of that investment provider under section 45(1)(b) —

(a) to produce to the persons appointed under subsection
(1), within such time and at such place as they may
require, all documents relating to the person 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 investment provider 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 investment provider which is under
investigation or a person who 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.

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(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 in criminal proceedings.

(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.

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

(a) a person has contravened section 12; or

(b) an exempted person has contravened a condition of an
exemption order made under section 13;

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 (e) of that subsection or exercising the powers conferred by
subsection (2).

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(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 in criminal proceedings.

(6) 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.

Powers of entry
51. (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 that there are reasonable grounds for
suspecting that a person is guilty of such a contravention as is
mentioned in section 50 and

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

(b) 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

(c) 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 subsection (1)(c) or to take, in relation to
any such documents, any other steps which may appear

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to be necessary for preserving them or preventing
interference with them;

(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 50.

(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 50, 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
52. (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 12 or of a
condition imposed by virtue of an exemption order made
under section 13; or

(b) under section 49;

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

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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 —

(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.

CHAPTER 6: DISCIPLINARY MEASURES

Public censure
53. (1) If the Authority considers that an investment provider has
contravened a requirement imposed on it by or under this Act, the
Authority may publish a statement to that effect.

(2) After a statement under this section is published, the
Authority shall send a copy of it to the investment provider.

Proposal to censure publicly
54. (1) If the Authority proposes to publish a statement in respect
of an investment provider under section 53, it shall give the investment
provider a warning notice.

(2) A warning notice about a proposal to publish a statement
shall set out the terms of the statement.

Terms of statement
55. (1) If the Authority decides to publish a statement under
section 53 (whether or not in the terms proposed), it shall without delay
give the investment provider concerned a decision notice.

(2) The decision notice shall set out the terms of the statement.

(3) If the Authority decides to publish a statement in respect of
an investment provider under section 53, the investment provider may
appeal the matter to the tribunal under section 33.

Warning notices
56. (1) A warning notice shall

(a) state the action which the Authority proposes to take;

(b) be in writing; and

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(c) give reasons for the proposed action.

(2) The warning notice shall specify a reasonable period (which
may not be less than 28 days) within which the person to whom it is
given may make representations to the Authority.

(3) The Authority may extend the period specified in the notice.

(4) The Authority shall then decide, within a reasonable period,
whether to give the person concerned a decision notice.

Decision notices
57. (1) A decision notice shall

(a) be in writing;

(b) give the Authority's reasons for the decision to publish a
statement under section 53; and

(c) give an indication of 

(i) any right to have the matter appealed to the
tribunal which is given by this Act; and

(ii) the procedure on such an appeal.

Notices of discontinuance
58. (1) If the Authority decides not to take 

(a) the action proposed in a warning notice; or

(b) the action to which a decision notice relates;

it shall give a notice of discontinuance to the person to whom the
warning notice or decision notice was given.

(2) A notice of discontinuance shall identify the proceedings
which are being discontinued.

Final notices
59. (1) If the Authority has given a person a decision notice and the
matter was not referred to the tribunal within the period within which
appeals are to be brought, the Authority shall, on taking the action to
which the decision notice relates, give the person concerned a final
notice.

(2) If the Authority has given a person a decision notice and the
matter was referred to the tribunal, the Authority shall, on taking action
in accordance with any directions given by

(a) the tribunal; or

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(b) the court pursuant to an appeal under section 37;

give that person a final notice.

(3) A final notice shall

(a) set out the terms of the statement;

(b) give details of the manner in which, and the date on
which, the statement will be published.

Publication
60. (1) Neither the Authority nor a person to whom a warning
notice or decision notice is given or copied may publish the notice or any
details concerning it.

(2) A notice of discontinuance shall state that, if the person to
whom the notice is given consents, the Authority may publish such
information as it considers appropriate about the matter to which the
discontinued proceedings related.

(3) A copy of a notice of discontinuance shall be accompanied
by a statement that, if the person to whom the notice is copied consents,
the Authority may publish such information as it considers appropriate
about the matter to which the discontinued proceedings related, so far as
relevant to that person.

(4) The Authority shall publish such information about the
matter to which a final notice relates as it considers appropriate.

(5) But the Authority may not publish information under this
section if publication of it would, in its opinion, be unfair to the person
with respect to whom the action was taken or prejudicial to the interests
of clients or potential clients of investment providers.

(7) Information is to be published under this section in such
manner as the Authority considers appropriate.

(8) "Notice of discontinuance" means a notice given under
section 58.

CHAPTER 7: PROTECTIVE MEASURES

Winding up and dissolution

Winding up or dissolution on petition from the Authority
61. (1) The Authority may present a petition to the court for the
winding up of a company or the dissolution of a firm which

(a) has been a licensed person; or

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(b) is carrying on, or has carried on, investment business in
contravention of the provisions of this Act.

(2) On such a petition, the court may wind up the company or
dissolve the firm if it is of the opinion that it is just and equitable that the
company be wound up or the firm dissolved.

(3) Part XIII (Winding Up) of the Companies Act 1981 shall
apply to the winding up of a company under this section.

Injunctions and restitutions

Injunctions
62. (1) If, on the application of the Authority, the court is satisfied


(a) that there is a reasonable likelihood that any person will
contravene a relevant requirement; or

(b) that any person has contravened a relevant requirement
and that there is a reasonable likelihood that the
contravention will continue or be repeated;

the court may make an order restraining the contravention.

(2) If on the application of the Authority the court is satisfied 

(a) that any person has contravened a relevant requirement;
and

(b) that there are steps which could be taken for remedying
the contravention;

the court may make an order requiring that person, and any other
person who appears to have been knowingly concerned in the
contravention, to take such steps as the court may direct to remedy it.

(3) If, on the application of the Authority the court is satisfied
that any person may have 

(a) contravened a relevant requirement; or

(b) been knowingly concerned in the contravention of such a
requirement;

it may make an order restraining him from disposing of, or otherwise
dealing with, any assets of his which it is satisfied he is reasonably likely
to dispose of or otherwise deal with.

(4) In subsection (2), references to remedying a contravention
include references to mitigating its effect.

