GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 2
On Thursday 29th November 2018, Global
Fund Media hosted an exclusive event in
conjunction with the Bahamas Financial
Services Board (BFSB), to showcase how the
jurisdiction is updating its regulatory regime,
not only to bring it into closer alignment with
global best practices, but also to open itself
up to more institutional fund interest.
The event started with a brief introduction
by Tanya McCartney, CEO and Executive
Director of the BFSB, who acknowledged
that this was a time of great change, not
least in the UK as the country assesses
the “impact as well as the opportunities
of Brexit”. “We trust that in this process,
The Bahamas will be top of mind for you,”
McCartney remarked to an audience that
featured a range of service provider and fund
management professionals.
To set the scene, McCartney welcomed
the Hon Theodore Brent Symonette, Minister
of Financial Services, Immigration Trade and
Industry. Symonette began by acknowledging
that today it is no longer business as usual.
International regulatory requirements and
compliance standards are becoming more
complex yet The Bahamas continues to
have an important role to play in delivering
wealth management tools to meet the needs
of clients.
“We live in a world that has never seen
so much wealth and the need to protect that
wealth is becoming increasingly relevant,”
said Symonette. “That is why we feel The
Bahamas is the clear choice for financial
partners to deliver services to HNW clients
around the world. We remain one of the
world’s foremost wealth management
centres, which has historically demonstrated
its commitment to providing high quality
services spanning a wide variety of fields;
private banking, estate planning, asset
Spotlight on The Bahamas
Opening its doors to the institutional marketplace
By James Williams, Managing Editor, Global Fund Media
SPOTLIGHT ON THE BAHAMAS
Tanya McCartney, BFSB
GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 3
SPOTLIGHT ON THE BAHAMAS
and over the years has developed innovative
solutions in areas including trust and
private banking, capital markets and most
recently in support of family offices. It is
home to a large cadre of skilled, motivated
professionals and as Symonette concluded:
“It is the prime focus of The Bahamas
Government to ensure that we maintain high
visibility and show our commitment to global
regulatory standards.”
Investment Funds Bill 2018: key
updates & developments
New legislation related to the Investment
Funds Bill 2018, recently approved by the
Government of The Bahamas features a
number of new developments.
The SCB’s initiative to overhaul the
legislation governing the investment funds
industry was launched with the appointment
of a technical drafting consultant and the
establishment of an IFA project team.
On 27th November 2017, the draft
Investment Funds Bill was issued for
public consultancy. This concluded on 28th
February, 2018. The draft regulations were
then issued on 13th April 2018, and that
consultation period ended on 15th June 2018.
Subsequent to both releases, the SCB
held industry-wide meetings as part of the
consultation process. Comments received
were all taken into consideration, collated
and are presently being reviewed and
discussed ahead of the Bill being formally
approved by the Ministry of Finance.
Key changes
Some of the key changes relate to:
• Definition of Bahamas versus non-
Bahamas based funds;
• “Carry on business in or from within The
Bahamas” as a trigger for licensing of
funds;
management, fund administration and other
corporate and financial services.
“We recognise the need to be innovative
in our approach and to display our
strength and commitment as a sustainable
international finance centre.”
To demonstrate this, over the past two
years The Bahamas has expanded its
participation on multilateral agreements, such
as mutual administrative assistance and tax
matters and multilateral competent authority
initiatives such as Common Reporting
Standards. It is also part of the OECD’s
multilateral BEPS Convention.
In addition, EU initiatives are being
addressed currently by The Bahamian
government’s Code of Conduct Group.
“The Deputy Prime Minister has tabled
the Register of Beneficial Ownership
Bill, the Commercial Entities (Substance
Requirements) Bill and we have in the
pipeline a new Investment Funds Act draft
bill. All of those are designed to bring us in
line with our commitments to the EU and
OECD valuations,” explained Symonette.
“In addition, the FATF evaluation report has
been published with a scheduled timeframe
and we look forward to implementing a
number of measures. We’ve committed to
providing financial and human resources
to ensure the FATF recommendations are
adhered to, moving forward.
