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The Mutual Fund Law in Bahamas

The continuing growth of Bahamas’ Financial sector has contributed to the recent progress of the country. More and more investors are coming in to take advantage of Bahamas’ stable economy. To regulate and maintain the developments in the financial industry of the country, Bahamas is making a new legislation in BFSB’S (Bahamas Financial Services Board) attempt to establish an eye-catching, risk-based program.

In December of 2003, Bahamas created a new platform called IFA, also known as Investment Fund Act. It is based on the country’s four classes of funds: Professional, SMART, Standard and Recognized Foreign Funds.

The IFA serves to:

a) Regulate the four classes of funds as mentioned earlier;
b) Maintain dual licensing by enabling the Securities Commission of The Bahamas to grant license to all 4 classes of funds;
c) Grant authority for Unrestricted Fund Administrators (UFA) to certify Professional & SMART funds;
d) And establish a new environment for investment funds that are focused on the classes of investors rather than the value of their investment.

The IFA is based on the classes of investment funds. These are:

1 Professional – for sophisticated investors;
2 SMART (Special Mandate Alternate Regulatory Test Fund) – an alternative for intermediaries and clients who do not fit a classification. This innovative category enables them to make an alternate mandate for their regime. The SMART fund serves two purposes in relation to the Investment Fund Act:
a. Standard fund – caters to the public and upon request of a client that doesn’t fit the category of Professional, Standard and Recognized Foreign Funds investment;
b. And the Recognized Foreign Fund – funds that are invested in another reliable jurisdiction. This enables clients to have new and existing investments on outside sources managed and regulated by the Bahamas.

Mutual funds in the Bahamas can also exercise investment freedom. It provides advantages in taxation and control on exchange which makes it a valuable commodity.

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