The Bahamas has made significant strides in the investment funds area, particularly in the past few years with the passage of the Investment Funds Act in 2003. The modern Act which established three primary categories of funds – Professional funds, SMART funds and Standard funds allowed for greater efforts to market The Bahamas as a domicile for investment funds and for the growth in this important sector.
With the introduction of the legislation, The Bahamas continued to adopt a licensing regime which is different to the registration system adopted by some jurisdictions. The Bahamas model for licensing is due to the membership by the Securities Commission of The Bahamas (SCB) in the International Organization of Securities Commissions (IOSCO). Although industry preferred the registration route, it recognised and agreed that IOSCO membership is in the best long-term interest of the funds industry in The Bahamas, since it reinforces the legitimacy of the jurisdiction as one which is properly regulated within established and recognised international standards.
The industry also recognised that The Bahamas provides an excellent alternative through the Unrestricted Fund Administrator (UFA). The UFA is one that has secured the delegated authority of the SCB to license funds – thus providing for the "same day" launch of investment funds and enabling it to compete with timelines offered in any jurisdiction.
Further to industry proposals, the SCB has recently also given its approval to a fast track process for the licensing of Professional Funds (those offered to only accredited investors) by Restricted Fund Administrators (RFA). The fast track process provides for the approval of this category of investment funds within 72 hours of receipt of a complete application. The process is facilitated by the elimination of delays caused by the extensive due diligence exercise undertaken in regular applications. The SCB rationalises that the investment funds in question target investors who are expected to be knowledgeable of the industry and capable of conducting their own due diligence; hence, they require a reduced level of scrutiny by the regulator. The due diligence process is aimed at ensuring that applicants and all related parties are fit and proper for the performance of their duties.
The SCB has issued guidelines that govern the new approval process, setting out the approach it will adopt in relation to the various requirements for licensing of these investment funds. Specific guidance has been provided regarding the nature and quality of documents required, as well as the due diligence information necessary on parties related to the investment fund.
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