“We’ve also started a process of WTO
accession. All told, we believe this sends
a loud and clear message to the IFC
community that The Bahamas is serious
about adhering to global financial standards
and making sure we have a clean,
competent jurisdiction.”
To further underscore its commitment to
remaining a progressive, forward-thinking
jurisdiction, earlier in 2018 The Bahamas
passed a Commercial Enterprise Bill. The
purpose of this was to attract people to The
Bahamas to develop arbitration technology,
international maritime trade, captive insurance,
and make it easier for them to transfer their
office headquarters to the jurisdiction.
There are numerous benefits to The
Bahamas, which will be discussed later
in this report. Suffice to say it is an
independent, English common law sovereign
territory. It offers a range of financial services
and products to meet clients’ requirements,
“We recognise the need
to be innovative in our
approach and to display our
strength and commitment
as a sustainable international
finance centre.”
Hon Theodore Brent Symonette
GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 4
SPOTLIGHT ON THE BAHAMAS
of non-Bahamian based funds to accredited
investors in The Bahamas is the regulatory
burden of the fund’s home jurisdiction, she
said. “As it now stands, the definition of non-
Bahamian based funds no longer includes
reference to a fund that is being offered
to accredited investors in The Bahamas
and is solely linked to a licensee of the
Commission: that is, an administrator or fund
manager acting on behalf of the fund that
is registered in another jurisdiction. In these
circumstances only a notification of the fund,
to the Commission, is required.”
Under the new Investment Funds Bill,
there will no longer be a requirement
for Bahamas-based funds to use a local
licensed fund administrator.
Rolle said that the SCB accepted this
change was necessary “to ensure the
jurisdiction opens itself to gain ground
globally”.
The proposed legislation removes the
category of exempt administrator. In addition,
the Bill provides that an administrator cannot
act on behalf of an investment fund unless
it holds a license under the Investment
Funds Act or is licensed and operates in a
prescribed jurisdiction.
Oversight of fund managers and
custodians
The Bill mandates the appointment of an
investment fund manager for all Bahamas-
based funds except for those funds whose
investors are 1) the fund manager or a
parent or subsidiary of the fund manager or
2) a feeder fund that invests 100 per cent of
its assets in a Master Fund.
Further, the draft Bill proposes a dual
system of regulation that will implement
a risk-based requirement for either the
registration or licensing of the fund manager.
• The ability to appoint international
administrators without requiring that they
be licensed in The Bahamas;
• The introduction of licensing requirements
for investment managers and regulatory
oversight of custodians;
• Introduction of an AIFMD regime with a
view to The Bahamas qualifying for an EU
passport.
The licensing of Bahamas-based funds under
the new regime will be defined as those
funds that carry on doing business from
The Bahamas, are incorporated, registered
or established in The Bahamas, have their
governing laws in The Bahamas (applicable
to unit trusts), or if they invite persons in The
Bahamas that are not accredited investors to
subscribe to the funds.
A foreign fund to which a Bahamian
accredited investor subscribes does not
have to seek licensing or registration in The
Bahamas.
In her presentation, Christina Rolle,
Executive Director of the Securities
Commission of The Bahamas said that
the new legislation proposed to re-orient
the definition of Bahamas-based funds “as
well as to rationalise the regulatory regime
applicable to non-Bahamas based funds”.
“In relation to the definition of an
investment fund, the current definition was
amended to no longer tie the investment
fund to it being a Bahamas-based fund. The
proposed definition deletes references to any
specific nexus between the fund and the
jurisdiction and replaces it with being sold to
non-accredited investors in The Bahamas..
“This change in the trigger of licensing
rationalises the basis for licensing so that
funds are licensed based on the activities
of the fund and not the fact that service
providers are located and/or licensed in the
jurisdiction,” explained Rolle.
For non-Bahamas based funds, the SCB
has determined not to re-establish the
requirement for professional funds sold in
The Bahamas to appoint a representative in
the jurisdiction and to remove this criterion
from the definition of non-Bahamian based
funds altogether.