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(5) "Relevant requirement" in relation to an application by the
Authority, means a requirement which is imposed by or under this Act.

Restitution orders
63. (1) The court may, on the application of the Authority, make an
order under subsection (2) if it is satisfied that a person has contravened
a relevant requirement, or been knowingly concerned in the
contravention of such a requirement, and

(a) that profits have accrued to him as a result of the
contravention; or

(b) that one or more persons have suffered loss or been
otherwise adversely affected as a result of the
contravention.

(2) The court may order the person concerned to pay to the
Authority such sum as appears to the court to be just having regard

(a) in a case within subsection (1)(a), to the profits
appearing to the court to have accrued;

(b) in a case within subsection (1)(b), to the extent of the
loss or other adverse effect;

(c) in a case within both subsections, to the profits
appearing to the court to have accrued and to the extent
of the loss or other adverse effect.

(3) Any amount paid to the Authority in pursuance of an order
under subsection (2) shall be paid by it to such qualifying person or
distributed by it among such qualifying persons as the court may direct.

(4) On an application under subsection (1) the court may
require the person concerned to supply it with such accounts or other
information as it may require for any one or more of the following
purposes 

(a) establishing whether any and, if so, what profits have
accrued to him as mentioned in subsection (1)(a);

(b) establishing whether any person or persons have
suffered any loss or adverse effect as mentioned in
subsection (1)(b) and, if so, the extent of that loss or
adverse effect; and

(c) determining how any amounts are to be paid or
distributed under subsection (3).

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(5) The court may require any accounts or other information
supplied under subsection (4) to be verified in such manner as it may
direct.

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

(7) "Qualifying person" means a person appearing to the court
to be someone

(a) to whom the profits mentioned in subsection (1)(a) are
attributable; or

(b) who has suffered the loss or adverse effect mentioned in
subsection (1)(b).

(8) "Relevant requirement" in relation to an application by the
Authority, means a requirement which is imposed by or under this Act.

Administrators

Appointment of administrator by court
64. (1) The court may, on the application of the Authority, make an
order appointing a person with appropriate experience to manage and
administer the business of an investment provider if it is satisfied that
as a consequence of the matters specified in subsection (2) every person
who is a controller of the investment provider is not a fit and proper
person to hold the particular position which he holds.

(2) Those matters are

(a) the Authority has restricted the investment provider's
licence so as to require the removal of one or more
controllers or the appointment of one or more
controllers; and

(b) the investment provider has failed to comply with such
requirement.

(3) An administrator appointed under subsection (1) in
managing and administering the business of the investment provider,
shall take such action as will protect the interests of the clients of the
investment provider, but shall not take on any new business.

(4) The court may from time to time give such directions to the
administrator as it considers appropriate to the performance of his
functions under this section.

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(5) With effect from the date of appointment of the
administrator, every person

(a) who is a controller of the investment provider shall
cease to hold office; and

(b) the administrator so appointed shall take over and be
solely responsible for the management and
administration of the investment provider's business.

(6) An administrator appointed under subsection (1) shall
receive such remuneration as the court may determine, which shall be
charged to, and payable by, the investment provider.

PART IV

REGULATION OF INVESTMENT EXCHANGES AND CLEARING
HOUSES

Recognised investment exchanges and clearing houses

Interpretation
65. (1) In this Part

"application" means an application for a recognition order made
under section 68 or 69;

"applicant" means a body corporate or a firm which has applied
for a recognition order;

"recognised body" means a recognised investment exchange or a
recognised clearing house;

"recognised clearing house" means a clearing house in relation
to which a recognition order is in force;

"recognised investment exchange" means an investment
exchange in relation to which a recognition order is in force;

"recognition order" means an order made under section 71;

"recognition requirements" has the meaning given in section 67;

"revocation order" has the meaning given in section 76.

(2) References in this Part to rules of an investment exchange
or a clearing house are to rules made, or conditions imposed, by the
investment exchange or the clearing house with respect to

(a) recognition requirements;

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(b) admission of persons to, or their exclusion from the use
of, its facilities; or

(c) matters relating to its constitution.

(3) References in this Part to guidance issued by an investment
exchange are references to guidance issued, or any recommendation
made, in writing or other legible form and intended to have continuing
effect, by the investment exchange to

(a) all or any class of its members or users; or

(b) persons seeking to become members of the investment
exchange or to use its facilities;

with respect to any of the matters mentioned in subsections (2)(a) to (c).

(4) References in this Part to guidance issued by a clearing
house are to guidance issued, or any recommendation made, in writing
or other legible form and intended to have continuing effect, by the
clearing house to

(a) all or any class of its members; or

(b) persons using or seeking to use its services;

with respect to the provision by it or its members of clearing services.

Exemption for recognised investment exchanges and clearing
houses.
66. (1) A recognised investment exchange is exempt from the
requirement to hold a licence under this Act in respect of any investment
activity

(a) which is carried on as a part of the exchange's business
as an investment exchange; or

(b) which is carried on for the purposes of, or in connection
with, the provision of clearing services by the exchange.

(2) A recognised clearing house is exempt from the requirement
to hold a licence under this Act in respect of any investment activity
which is carried on for the purposes of, or in connection with, the
provision of clearing services by the clearing house.

Qualifications for recognition
67. (1) The Minister, acting on the advice of the Authority, may
make regulations setting out the requirements 

(a) which shall be satisfied by an investment exchange or
clearing house if it is to qualify as a body in respect of

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which the Authority may make a recognition order under
this Part; and

(b) which, if a recognition order is made, it shall continue to
satisfy if it is to remain a recognised body.

(2) Requirements resulting from this section are referred to in
this Part as "recognition requirements".

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

Application by an investment exchange
68. (1) Any body corporate or a firm may apply to the Authority for
an order declaring it to be a recognised investment exchange for the
purposes of this Act.

(2) The application shall be made in such manner as the
Authority may direct and shall be accompanied with

(a) a copy of the applicant's constitution;

(b) a copy of the applicant's rules;

(c) a copy of any guidance issued by the applicant;

(d) the required particulars; and

(e) such other information as the Authority may reasonably
require for the purpose of determining the application.

