The Bahamas has a long history of providing investment fund services and has taken measured steps over the past few years to differentiate itself from other jurisdictions by creating a mechanism to establish different types of funds with more flexibility and appropriate levels of governance.

With the overriding objective set as compliance with the International Organisation of Securities Commissions (IOSCO), close attention is paid to the need for a strong corporate governance environment, while maintaining a regulatory framework that is appropriately responsive and vigilant for funds and clients investing in them.

In this regard a dual licensing regime exists in The Bahamas. The **Securities Commission of The Bahamas (SCB)** is authorised to license all classes of funds and **Unrestricted Fund Administrators (UFA)** are authorised to license funds offered only to accredited investors. Irrespective of who licenses the fund, the fund must operate in a manner that is consistent with its constitutive documents and adherence to Bahamian law, specifically the Investment Funds Act and anti-money laundering legislation.

What distinguishes The Bahamas from other jurisdictions is the latitude provided to administrators, who at the same time must meet and maintain certain licensing and governance requirements. This has also negated the need to impose the requirement for independent directors.

Each administrator must:

* Meet fit and proper standards established by the SCB;
* Undertake an annual audit and meet ongoing reporting obligations to the SCB; and
* In the case of an UFA, maintain a physical presence in The Bahamas.

All administrators also have statutory duties to take reasonable efforts to ensure among other matters that a fund adheres to its constitutive documents and is not carrying on its business in a manner which is – or likely to be – prejudicial to investors and creditors.

Reporting requirements for fund administrators include:

* Annual audited financial statements;
* Any material changes such as changes in directors or its registered office;
* A principal office to a fund;
* Resignation as administrator of a fund; and
* Information on the operation of the funds it regulates.

Under this system a Bahamian licensed administrator is required for all Bahamian domiciled investment funds, which may in turn delegate a foreign sub administrator.

The UFA has several advantages within its regulatory scope. It can, for example, complete the necessary due diligence review of fund parties and coordinate with onshore and offshore parties for the completion of the offering memorandum and constitutive documents. The UFA can also certify fund compliance within Bahamian law and license the fund under its own internal authorization procedures.

These capabilities provide the UFA with competitive advantages within a regulated environment. For example, it can market a fund immediately upon company incorporation and the completion of licensing procedures; and can also administer funds domiciled in recognized jurisdictions from The Bahamas without any further licensing procedures other than a filing notification with SCB.

While the focus of the Bahamian environment is on oversight of the fund administrator, there are some specific requirements with which the fund must comply. In addition to those noted earlier with respect to adherence with its constitutive documents and Bahamian law, the reporting requirements for an investment fund include:

* Annual audited financial statements unless statutory exempt;

* And any material changes such as:

(i) Changes in directors or registered office;

(ii) Change in administrator;

(iii) Transfer of jurisdiction;

(iv) Change in the provisions in the constitutive documents; and

(v) Change in the provisions of the offering memorandum.

SCB and administrator oversight creates a high degree of flexibility for fund administration in The Bahamas, while providing an appropriate level of corporate governance for the growing but increasingly complex funds industry.