Rolle said that the SCB accepted that
such an appointed representative “would be
burdensome”.
Any regulatory risk arising from the sale
“In relation to the definition
of an investment fund, the
current definition was
amended to no longer tie the
investment fund to it being a
Bahamas-based fund.”
Christina Rolle, Securities Commission
of The Bahamas
GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 5
SPOTLIGHT ON THE BAHAMAS
• The regulatory landscape – what’s new?
• Growth Markets & Service Provider
Developments;
• Product Innovations.
The panel included:
• Michael Paton, Head of Corporate &
Commercial, Investment Funds and
Banking & Securities Group, Lennox Paton;
• Ryan Pinder, Partner, Graham Thompson;
• Linda Beidler D’Aguilar, Partner, Glinton
Sweeting O’Brien;
• Heather Thompson, Of Counsel, Higgs
Johnson.
1. Regulatory landscape – what’s new?
Like all other international finance centres,
The Bahamas has found itself to be the
focus of the EU Code of Conduct Group,
the OECD and the Financial Action Task
Force (FATF).
Paton said that the primary issue for The
Bahamas in 2018 has centred on the threat
of blacklisting by the EU for potentially
being an uncooperative jurisdiction for tax
purposes. Following a list of criteria in order
not to be considered uncooperative, which
the EU published in December 2017, it then
came out with a list of jurisdictions that were,
in effect, on a grey list.
“The EU clearly set out a list of criteria
to comply with: for example, we had to
bring into force a beneficial ownership
register. This will be a decentralised register.
The Government and various competent
authorities will have the ability search the
register. Importantly, however, the register
will not be open to public search or access,”
explained Paton.
Another requirement by the EU is
Fund managers of Bahamas-based funds
which are being sold to accredited investors
will only require registration, explained Rolle,
while managers of Bahamas-based funds
being sold to non-accredited retail investors
will need to be licensed.
Licensed fund managers in the jurisdiction
will require working capital of USD125K but
there is no capital requirement for registered
fund managers.
For fund managers who do not appoint
a custodian, they will be obliged to ensure
that the usual custodial obligations for
holding assets are carried out appropriately.
Custodian oversight is another example of
how the Commission will be applying a risk-
based regulatory approach to the jurisdiction,
moving forward.
“There is no need to register or license
a custodian separately from the investment
fund. The proposed provisions require that
a custodian be appointed unless exempted
by the SCB. The custodian is also required
to be independent of the fund administrator,
fund manager and operator of the fund,”
added Rolle.
The draft Investment Funds Bill is
currently subject to cabinet approval by the
government, which the SCB expects to be
passed in early 2019.
The Bahamas value proposition:
products and services deep dive
Following Rolle’s presentation, a panel
discussion featuring a number of leading
Bahamian service providers was moderated
by James Williams, Managing Editor, Global
Fund Media. The panel discussion focused
in on three main areas, which included:
Ryan Pinder,
Graham Thompson
Michael Paton,
Lennox Paton
James Williams,
Global Fund Media
Linda Beidler D’Aguilar,
Glinton Sweeting O’Brien
Heather Thompson,
Higgs Johnson
GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 6
SPOTLIGHT ON THE BAHAMAS
Linda referred to,” said Pinder, who went on
to emphasise that the updated Investment
Funds Bill is especially exciting as it should
lead to more institutional funds business
being created.
After all, The Bahamas has historically
been known as a private wealth centre.
Pinder remarked that one of the most
exciting components of the new Investment
Funds Act will be the ability to properly
allocate the fiduciary obligations in the right
places; that is, back to the fund manager
and not left solely to the fund administrator.
“That should make it more attractive
to setting up institutional funds in The
Bahamas. The prospect of future growth
in our funds space is very exciting. Major
international fund administrators are not in
the business of taking on fiduciary risk in
the context of fund administration. I think
the segregation of duties and the new
licensing of fund managers is going to go a
long way to demonstrating that we have the
commitment to develop an institutional fund
market,” suggested Pinder.