(3) The required particulars are

(a) particulars of any arrangements which the applicant has
made, or proposes to make, for the provision of clearing
services in respect of transactions effected on the
exchange;

(b) if the applicant proposes to provide clearing services in
respect of transactions other than those effected on the
exchange, particulars of the criteria which the applicant
will apply when determining to whom it will provide
those services.

Application by a clearing house
69. (1) Any body corporate or a firm may apply to the Authority for
an order declaring it to be a recognised clearing house for the purposes
of this Act.

(2) The application shall be made in such manner as the
Authority may direct and shall be accompanied with

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(a) a copy of the applicant's constitution;

(b) a copy of the applicant's rules;

(c) a copy of any guidance issued by the applicant;

(d) the required particulars; and

(e) such other information as the Authority may reasonably
require for the purpose of determining the application.

(3) The required particulars are

(a) if the applicant makes, or proposes to make, clearing
arrangements with a recognised investment exchange,
particulars of those arrangements;

(b) if the applicant proposes to provide clearing services for
persons other than recognised investment exchanges,
particulars of the criteria which it will apply when
determining to whom it will provide those services.

Applications: supplementary
70. (1) At any time after receiving an application and before
determining it, the Authority may require the applicant to provide such
further information as it reasonably considers necessary to enable it to
determine the application.

(2) Information which the Authority requires in connection with
an application shall be provided in such form, or verified in such
manner, as the Authority may direct.

(3) Different directions may be given, or requirements imposed,
by the Authority with respect to different applications.

Recognition orders
71. (1) Subject to subsection (6), if it appears to the Authority that
the applicant satisfies the recognition requirements applicable in its
case, the Authority may make a recognition order declaring the applicant
to be 

(a) a recognised investment exchange, if the application is
made under section 68;

(b) a recognised clearing house, if it is made under section
69.

(3) In considering an application, the Authority may have
regard to any information which it considers is relevant to the
application.

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(4) A recognition order shall specify a date on which it is to
take effect.

(5) Section 77 has effect in relation to a decision to refuse to
make a recognition order 

(a) as it has effect in relation to a decision to revoke such an
order; and

(b) as if references to a recognised body were references to
the applicant.

(6) The Authority shall not make a recognition order under this
section in respect of an investment exchange or a clearing house until it
has been advised by the Minister that the making of the order is in
accordance with the economic and financial policy of the Government.

Liability in relation to recognised body's regulatory functions
72. (1) A recognised body and its officers and staff shall not be
liable in damages for anything done or omitted in the discharge of the
recognised body's regulatory functions unless it is shown that the act or
omission was in bad faith.

(2) In this section "regulatory functions" means the functions of
the recognised body so far as relating to, or to matters arising out of, the
obligations to which the body is subject under or by virtue of this Act.

Notification requirements
73. (1) The Authority may make rules requiring a recognised body
to give it 

(a) notice of such events relating to the body as may be
specified; and

(b) such information in respect of those events as may be
specified.

(2) The rules may also require a recognised body to give the
Authority, at such times or in respect of such periods as may be
specified, such information relating to the body as may be specified.

(3) An obligation imposed by the rules extends only to a notice
or information which the Authority may reasonably require for the
exercise of its functions under this Act.

(4) The rules may require information to be given in a specified
form and to be verified in a specified manner.

(5) If a recognised body

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(a) alters or revokes any of its rules or guidance; or

(b) makes new rules or issues new guidance;

it shall give written notice to the Authority without delay.

(6) If a recognised investment exchange makes a change

(a) in the arrangements it makes for the provision of
clearing services in respect of transactions effected on
the exchange; or

(b) in the criteria which it applies when determining to
whom it will provide clearing services;

it shall give written notice to the Authority without delay.

(7) If a recognised clearing house makes a change

(a) in the recognised investment exchanges for whom it
provides clearing services; or

(b) in the criteria which it applies when determining to
whom (other than recognised investment exchanges) it
will provide clearing services;

it shall give written notice to the Authority without delay.

(8) In this section "specified" means specified in rules made by
the Authority.

Modification or waiver of rules
74. (1) The Authority may, on the application or with the consent of
a recognised body, direct that rules made under section 73 

(a) shall not to apply to the body; or

(b) shall apply to the body with such modifications as may
be specified in the direction.

(2) An application shall be made in such manner as the
Authority may direct.

(3) Subsections (4) to (6) apply to a direction given under
subsection (1).

(4) The Authority shall not give a direction unless it is satisfied
that

(a) compliance by the recognised body with the rules, or
with the rules as unmodified, would be unduly
burdensome or would not achieve the purpose for which
the rules were made; and

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(b) the direction would not result in undue risk to persons
whose interests the rules are intended to protect.

(5) A direction may be given subject to conditions.

(6) The Authority may 

(a) revoke a direction; or

(b) vary it on the application, or with the consent, of the
recognised body to which it relates.

Authority's power to give directions
75. (1) This section applies if it appears to the Authority that a
recognised body 

(a) has failed, or is likely to fail, to satisfy the recognition
requirements; or

(b) has failed to comply with any other obligation imposed
on it by or under this Act.

(2) The Authority may direct the body to take specified steps for
the purpose of securing the body's compliance with 

(a) the recognition requirements; or

(b) any obligation of the kind in question.

(3) A direction under this section shall be enforceable, on the
application of the Authority, by an injunction .

(4) The fact that a rule made by a recognised body has been
altered in response to a direction given by the Authority shall not prevent
it from being subsequently altered or revoked by the recognised body.

Revoking recognition
76. (1) A recognition order may be revoked by an order made by
the Authority at the request, or with the consent, of the recognised body
concerned.

(2) If it appears to the Authority that a recognised body

(a) is failing, or has failed, to satisfy the recognition
requirements; or

(b) is failing, or has failed, to comply with any other
obligation imposed on it by or under this Act;

it may make an order revoking the recognition order for that body even
though the body does not wish the order to be made.

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(3) An order under this section ("a revocation order") shall
specify the date on which it is to take effect.

(4) In the case of a revocation order made under subsection (2),
the specified date shall not be earlier than the end of the period of three
months beginning with the day on which the order is made.

