Thursday, July 3, 2014
Thursday, July 3, 2014
The Bahamas Financial Services Board (BFSB) last week hosted an industry consultation for the latest financial services sector product soon to be rolled out: the Investment Condominium (ICON).
BFSB chief executive officer Aliya Allen in introductory remarks at the event spoke to the collaborative work done by a wide assembly of industry partners in preparing the fund structuring vehicle to this stage of final consultation prior to its submission to Cabinet and ultimately to Parliament.
These partners, she said, included the Ministry of Financial Services, the Association of International Banks & Trust Companies, the Office of the Attorney General and the Securities Commission of the Bahamas; all of these were an integral part of the private-sector led Working Group that conceived, developed and drafted legislation for the ICON.
She referenced the upward trend in investment fund registration over the last two years, with some 100 new funds licensed in 2013 alone.
“This is indicative of the successful niche fund business in The Bahamas, largely on back of the investment fund vehicle known as the SMART Fund.”
In describing the ICON, various presenters spoke to the fact that it continues The Bahamas’ commitment to providing smart, innovative investment solutions within a well-regulated environment.
It is a contractual relationship subsisting between investors (called participants) under which the investors agree to pool assets for the purposes of investing those assets as a collective. The structure is then licensed and fully regulated as an investment fund – similar to the use of existing vehicles such as the International Business Company, the Exempted Limited Partnership, and the Unit Trust.
Although not limited to use by investors and fund managers from any one country, this new vehicle was created and tailored with the Brazilian environment and, indeed, the success of the Brazilian hedge fund industry in mind. All of Brazil’s almost 13,000 funds are organized as condominiums registered with and regulated by the CVM.
The condominium has been a part of the Brazilian civil code since 1916, though expanded and amended substantially by revisions to the civil code and further by CVM rules.
Minister for Financial Services Ryan Pinder also addressed the briefing, which was packed with industry practitioners, describing the ICON as a prime example of how The Bahamas stays “ahead of the game” rather than being reactive to market needs.
He expressed personal pride in the new product and assured industry of his Ministry’s commitment to its success.
“The ICON is a fundamental tool for continued growth in the Latin American region”, he said, “and already is generating a tremendous buzz both domestically and internationally.”
The Minister encouraged the private sector to become intensely engaged with the roll out of this new product.
Ana Luiza Salles Lourenço Oliveira, tax advisor in PwC Brasil, joined the Briefing by video link to provide an overview of the Brazilian environment for funds.
In Brazil, the condominium (regulated under the Brazilian Civil Code) was chosen as the structure for investment funds, and essentially is an arrangement where two or more persons share a common property.
Much of her presentation focused on the multimarket funds (fundos multimercados) primarily used by Brazilians to invest abroad, but the tax expert also provided an overview of the Brazilian tax system.
Other presenters included Brian Jones, UBS (Bahamas) Ltd; Christel Sands-Feaste, Higgs & Johnson; Linda Beidler-D’Aguilar, Graham Thompson; Pamela Klonaris, Delaney Partners; and Wendy Warren, Caystone Solutions.
These all presented on the technical aspects of the bill, including the role of the administrator, comparisons with other vehicles and the conversion process where an existing vehicle may wish to convert to an ICON.
Mechelle Martinborough, Legal Counsel at the Securities Commission of The Bahamas, provided a regulatory perspective, speaking to the role of the Commission in the consultation process to date, regulation of the ICON Fund, and the differentiation of the SCB’s role versus that of the Registrar General’s Department.
The ICON will be launched officially on the occasion of BFSB’s upcoming Bahamas Landfall: Destination Brazil promotion. A large public and private sector delegation will be in Rio and Sao Paulo from August 09-15 for the event, which includes briefings and one-on-one meetings with Brazilian intermediaries.