By LINDSAY THOMPSON lindsay@nasguard.com

Enactment of the new Investment Funds Act is critical to establishing an efficient and competitive financial services sector, but everybody's waiting for the Securities Commission of The Bahamas to sign off on it, according to the chairman of the Financial Services Consultative Forum.

For enactment, the regulations and templates for the SMART fund provision under the act need to be completed.

"We regard these matters as extremely urgent and we would hope to be able to complete our review and submit a final report to the government on the regulations and templates within the next two weeks," said attorney Brian Moree, chairman of the government-appointed forum.

Minister of Financial Services and Investments Allyson Maynard-Gibson confirmed that her ministry, too, is waiting for the commission to complete its work on the regulations and templates.

The government wants to have the act enacted "as soon as possible," the minister said. "The government would be very, very happy if the financial-services sector is able to put those regulations forward as early as (two weeks)."

Officials from the commission were unavailable for comment; director Hillary Deveaux was out of the country.

The Investment Funds Act was part of a package of radical financial bills passed three years ago in the wake of The Bahamas Financial Services blacklisting by the Organisation for Economic Cooperation and Development's Financial Action Task Force. The FATF labelled this jurisdiction and others uncooperative in efforts to fight money laundering.

One objective is to put The Bahamas ahead of its main regional competitor, the Cayman Islands, which is demonstrating innovative product development, promotional flair, professional competence, and legislative and regulatory support.

"Its primary role and benefit is it would provide a very modern and competitive statutory framework for the mutual-funds business, which is very big business within the financial-services sector," Mr. Moree said.

"We certainly have to operate at a level of efficiency and productivity in both public and private sectors in order to properly service this business," Mr. Moree said.

In this regard, he noted that the securities commission has to be properly equipped to deal with the business within a time frame acceptable by international standards. That is going to involve adequate human resources, sufficient level of funding, retraining and ongoing training of staff.

"It is extremely important that the regulator is put in a position to properly regulate the industry, mutua-funds business specifically, and be given adequate funds to do that," Mr. Moree said.

The aim of the legislation is to also present a workable regulatory structure that does not fetter growth of this aspect of the financial-services sector.

The act would create a new licensing structure for funds, which means that all Bahamas-based funds (funds incorporated, administered or whose investment adviser or investment manager is located in The Bahamas) must be licensed or registered with the securities commission.

Non–Bahamas-based funds, depending on their relationship to The Bahamas, must either appoint a representative registered with the commission or notify the commission of the relevant relationship.

The practical effect is that the "exempt fund" structure will be no more; instead all funds operating in the jurisdiction will be "regulated" or "submitted" to the commission in one way or another.

With regard to disciplinary matters, the act provides the commission with "administrative sanctioning" powers, which allow it to deal with breaches of the act by both regulated and unregulated funds. These powers, though existing in current legislation are unclear and limited. Implementation of the current provisions is cumbersome and in many instances the only real recourse available to the commission is through the criminal system.

The act further provides a new fee structure for both investment-fund administrators and investment funds that are more realistic, yet remains competitive. By lifting the exemptions from fees afforded to bank and trusts, there will be a substantial increase in the commission's income, which should be "one small step toward self-sufficiency," ultimately the commission's financial goal.

Caption:Allyson Maynard-Gibson, Minister of Financial Services and Investments

Posted Monday 21 July, 2003