(5) A revocation order may contain such transitional provisions
as the Authority thinks necessary or expedient.

Directions and revocation: procedure
77. (1) Before giving a direction under section 75, or making a
revocation order under section 76(2), the Authority shall

(a) give written notice of its intention to do so to the
recognised body concerned;

(b) take such steps as it considers reasonably practicable to
bring the notice to the attention of members (if any) of
that body; and

(c) publish the notice in such manner as it thinks
appropriate for bringing it to the attention of other
persons who are, in its opinion, likely to be affected.

(2) A notice under subsection (1) shall 

(a) state why the Authority intends to give the direction or
make the order; and

(b) draw attention to the right to make representations
conferred by subsection (3).

(3) Before the end of the period for making representations

(a) the recognised body;

(b) any member of that body; and

(c) any other person who is likely to be affected by the
proposed direction or revocation order;

may make representations to the Authority.

(4) The period for making representations is 

(a) two months beginning

(i) with the date on which the notice is served on
the recognised body; or

(ii) if later, with the date on which the notice is
published; or

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(b) such longer period as the Authority may allow in the
particular case.

(5) In deciding whether to 

(a) give a direction; or

(b) make a revocation order;

the Authority shall have regard to any representations made in
accordance with subsection (3).

(6) When the Authority has decided whether to give a direction
under section 75 or to make the proposed revocation order, it shall 

(a) give the recognised body written notice of its decision;
and

(b) if it has decided to give a direction or make an order,
take such steps as it considers reasonably practicable
for bringing its decision to the attention of members of
the body or of other persons who are, in the Authority's
opinion, likely to be affected.

(7) If the Authority considers it essential to do so, it may give a
direction under section 75

(a) without following the procedure set out in this section;
or

(b) if the Authority has begun to follow that procedure,
regardless of whether the period for making
representations has expired.

(8) If the Authority has, in relation to a particular matter,
followed the procedure set out in subsections (1) to (5), it need not follow
it again if, in relation to that matter, it decides to take action other than
that specified in its notice under subsection (1).

PART V

RESTRICTION ON DISCLOSURE OF INFORMATION

Restricted information
78. (1) Except as provided by sections 79, 80 and 81 

(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

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(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 is guilty of 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
79. (1) Section 78 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.

(2) Without prejudice to the generality of subsection (1), section
78 does not preclude the disclosure of information by the Authority to
the auditor or accountant of an investment provider, or the person
appointed to make a report under section 45(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
80. (1) Section 78 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.

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(2) Section 78 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 78, 79 and this section.

(4) Section 78 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 45 (1)(b);

(b) with a view to the institution 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.

(5) Section 78 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
49, 50 or 51 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.

(6) 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
81. (1) Section 78 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 78
or

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

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(b) with a view to the institution 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.

PART VI

MISCELLANEOUS AND SUPPLEMENTAL

False documents or information
82. (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;

is guilty of 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 $100,000 or to
imprisonment for four years or to both.

(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.

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Offences by companies
83. (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.

Notices
84. (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

(c) by sending it to him at that address by facsimile,
electronic mail 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 or registered office
in Bermuda.

Service of notice on Authority
85. (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, electronic mail or other similar means which produce a
document containing the text of the communication.

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

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

Repeal, savings and transitional
87. (1) The Investment Business Act 1998 is repealed ("the
repealed Act").

(2) On the commencement of this Act the Authority shall issue
to every undertaking licensed under the repealed Act a licence under this
Act; and such licence shall contain such restrictions on the scope of the
investment activity or the manner of operating the investment business
(but not on the duration of the licence), as would correspond to the
restrictions, if any, contained in the licence issued under the repealed
Act.

(3) Upon the issue of a licence pursuant to subsection (2) the
provisions of this Act shall apply to the investment provider as if such
licence were issued pursuant to an application made under section 16.

(4) A person who, immediately before the commencement of
this Act, was carrying on investment business in or from Bermuda but
was exempted by virtue of paragraph 2 of the Schedule to the repealed
Act, may continue to carry on investment business without a licence
under this Act for a period beginning with the date of commencement of
this Act and ending three months thereafter.

(5) Notwithstanding the provisions of Part IV, on the
commencement of that Part the Authority shall make a recognition order
declaring the Bermuda Stock Exchange Company, a body corporate
established by the Bermuda Stock Exchange Act 1992, to be a
recognised investment exchange.

(6) On the making of the recognition order, the provisions of
Part IV shall apply to the Bermuda Stock Exchange Company as if such
order were made pursuant to an application made under section 68.

Consequential amendments
88. (1) The Government Authorities (Fees) Act 1971 is amended in
Part B of the First Schedule

(a) by deleting where it occurs the following item

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70

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

and

(b) by inserting in its proper alphabetical position the
following item

"appeal tribunal constituted in accordance with section
34 of the Investment Business Act 2003"."

(2) The Third Schedule to the Bermuda Monetary Authority
Act 1969 is amended by deleting "an investment provider licensed under
the Investment Business Act 1998" and substituting an investment
provider licensed under the Investment Business Act 2003".

(3) Regulation 2(2)(a) of the Proceeds of Crime (Money
Laundering Regulations 1998 is amended by deleting paragraph (iia) and
substituting the following paragraph.

"(iia) a person licensed under the Investment
Business Act 2003;".

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FIRST SCHEDULE

(Section 3(1))

INVESTMENTS AND INVESTMENT ACTIVITIES

Part 1

Investments
SHARES, ETC.

1. Shares and stock in the share capital of a company.

DEBENTURES, ETC.

2. Debentures, including debenture stock, loan stock, bonds,
certificates of deposit and any other securities issued by a body
corporate, government, public authority or other body whether or not
constituting a charge on the assets of such body.

INSTRUMENTS GIVING ENTITLEMENT TO INVESTMENTS

3. Warrants or other instruments entitling the holder to subscribe
for investments falling within paragraph 1 or 2, except that an
investment falling within this paragraph shall not be regarded as falling
within paragraph 6, 7 or 9.

