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Two new Bahamaian Acts in brief

Chris Hamblin, Editor, London, 8 February 2016

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Two new laws aimed at the securities industry that are of importance to private wealth management have come into effect in the Bahamas recently.

The Securities Commission of The Bahamas was largely responsible for the enactment of the Securities Industry (Anti-Money Laundering and Countering the Financing of Terrorism) Rules 2015 and the Securities Industry Amendment) Regulations 2015 that came into force on 4th December and 8th December respectively.

The AML/CFT rules, as the regulator calls them, were passed to please the Financial Action Task Force, the Organisation for Economic Co-opertion and Development's 'little brother' whose offices are in the same building in Paris. All registrants of the Securities Commission have to obey the rules.
 
The  rules  covers, among other things, internal  controls, risk-rating, the verification of customers' identities and the keeping of records. The Securities Industry  (Amendment) Regulations 2015 make changes to Regulations 69 and 88 of the Securities Industry Regulations 2012, which oblige registrants to ensure that clients make suitable investments and to segregate clients' cash from their assets.

Regulation 69 of the Securities Industry Regulations has been amended by the deletion of paragraph 2, so registrants need no longer state their opinions before executing client-instructed transactions (buy, sell or hold) which, in their opinion, may not be suitable for the clients. Regulation 88 has been amended by the  insertion of a new paragraph that gives exemption to registrants who hold licenses under the Bank and Trust Companies Regulation Act (Ch 316) from the requirement to hold clients' cash and assets in designated trust accounts that are separate and apart from the firms' property.

Copies of the legislation can be found on the regulator’s website at www.scb.gov.bs. The Securities Commission of The Bahamas was set up by the Securities Board Act 1995 (now repealed). Its mandate is now housed in the Securities Industry Act 2011.

The AML/CFT rules state that firms should set up their own risk rating 'frameworks' (a piece of office jargon that Americans invariably use to mean 'body of law' but which for Europeans is interchangeable with the word 'thing,' with the British sometimes using one meaning and sometimes another, occasionally on the same page) which assess the risk profiles of new customers. They have to ensure that the risk associated with each 'customer relationship' (presumably this means each business relationship that they might have with each customer) is 'identifiable.' They must take account of such risk factors as the type (or profession) of each customer; his country of domicile; how complex the ownership structures of his investment vehicles are; how complex their legal structures are; the 'source of business,' presumably an allusion to the way in which the financial institution came by the customer; his assets by type; the type, size and volume of his transactions; the 'level' of his cash transactions; and his adherence to his customer activity profile. There must be periodic (rule 5 does not say 'annual') exercises to keep these categories up-to-date.

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