Bermuda To Introduce Tougher Hedge Fund Regulation

by Carla Johnson, Investors Offshore.com

09 June 2003

Speaking at a seminar in New York recently, the CEO of the Bermuda Monetary Authority, Cheryl-Ann Lister, announced that changes will be made to the island's hedge fund regulations in order to tighten controls on the industry.

The seminar, organised by the Bermuda International Business Association and Forbes magazine was told by the BMA head: "new provisions, to be introduced in Parliament towards the end of 2003, will provide more effective intervention and enforcement powers for the regulators to use in those few cases in which concerns arise."

As the Securities And Exchange Commission (SEC) continues to ponder the thorny issue of whether hedge funds should operate under stricter regulation, the Bermudian authorities appear to have come to the conclusion that a moderate form of regulation on the industry is the best way forward.

"The BMA conducts a thorough review of owners and senior personnel for fitness and integrity. In addition we review prospectuses rigorously and ensure that material changes are properly signalled. In the case of investment managers, we evaluate their track record, experience, skills and regulatory status," explained Mrs Lister, adding: "Simply, we aim not to do marginal business; and we make no apologies for that."

Whilst Bermuda already had fairly stringent rules concerning disclosure requirements and prospectuses as a result of the Bermuda Companies Act in addition to lending rules concerning to funds leveraging their market positions, Mrs Lister said this will soon be augmented by the introduction of a licensing system for funds operating inside Bermuda.

The new rules will also widen the definition of a collective investment scheme to include any corporate or private scheme that has pooled money for the express purpose of investing.

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