UNITS IN COLLECTIVE INVESTMENT SCHEMES

4. Any right to participate in a unit trust scheme within the
meaning of the Stamp Duties Act 1976.

CERTIFICATES REPRESENTING INVESTMENTS

5. Certificates or other instruments which confer contractual or
property rights

(a) in respect of any investment held by someone other than
the person on whom the rights are conferred by the
certificate or other instrument; and

(b) the transfer of which may be effected without requiring
the consent of that person.

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OPTIONS

6. Options to acquire or dispose of—

(a) any investment falling within any other paragraph of
this Part;

(b) any currency;

(c) palladium, platinum, gold or silver;

(d) an option to acquire or dispose of any investment.

FUTURES

7. (1) Rights under a contract for the sale of a commodity or
property of any other description under which delivery is to be made at a
future date and at a price agreed upon when the contract is made,
except that this paragraph does not apply if the contract is made for
commercial and not investment purposes.

(2) A contract shall be regarded as made for investment
purposes if it is made or traded on an investment exchange recognised
by the Authority, or made otherwise than on such an exchange but
expressed to be as traded on such an exchange or on the same terms as
those on which an equivalent contract would be made on such an
exchange.

(3) A contract not falling within subparagraph (2) shall be
regarded as made for commercial purposes if under the terms of the
contract delivery is to be made within 30 days.

INTERESTS IN A PARTNERSHIP

8. Instruments which confer an interest in a partnership.

CONTRACTS FOR DIFFERENCES

9. (1) Rights under

(a) a contract for differences; or

(b) any other contract the purpose or pretended purpose of
which is to secure a profit or avoid a loss by reference to
fluctuations in

(i) the value or price of property of any description;
or

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(ii) an index or other factor designated for that
purpose in the contract;

other than a contract where the parties intend that the profit is to be
obtained or the loss avoided by taking delivery of any property to which
the contract relates.

(2) This paragraph does not apply to designated investment
contracts within the meaning of section 57A(1) of the Insurance Act
1978.

LONG TERM BUSINESS

10. (1) Rights under a contract the effecting and carrying out of
which constitutes long-term business within the meaning of the
Insurance Act 1978.

(2) This paragraph does not apply to rights under a contract of
insurance if 

(a) the benefits under the contract are payable only on
death or in respect of incapacity due to injury, sickness
or infirmity;

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

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

(d) the contract does not make provision for its conversion
or extension in a manner that would result in its ceasing
to comply with the preceding paragraph.

(3) Where the provisions of a contract of insurance are such
that the effecting and carrying out of the contract may constitute both
long-term business and general business as defined in section 1 of the
Insurance Act 1978, references in this paragraph to rights and benefits
are references only to such rights and benefits as are attributable to the
provisions of the contract relating to long-term business.

(4) This paragraph does not apply to rights under a
reinsurance contract.

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(5) Rights falling within this paragraph shall not be regarded as
falling within paragraph 9.

RIGHTS AND INTERESTS IN INVESTMENTS

11. Rights to and interests in any investment falling within any of
the preceding paragraphs of this Part.

Part 2

Investment Activities

DEALING IN INVESTMENTS

1. (1) Buying, selling, subscribing for, or underwriting,
investments, or offering or agreeing to do so, either as principal or agent.

(2) A person does not carry on an activity of the kind specified
in subparagraph (1) by accepting or transferring an instrument creating
or acknowledging indebtedness in respect of any loan, credit, guarantee
or other similar financial accommodation or assurance which he has
made, granted or provided.

(3) The reference in subparagraph (2) to a person accepting or
transferring an instrument includes a reference to a person becoming a
party to an instrument otherwise than as a debtor or a surety.

(4) Subparagraph (1) does not apply to

(a) any dealings by a company in its own shares or share
warrants or in its own debentures or debenture
warrants;

(b) any dealings by a unit trust in its own units; and

(c) any dealings by a partnership in its own partnership
interests.

(5) This paragraph applies to a transaction which is to be
entered into by a person as principal or agent only if

(a) he continuously holds himself out as willing to enter into
transactions of that kind at prices determined by him
generally and continuously rather than in respect of
each particular transaction; or

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(b) he continuously holds himself out as engaging in the
business of buying investments with a view to selling
them and those investments are or include investments
of the kind to which the transactions relate; or

(c) he continuously solicits members of the public for the
purpose of inducing them to enter as principals or
agents into transactions to which that paragraph applies
and the transaction is or is to be entered into as a result
of his having solicited members of the public in that
matter.

(6) In subparagraph (5) "members of the public" in relation to
the person soliciting them (the "relevant person"), means any other
person except 

(a) licensed persons or exempted persons;

(b) members of the same group as the relevant person;

(c) persons who are or propose to become, participators
with the relevant person in a joint enterprise.

(7) Subparagraph (5) applies only if the investment to which
the transaction relates or will relate falls within any of paragraphs 1 to
10 of Part 1 or, so far as relevant to any of those paragraphs, paragraph
11 of Part 1.

ARRANGING DEALS IN INVESTMENTS

2. (1) Making or offering, or agreeing to make

(a) arrangements with a view to another person buying,
selling, subscribing for or underwriting a particular
investment, being arrangements which bring about or
would bring about the transaction in question;

(b) arrangements with a view to a person who participates
in the arrangements buying, selling, subscribing for or
underwriting investments.

(2) This paragraph does not apply to a person by reason of his
making, or offering or agreeing to make, arrangements with a view to a
transaction to which he will himself be a party as principal or which will
be entered into by him as agent for one of the parties.

(3) This paragraph does not apply to a person by reason of his
making, or offering or agreeing to make, arrangements with a view to a
person accepting, or with a view to a person transferring, whether as

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principal or as agent, an instrument creating or acknowledging
indebtedness in respect of any loan, credit, guarantee or other similar
financial accommodation or assurance which he or his principal has
made, granted or provided or which he or his principal has offered or
agreed to make, grant or provide.

(4) Arrangements do not fall within subparagraph (1)(b) by
reason of their having as their purpose the provision of finance to enable
a person to buy, sell, subscribe for or underwrite investments.