Beidler D’Aguilar said she had
spoken with a number of onshore fund
administrators, both in the EU and North
America, and that there was now a level of
interest “that we just hadn’t seen previously”.
“Also, we do not require local audit sign-
off,” stressed Paton. “Our approach when
redrafting the legislation was to try to be as
facilitative as possible while also meeting our
IOSCO principal obligations. We now have a
framework in place that makes it much more
interesting for institutional funds.”
that anyone doing business activities in
The Bahamas must have a “substantive
economic presence” on the island. The EU
is particularly focused on what it calls highly
mobile capital and business. In short, they
don’t want offshore jurisdictions hosting
businesses without substance.
“If you are a fund management business
registered or incorporated in The Bahamas,
you will be required under the new
legislation to have offices, staff, and have the
ability to make important strategic decisions
from the jurisdiction. Although investment
funds per se are not in the scope of this
legislation, we are satisfied the amended
Investment Funds Bill 2018 will satisfy the
EU’s requirements,” said Paton.
Substance requirements
Given that The Bahamas is home to a
number of international banks which has
trained and developed local talent over many
years, Pinder, who was a minister of financial
services for the previous administration,
believes the island has the capacity and is
“well positioned to service the market when
it comes to more emphasis on substance
and having decision-makers located here.
“When looking at jurisdictions on a
go-forward basis in a new world order of
economic substance, The Bahamas is well
positioned,” said Pinder. Beidler D’Aguilar
added that with recent developments
upgrading the University of The Bahamas
campus, the island is equipped to produce
qualified personnel to perform qualified roles
in financial and corporate institutions to meet
the substance requirements.
“There will also be a need to bring in
talent as well and there is a commitment
to ensure overseas persons are able to
get work permits as essential staff. There
will be both a domestic and international
component to growth, which is going to
improve our financial services sector,” said
Beidler D’Aguilar.
Commercial Enterprises Bill & Investment
Funds Bill 2018
The introduction of the Commercial
Enterprises Bill is a reinforcing factor in
support of the substantial development of
businesses in The Bahamas. “It provides
a fast-track process for work permits, as
GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 7
SPOTLIGHT ON THE BAHAMAS
recognised that there is a need to have
outside expertise. I think in certain areas
we will continue to expand under the new
Commercial Enterprises Bill.”
Broker/dealer growth
Another interesting growth area, which has
been underway over the last couple of years,
is an influx of broker/dealer activity, especially
with respect to FX. There are now a number
of new licensees leveraging local expertise to
help them operate in The Bahamas, some of
who are experts in the fintech space.
“We are, therefore, seeing a merger of
fintech with the broker/dealer community
that goes beyond the scope of our traditional
private banking environment,” remarked Pinder.
A third growth area that the panel brought
to the audience’s attention was the growth in
family office activity.
Beidler D’Aguilar suggested that the
need to centralise the collection and
maintenance of information because of
Common Reporting Standards and other tax
reporting requirements was essential when
families have large interests across different
regions. “As a result,” she said, “we are
seeing more interest in The Bahamas among
family offices because it is home to all the
necessary service providers and, moreover,
we are well located for the Americas. It is a
good place for families to consider, utilising
the various investment products we have
including trusts, funds, SPVs.”
Paton agreed and felt that the relocation
of HNW and UHNW individuals continues to
be a good opportunity for The Bahamas:
“We have the infrastructure, the lifestyle,
the climate, the location. The Latin America
market in particular finds the jurisdiction a
very interesting place. We are seeing some
of the trust companies morphing into multi-
family offices as well.”
3. Product innovations
The third key area of discussion on the panel
related to product innovation; something
that The Bahamas has fully embraced
over the last five to 10 years and which is,
arguably, one of the key requirements of any
progressive international finance centre.
While The Bahamas has made significant
strides to update its investment funds
legislation, Beidler D’Aguilar was quick
2. Growth markets & service provider
developments
One key development that The Bahamas is
particularly keen to take a leadership position
on is blockchain and the overall growth in
‘fintech’ services.
