BERMUDA Law and Practice Contributed by: Bourn Collier and Sharon A. Beesley, BeesMont Law Limited
Conflicts of Interests Policies DABA licensees must maintain conflicts of interest policies covering the identification, management and disclosure of actual and potential conflicts. Dual- hatting arrangements (where individuals hold roles in multiple regulated entities or in both a regulated entity and an affiliated service provider) require particular attention. Requirements include record-keeping and dem- onstrating to the BMA that individuals affected can discharge their responsibilities to each entity without conflict. The BMA expects a phase-out plan where dual-hatting cannot be adequately mitigated. 3.3 Change of Control Both DABA and DAIA incorporate a regime requiring the BMA to be notified of proposed changes of share- holder controllers (those holding 10% shareholding) or a majority shareholder of a DABA or DAIA licensee, with the BMA given three months to respond to either notify that it has no objection or that it does have an objection (which could include reasons such as the prospective controller not being a fit and proper per- son or threat to potential clients of the licensee). The BMA can also object to any existing controller if it appears to the Authority that the person is not or is no longer a fit and proper person. Contravention by a controller (in failing to give notice or becoming a controller before the end of the notice period) is an offence and the BMA can direct that restrictions shall apply to shares of the licensee (including on transfer, further issuance, payment on the shares or exercise of voting rights). 3.4 Passporting There is no passporting regime for DABA licensees into the European Union, the United Kingdom, the United States or any other major financial market. Each cross-border activity by a DABA licensee must be assessed against the host jurisdiction’s local licensing requirements. The BMA does participate in the Global Financial Innovation Network (GFIN), co-ordinated by the UK Financial Conduct Authority, which provides a struc- tured route for innovative financial services firms to
• appoint an expert to conduct an annual review of their controls over client assets; • pay client assets as soon as possible upon receipt into a (separate) client account; • apply a priority waterfall with the purposes of the Custody Rules first ranking, then for respective clients then for the provider itself; and • upon certain pooling events (such as default by the provider or the BMA giving a direction in respect of assets held by the provider), the provider shall pool all client assets held (from various client accounts) and make available to meet the claims of clients on a pari passu basis. Appointment of Bermuda-Based Representatives Both DABA and DAIA include requirements for a representative with an office in Bermuda with vari- ous duties. DABA licensees are required to appoint a Senior Representative and DAIA authorised parties are required to appoint a local representative, who shall be required to make disclosures to the Author- ity, such as non-compliance with its obligations under legislation and BMA guidance, including the likelihood of the entity becoming insolvency, failures to comply with conditions imposed by the BMA. 3.2 Set-Up Requirements See 3.1 Licensing Requirements . In respect of personnel and prudential requirements (in addition to previous comments). Head Office Section 21 of DABA requires that every licensed undertaking (other than a Class T licence) shall main- tain a head office in Bermuda. In addition the BMA has published guidance on the manner in which Class M and Class F DABA licensees may be directed and managed from a Bermuda head office. The Guidance applies a factor-based, proportionality- driven approach considering where strategy, risk man- agement and decision-making occur; the location of senior executives and board meetings; and the resi- dence of officers, employees and at least one director.
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