(5) This paragraph does not apply to arrangements for the
introduction of persons to another person if

(a) the person to whom the introduction is made is a
licensed or exempted person or is a person whose
ordinary business involves him in engaging in an
investment activity and who is not unlawfully carrying
on investment business in Bermuda; and

(b) the introduction is made with a view to the provision of
independent advice or the independent exercise of
discretion either

(i) in relation to investments generally; or

(ii) in relation to any class of investments if the
transaction or advice is or is to be with respect
to an investment within that class.

(6) The references in subparagraph (3) to a person accepting an
instrument include references to a person becoming a party to an
instrument otherwise than as a debtor or surety.

MANAGING INVESTMENTS

3. Managing or offering, or agreeing to manage, assets belonging to
another person where those assets consist of or include investments.

INVESTMENT ADVICE

4. Giving or offering, or agreeing to give, to persons in their capacity
as clients or potential clients, advice on the merits of their purchasing,
selling, subscribing for or underwriting an investment, or exercising any
right conferred by an investment to acquire, dispose of, underwrite or
convert an investment.

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SAFEGUARDING AND ADMINISTERING INVESTMENTS

5. (1) Safeguarding and administering or arranging for the
safeguarding and administration of assets belonging to another where

(a) those assets consist of or include investments falling
within any of paragraphs 1 to 8 of Part 1; or

(b) the arrangements for their safeguarding and
administration are such that those assets may consist of
or include investments and the arrangements have at
any time been held out as being arrangements under
which investments would be safeguarded and
administered.

(2) Offering or agreeing to safeguard and administer, or to
arrange for the safeguarding and administration of, assets belonging to
another where the circumstances fall within subparagraphs (1) (a) and
(b).

(3) This paragraph does not apply to a person by reason of his
safeguarding and administering assets, or offering or agreeing to do so,
under arrangements 

(a) under which another person (the "primary custodian"),
who is permitted to provide a service falling within this
paragraph, undertakes to the person to whom the assets
belong a responsibility in respect of the assets which is
no less onerous than the responsibility which the
primary custodian would undertake to that person if the
primary custodian were safeguarding and administering
the assets himself; and

(b) which are operated by the primary custodian in the
course of carrying on in Bermuda investment business
falling within this paragraph.

(4) None of the following activities constitutes the
administration of assets

(a) providing information as to the number of units or the
value of any assets safeguarded;

(b) converting currency;

(c) receiving documents relating to an investment solely for
the purpose of onward transmission to, from or at the
direction of the person to whom the investment belongs.

(5) For the purposes of this paragraph it is immaterial that the
assets safeguarded and administered

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(a) constitute units of a security, title to which is recorded
on the relevant register of securities as being held in
uncertificated form; or

(b) may be transferred to another person, subject to a
commitment by the person safeguarding and
administering them, or arranging for their safeguarding
and administration, that they will be replaced by
equivalent assets at some future date or when so
requested by the person to whom they belong.

(6) This paragraph does not apply to arrangements for the
introduction of persons to another person if

(a) the person to whom the introduction is made is
permitted to provide a service falling within this
paragraph; and

(b) the introduction is made with a view to the provision in
Bermuda of a service falling within this paragraph or the
making of arrangements operated in Bermuda for the
provision of a service falling within this paragraph by a
person who is not connected with the person by whom
the introduction is made.

(7) For the purposes of subparagraph (6) the person making
the introduction shall be regarded as connected with the other person if
he is either a body corporate in the same group as that other person or
remunerated by that other person.

(8) For the purpose subparagraphs (3) and (6), a person is
permitted to provide a service falling within this paragraph if

(a) he is a licensed person who may provide that service; or

(b) he is an exempted person as respects any investment
business which consists of or includes that service.

Part 3

Excluded activities

GROUPS, FIRMS AND JOINT ENTERPRISES

1. (1) Paragraph 1 of Part 2 does not apply to any transaction
which is or is to be entered into by a person as principal with another
person if 

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(a) they are members of the same group or firm; or

(b) they are, or propose to become, participators in a joint
enterprise and the transaction is or is to be entered into
for the purpose of, or in connection with, that enterprise.

(2) Paragraph 1 of Part 2 does not apply to any transaction
which is or is to be entered into by a person as agent for another person
in the circumstances mentioned in subparagraphs (1)(a) and (b) if where
the investment falls within any of paragraphs 1 to 10 of Part 1, or, so far
as relevant to any of those paragraphs, paragraph 11 of Part 1, the agent
does not

(a) hold himself out (otherwise than to other members of the
same group or firm or persons who are or propose to
become participators with him in a joint enterprise) as
engaging in the business of buying investments with a
view to selling them and those investments are or
include investments of the kind to which the transaction
relates; or

(b) regularly solicit members of the public for the purpose of
inducing them to enter as principals or agents into
transactions to which paragraph 1 of Part 1 applies;

and the transaction is not or is not to be entered into as a result of his
having solicited members of the public in that manner;

(3) Paragraph 2 of Part 2 does not apply to arrangements
which a person makes or offers or agrees to make if

(a) that person is a member of a group or firm and the
arrangements are with a view to another member in the
same group or firm entering into a transaction of the
kind mentioned in that paragraph; or

(b) that person is or proposes to become a participator in a
joint enterprise and the arrangements are with a view to
another person who is or proposes to become a
participator in the enterprise entering into such a
transaction for the purposes of or in connection with
that enterprise.

(4) Paragraph 3 of Part 2 does not apply to a person by reason
of his managing or offering or agreeing to manage the investments of
another person if

(a) they are members in the same group or firm; or

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(b) they are, or propose to become, a participator in a joint
enterprise and the investments are or are to be managed
for the purposes of or in connection with, that
enterprise.

(5) Paragraph 4 of Part 2 does not apply to advice given by a
person to another person if

(a) they are members of the same group or firm; or

(b) they are, or propose to become, participators in a joint
enterprise and the advice is given for the purposes of or
in connection with, that enterprise.

