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Recent amendments to Bermuda’s Investment Funds Act now require certain investment funds, organized in jurisdictions outside of Bermuda, to be designated and register as “Overseas Investment Funds” with the Bermuda Monetary Authority. These new registration requirements potentially apply to all “in scope” investment funds including, but not limited to, closed-ended and private equity vehicles.
The Investment Funds Amendment Act 2019 (the “Amendment Act”), which amends the Investment Funds Act 2006 (the “Act”) came into force on 1 January 2020, and provides for a new system of registration in Bermuda for foreign (i.e. non Bermuda organized) investment funds, where such funds are managed, marketed, promoted and/or sold “in and from within” Bermuda (collectively “Fund Promotion”). Previously, Fund Promotion undertaken by non-Bermuda organized investment funds was not subject to regulation pursuant to the provisions of the Act. Commencing on 1 January 2020, no foreign investment fund which is in scope of the Act may be managed or carry on promotion in or from within Bermuda, unless designated and registered as an “Overseas Investment Fund” by the Bermuda Monetary Authority (BMA) pursuant to the terms of the Act.
The Amendment Act contains a transitional provision for those foreign investment funds (FIFs) which: (i) now meet the new definition of an “Overseas Investment Fund”; and (ii) were engaged in Fund Promotion prior to 1 January 2020 (each a “Grandfathered Fund”). Each Grandfathered Fund has been granted a period ending on 30 June 2020 (the “Grandfather Period”) to comply with the terms of the Act and to become registered. Grandfathered Funds may continue to undertake Fund Promotion during the Grandfather Period provided the registration of such Grandfathered Fund is affected on or before 30 June 2020.
It is important to note that: (i) FIFs that become in scope of the Act after the Commencement Date and which have not been grandfathered are required to complete their registration immediately and prior to any Fund Promotion being undertaken; and (ii) the new registration requirements are fund-specific. There is no sheltering for an investment fund which may be a member of a wider group of investment funds, some of which may already be duly registered.
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Foreign Investment Funds Managed or Promoted In or From Within Bermuda Subject to New Registration Requirements