As a top-tier regulator, the SCB
understands the flexibility needed for new
business and as such has been developing
the framework that will be required.
Pinder said he was hopeful that the
jurisdiction will soon release “some
groundbreaking regulation for public
consultation that both addresses the
framework for cryptocurrency and digital
asset offerings, and also for digital asset
exchanges based in The Bahamas”.
“We’ve moved at a measured pace but
quick enough to attract business to the
jurisdiction,” he said. “The SCB is certainly
seeing a lot of interest in the digital assets
space among fund managers.”
Whatever legislation does get introduced
will need to strike a balance between what
has to be regulated and what has to be
registered. It is hoped that this pragmatic
approach, overseen by a business-
friendly regulator, will attract technology
entrepreneurs and specialists in the fintech
space over the coming years.
To support this, however, The Bahamas
will need to continue to build out its
business infrastructure.
“It’s a case of building on our existing
strength,” said Thompson. “We’ve always
had a good service provider infrastructure
and successive governments have
GFM EVENTS Special Report Feb 2019 www.globalfundmedia.com | 8
SPOTLIGHT ON THE BAHAMAS
At which point, the manager can market it to
accredited investors.
It is attractive for family offices to have
a licensed structure for the purposes of
transparency with respect to different family
members. This can be important in avoiding
conflict and can help manage the family’s
various investment interests.
Also, there are no restrictions as to
the types of assets that can be held
by investment funds in The Bahamas.
One can use a SMART fund to invest in
cryptocurrencies, real estate, wine, art, etc.
“We also have segregated account
companies that are utilised for investment
funds, which have segregated cells
underneath the Master Fund. There is no
risk of cross-contamination of liabilities or
asset classes. They can all be separately
managed within one umbrella fund in
different cells,” added Pinter.
Conclusion
In summary, The Bahamas is gearing itself
up to enter a new stage of growth as it
sets out to build more of an institutional
funds marketplace to support global fund
management activities. By placing more
fiduciary duties on the fund operator and
the custodian, it is hoped that more global
fund administrators will be attracted to the
jurisdiction.
And with a clear commitment to digital
asset innovation, The Bahamas is putting the
pieces in place to remain one of the world’s
leading, progressive international finance
centres. n
to stress that this broad overhaul has not
changed the nature of the fund products
themselves.
One of the more innovative products is the
Investment Condominium (ICON). An ICON
structure is relatively simple to establish. It
can be used for either a SMART Fund or a
Bahamian Professional Fund, and one of the
advantages is that it can be brought to market
through an unrestricted fund administrator.
To briefly explain, the ICON is based on
the investment condominium, a form of joint
ownership of property under Brazilian civil
law, and was integrated into the Brazilian
investment funds regime as the means
by which managers would establish and
register their funds. It is a contractual
agreement between an administrator and
those investors who have agreed to invest
jointly and is similar, in principle, to collective
investment schemes in Europe.
“We took that notion and enabled it
through a piece of legislation,” said Beidler
D’Aguilar. “It makes it much easier for
Brazilian investors to understand how their
Bahamian fund will work because it uses
a familiar structure. We see wider interest
in the ICON across the Americas. The
administrator must be independent, which
investors like.”
Tax deferral is important for family offices,
as well as asset protection and succession
planning.
“Going in to an ICON Fund or a SMART
Fund gives them that tax deferral and when
they redeem, they get taxed at capital gain
rates rather than ordinary income tax rates,”
explained Paton.
With respect to SMART Funds, they fit in to
seven different templates that focus on either
a limited number of investors, the nature of the
investors (accredited versus non-accredited),
and a minimum investment criteria.
“We see them being used as incubator
funds, for example, and large subscription
family funds. They are easily licensed, they
only need a term sheet as opposed to a full
private placement memorandum and offering
document,” said Pinter.
Indeed, a fund manager might want to
use one as an incubator fund to test their
strategy with a limited number of investors,
build a track record, and then, at a later point
in time, transform it into a Professional Fund.