(6) Paragraph 5 of Part 2 does not apply to a service which a
person provides or offers or agrees to provide or to arrangements which a
person makes or offers or agrees to make for the provision of a service
if

(a) that person is a member of the group or firm and the
service is or is to be provided to a another member in the
same group or firm and relates or will relate to assets
which belong to that other member; or

(b) that person is or proposes to become a participator in a
joint enterprise and the assets to which the service
relates or will relate are or are to be held on behalf of
another person who is or proposes to become a
participator in the enterprise and are or are to be held
for the purposes of or in connection with that enterprise.

(7) The definition in paragraph 1(6) of Part 2 shall apply also
for the purposes of subparagraph (2).

SALE OF GOODS AND SUPPLY OF SERVICES

2. (1) This paragraph concerns certain activities carried on for the
purposes of or in connection with the sale of goods or supply of services
by a supplier to a customer.

(2) Paragraph 1 of Part 2 does not apply to any transaction
which is or is to be entered into by the supplier as principal if it is to be
entered into by him with the customer for the purposes of or in
connection with the sale of goods or supply of services or a related sale or
supply.

(3) Paragraph 1 of Part 2 does not apply to any transaction
which is or is to be entered into by the supplier as agent for the customer
if it is or is to be entered into for the purposes of or in connection with

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the sale of goods or supply of services or a related sale or supply, and
where the investment falls within any of paragraphs 1 to 3 of Part 1 or so
far as relevant to any of those paragraphs, paragraph 11 of Part 1, the
supplier does not 

(a) hold himself out (otherwise than to the customer) as
engaging in the business of buying investments with a
view to selling them and those investments are or
include investments of the kind to which the transaction
relates; or

(b) regularly solicit members of the public for the purpose of
inducing them to enter as principals or agents into
transactions to which paragraph 1 of Part 2 applies;

and the transaction is not or is not to be entered into as a result of his
having solicited members of the public in that manner.

In this subparagraph "members of the public" has the same meaning as
in paragraph 1(6) of Part 2;

(4) Paragraph 2 of Part 2 does not apply to arrangements
which the supplier makes with a view to the customer entering into a
transaction for the purposes of or in connection with the sale of goods or
supply of services or a related sale or supply.

(5) Paragraph 3 of Part 2 does not apply to the supplier by
reason of his managing the investments of the customer if they are or are
to be managed for the purposes of or in connection with, the sale of
goods or supply of services or a related sale or supply.

(6) Paragraph 4 of Part 2 does not apply to advice given by the
supplier to the customer for the purposes of or in connection with the
sale of goods or supply of services or a related sale or supply or to a
person with whom the customer proposes to enter into a transaction for
the purposes of or in connection with the sale of goods or supply of
services or a related sale or supply.

(7) Where the supplier is a member of a group, subparagraphs
(2) to (6) shall apply to any other member of the group as they apply to
the supplier; and where the customer is a member of a group, references
in those subparagraphs to the customer include references to any other
member of the group.

(8) In this paragraph 

"supplier" means a person whose main business is to sell goods
or supply services and not to carry on any activities of the
kind specified in Part 2 and, where the supplier is a member
of a group, also means any other members of that group;

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"customer" means a person other than an individual, to whom a
supplier sells goods or supplies services, and where the
customer is a member of a group, also means any other
member of that group;

"related sale or supply" means a sale of goods or supply of
services to the customer otherwise than by the supplier, but
for or in connection with the sale of goods or supply of
services by a supplier to a customer.

EMPLOYEE SHARE SCHEMES

3. (1) A person ("C"), a member of the same group as C or a
relevant trustee does not carry on an activity of the kind specified by
paragraph 1 of Part 2 by entering as principal or agent into a transaction
the purpose of which is to enable or facilitate

(a) transactions in shares in, or debentures issued by, C
between, or for the benefit of, any of the persons
mentioned in subparagraph (2); or

(b) the holding of such shares or debentures by, or for the
benefit of, such persons.

(2) The persons referred to in subparagraph (1) are 

(a) the bona fide employees or former employees of C or of
another member of the same group as C;

(b) the wives, husbands, widows, widowers, or children or
step-children under the age of eighteen of such
employees or former employees.

(3) There is excluded from paragraph 2 of Part 2 arrangements
made by C, a member of the same group as C or a relevant trustee if the
arrangements in question are for, or with a view to, a transaction of the
kind described in subparagraph (1).

(4) There is excluded from paragraph 5 of Part 2 any activity if
the assets in question are, or are to be, safeguarded and administered by
C, a member of the same group as C or a relevant trustee for the purpose
of enabling or facilitating transactions of the kind described in
subparagraph (1).

(6) In this paragraph 

(a) "shares" and "debentures" include 

(i) any investment of the kind specified by
paragraph 1 or 2 of Part I;

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(ii) any investment of the kind specified by
paragraph 3 or 5 of Part I so far as relevant to
paragraphs 1 and 2 of Part 1; and

(iii) any investment of the kind specified by
paragraph 11 of Part 1 so far as relevant to
investments of the kind mentioned in (i) or (ii)
above;

(b) "relevant trustee" means a person who, in pursuance of
the arrangements made for the purpose mentioned in
subparagraph (1), holds, as trustee, shares in or
debentures issued by C.

SALE OF BODY CORPORATE

4. (1) Paragraphs 1 and 2 of Part 2 do not apply to the acquisition
or disposal of, or to anything done for the purposes of the acquisition or
disposal of, shares in a body corporate other than a mutual fund
company, and paragraph 4 of Part 2 does not apply to advice given in
connection with the acquisition or disposal of such shares if either 

(a) the conditions set out in subparagraph (2) are met; or

(b) those conditions are not met, but the object of the
transaction may nevertheless reasonably be regarded as
being the acquisition of day to day control of the affairs
of the body corporate.

(2) The conditions mentioned in subparagraph (1)(a) are that

(a) the shares consist of or include shares carrying 50 per
cent or more of the voting rights attributable to share
capital which are exercisable in all circumstances at any
general meeting of the body corporate;

(b) the shares, together with any already held by the person
acquiring them, carry not less than that percentage of
those voting rights; and

(c) in either case, the acquisition and disposal is, or is to be,
between parties each of whom is a body corporate, a
firm, a single individual or a group of connected
individuals.

