UPDATE ON TRUSTEES AND TRUST BUSINESS
As a service to clients and to assist present and future trustees of Bermuda trusts and for those considering appointing Bermuda trustees to new or existing trusts, Cox Hallett Wilkinson Limited (“CHW”) has prepared this update of the Trusts (Regulation of Trust Business) Amendment Act 2019 (“the Amendment Act”) including related statutes, statutory instruments and rules. The Trusts (Regulation of Trust Business) Act 2001 (the “2001 Act”) incorporates all amendments to date.
The most recent legislative update includes the passing of the Amendment Act that will have the effect of enhancing Bermuda’s trust regulatory regime. The Amendment Act is in force from 31 December 2019. The changes are intended to enhance the regulatory framework for trust business in Bermuda and ensure that it remains effective and in line with evolving international standards.
All trustees carrying out trust business in Bermuda must be licensed by the Bermuda Monetary Authority (BMA) pursuant to the 2001 Act, unless otherwise exempted.
Licensed trustees in Bermuda must now abide by the trust business Code of Practice (the “Code”) which has been issued pursuant to section 7 of the 2001 Act and the Statement of Principles issued pursuant to section 6 of the 2001 Act.
The Amendment Act introduces the following changes to the 2001 Act:
- New section 4B – A physical presence in Bermuda must be demonstrated by all licensed undertakings and the trust business of such undertakings must be directed and managed from Bermuda.
The BMA has acknowledged that a licensed undertaking might reasonably require the holding of some meetings or operations outside of Bermuda, or the inclusion of directors, controllers or employees not resident in Bermuda. The BMA has confirmed that this is acceptable, on the basis that persons located outside Bermuda remain available to the BMA when required and the record-keeping provisions of the Code are strictly followed.
- Amended section 13 – The fee prescribed under the Bermuda Monetary Authority Act 1969 (the “BMA Act”) to inspect a licence at the BMA by a member of the public is no longer required and a list of all the undertakings for the time being licensed shall be provided free of charge by the BMA on its website ;
- Amended section 22 – The BMA is now empowered, where it deems appropriate, to restrict the surrender of a licence by a licensed undertaking;
- New section 47A – Each licensed undertaking holding client funds must segregate such funds from its own;
- New section 57A – The BMA can make new and additional prudential rules;
- Amends First Schedule - New sub-paragraph 6A in First Schedule – The minimum criterion for licensing is enhanced by requiring the maintenance of adequate liquidity; and
- Provide for consequential amendments to the BMA Act.
EXEMPTION FROM LICENSING
The Trusts (Regulation of Trust Business) Exemption Order 2002 (the “Exemption Order”) provides the instances where a trustee is not required to hold a licence under the 2001 Act.
A trustee is not required to be licensed where the trustee is:
- A private trust company (PTC) but it must provide the BMA with a letter, executed by the directors of the PTC, stating (a) that the company is providing the services of a trustee only to the trusts specified in its Memorandum of Association; or (b) in the case of an overseas company, in its permit; and to other such trusts as the Minister has approved. The letter should also confirm that the PTC will notify the BMA of any change in the nature and scope of its trust business;
- A member of a professional body in Bermuda recognised by the Minister of Finance who holds a certificate issued for those purposes by that professional body;
- A professional person who appoints a licensed trust company (with which he is connected as specified in the Exemption Order) to maintain trust records of the trust of which he is a trustee;
- A bare trustee; or
- A trustee of a registered pension fund or certain approved collective schemes.
The Exemption Order has been changed with the passing of the Trusts (Regulation of Trust Business) Exemption Amendment Order 2019 (the “Amendment Order”) which came into force on 31 December 2019. Trustees who are seeking to be exempted from licensing pursuant to the 2001 Act must now apply for an exemption, and in the case of a PTC, to declare on or before 31 March in every year that they continue to qualify for exemption.
In a welcome concession to PTCs, neither a licensing regime nor an annual fee for PTCs will be required by the BMA. The changes are intended to permit the BMA to monitor the activities of PTCs without introducing unnecessary regulations.
If you have any further questions regarding this update, please contact any member of our Corporate or Trust and Private Client Departments.
This update is not intended to be exhaustive and should not be construed as proper legal advice and is not intended to be relied upon in relation to any specific matter. It deals in broad terms only and is intended merely to provide a brief overview and give general information.
CHW, Hamilton, Bermuda
6 January 2020