Bahamas Updates Physical Presence Standards

by Phillip Morton, Investors Offshore.com

12 November 2009

The Securities Commission of the Bahamas has released a "Statement of Practice on Physical Presence Standards" which will be enforceable immediately. The Statement of Practice provides guidance on the physical presence standards for licensees and registrants under the Securities Industry Act, 1999.

The physical presence standards are now more flexible as they provide a Securities Investment Advisor firm with the option of meeting the general physical presence standards that require personnel and physical facilities, or to meet their physical presence requirements by the appointment of a "Managing Representative" who will be responsible for the administration of the registered firm.

According to the Statement of Practice, a Securities Investment Advisor firm utilizing a Managing Representative in The Bahamas, must have at least one of its executives registered with the Commission, but its executives do not have to reside in The Bahamas. In addition, the Managing Representative appointed must be either a registrant of the Commission, a licensee of the Central Bank of The Bahamas, or a licensee of the Inspector of Financial and Corporate Services Provider. The Managing Representative must be operating within the Bahamas and have the capacity, as well as managerial and technical resources and expertise, to act as a Managing Representative. However, the Securities Investment Advisor firm still has the responsibility of ensuring that all requirements under relevant legislation, and regulatory and supervisory standards, are met and maintained. Guidance on the various requirements relating to the Managing Representative, i.e. terms of the required agreement as well as record keeping requirements, are further detailed in the practice note, available on the SCB website.

Speaking on the Statement of Practice, Philip Stubbs, Chairman of the Commission, said: “The Commission is of the view that this is a very positive development for the capital markets that will enhance business opportunities for new and existing industry participants." He further commented that “the development would be most beneficial to external asset managers desirous of registering as Securities Investment Advisors through the Managing Representative option."

The Statement of Practice issued by the Commission is currently not legally enforceable. It is the Commission’s intention, however, to make the Statement of Practice enforceable by approving it as a Guideline by June 2010. Until that time, the Commission advises that it will use the standards established in the Statement of Practice to assess new applications.

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