(3) In this paragraph

"group of connected individuals", in relation to the party
disposing of the shares, means persons each of whom is, or is

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a close relative of, a director or senior executive of the body
corporate and, in relation to the party acquiring the shares,
means persons each of whom is, or is a close relative of, a
person who is or is to be a director or senior executive of the
body corporate.

"close relative" means a person's spouse, his children and step-
children, his parents and step-parents, his brothers and
sisters and his step-brothers and step-sisters.

TRUSTEES AND PERSONAL REPRESENTATIVES

5. (1) Paragraph 1 of Part 2 does not apply to a person by reason
of his buying, selling or subscribing for an investment or offering or
agreeing to do so if

(a) the investment is, or as the case may be, is to be held by
him as trustee or personal representative; and

(b) he does not hold himself out as providing a service of
buying and selling investments;

unless that person is remunerated for what he does in addition to any
remuneration he receives for discharging his duties as trustee or
personal representative.

(2) Paragraph 2 of Part 2 does not apply to anything done by a
person as trustee or personal representative with a view to

(a) a fellow trustee or personal representative and himself
engaging in their capacity as such in an activity falling
within paragraph 1 of Part 2; or

(b) a beneficiary under the trust, will or intestacy engaging
in any such activity;

unless that person is remunerated for what he does in addition to any
remuneration he receives for discharging his duties as trustee or
personal representative.

(3) Paragraph 3 of Part 2 does not apply to anything done by a
person as trustee or personal representative unless he holds himself out
as offering investment management services or is remunerated for
providing such services in addition to any remuneration he receives for
discharging his duties as trustee or personal representative.

(4) Paragraph 4 of Part 2 does not apply to advice is given by a
person as trustee or personal representative to 

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(a) a fellow trustee or personal representative for the
purposes of the trust or estate; or

(b) a beneficiary under the trust, will or intestacy
concerning his interest in the trust fund or estate;

unless that person is remunerated for doing so in addition to any
remuneration he receives for discharging his duties as trustee or
personal representative.

(5) Paragraph 5 of Part 2 does not apply to anything done by a
person as a trustee or personal representative unless

(a) he holds himself out as providing a service falling within
paragraph 5 of Part 2; or

(b) he is remunerated for providing such a service in
addition to any remuneration he receives for discharging
his duties as trustee or personal representative.

ADVICE GIVEN OR ARRANGEMENTS MADE IN COURSE OF LEGAL
PROFESSION

6. (1) Paragraph 2 of Part 2 does not apply to arrangements

(a) which are made in the course of the carrying on of the
profession of a barrister and attorney; and

(b) the making of which may reasonably be regarded as a
necessary part of other services provided in the course of
carrying on that profession.

(2) Paragraph 4 of Part 2 does not apply to advice

(a) which is given in the course of the carrying on of the
profession of a barrister and attorney; and

(b) the giving of which may reasonably be regarded as a
necessary part of other services given in the course of
carrying on that profession.

(3) Paragraph 5 of Part 2 does not apply to the provision of a
service or to arrangements made for the provision of a service where

(a) the service is provided or the arrangements are made in
the course of the carrying on of the profession of a
barrister and attorney; and

(b) the provision of the service or the making of the
arrangements may reasonably be regarded as a

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necessary part of other services provided in the course of
carrying on that profession.

(4) Advice shall not be regarded as falling within sub-
paragraph (1)(b), the making of arrangements shall not be regarded as
falling within sub-paragraph (2)(b) and the provision of a service or the
arranging for the provision of a service shall not be regarded as falling
within sub-paragraph (3)(b) if the giving of the advice, the making of the
arrangements or the provision, or the arranging for the provision, of the
service is remunerated separately from the other advice or services.

ADVICE GIVEN IN NEWSPAPERS AND BROADCASTING SERVICES

7. Paragraph 4 of Part 2 does not apply to advice given

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

(b) in any programme included, or made for inclusion, in
any television broadcasting service or sound
broadcasting service;

if the principal purpose of the publication taken as a whole and
including any advertisements contained in it, is not to lead persons to
invest in any particular investment.

Part 4

Interpretation

1. For the purposes of this Schedule a transaction is entered into
through a person if he enters into it as agent or agents for it to be
entered into by another person as principal or agent.

2. In this Schedule, a joint enterprise" means an enterprise into
which two or more persons ("the participators") enter for commercial
purposes related to a business or businesses (other than investment
business) carried on by them; and where a participator is a member of a
group each other member of the group shall also be regarded as a
participator in the enterprise.

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SECOND SCHEDULE

(section 17)

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
investment provider 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 investment provider 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
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

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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 investment provider which is a company or a
firm, at least two individuals shall effectively direct the business of the
investment provider.

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

Composition of board of directors

4 In the case of an investment provider which is a company, the
directors shall 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 investment provider and the nature and scale of its operations.

Business to be conducted in prudent manner

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

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

(3) An investment provider 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 of such amount as the
Authority may prescribe or as it may require in any particular case.

(4) An institution shall not be regarded as conducting its
business in a prudent manner unless it maintains or, as the case may
be, will maintain adequate liquidity, having regard to the relationship
between its liquid assets and its actual and contingent liabilities, to the
times at which those liabilities will or may fall due and its assets mature,
and to any other factors appearing to the Authority to be relevant.

(5) For the purposes of subparagraph (4) the Authority may, to
such extent as it thinks appropriate, take into account as liquid assets,
assets of the investment provider and facilities available to it which are
capable of providing liquidity within a reasonable period.

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(6) An investment provider shall not be regarded as conducting
its business in a prudent manner unless it makes or, as the case may
be, will maintain adequate accounting and other records of its business
and adequate systems of control of its business and records.

(7) Those records and systems shall not be regarded as
adequate unless they are such as to enable the business of the
investment provider to be prudently managed and the investment
provider 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 investment
provider as are mentioned in paragraph 4.

(8) An investment provider 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 investment
provider's operations.

(9) Subparagraphs (2) to (8) are without prejudice to the
generality of subparagraph (1).

Consolidated supervision

6 The position of the investment provider within the structure of
any group to which it may belong shall be such that it will not obstruct
the conduct of effective consolidated supervision.

Integrity and skill

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

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