While the passage of the Investment Business Act 1998 in the House of Assembly has been welcomed by those working in the investment sector, some say the legislation needs a lot more beefing up to protect investors from unscrupulous practitioners.

Finance Minister Grant Gibbons agreed that meat needs to be put on the legislation before it is implemented. He said the Act as passed is an initial framework to get the process of regulating Bermuda's growing investment services industry off the ground.

One area that still needs to be addressed is a formalised process to deal with investor complaints against firms and those in the investment business.

The legislation, which has been four years in the making and is set to go for passage before the Senate, gives wide ranging regulatory and supervisory powers over the investment sector to the Bermuda Monetary Authority (BMA).

BMA General Manager Malcolm Williams said the legislation will invest regulation of the sector in an independent body and de-politicise the process.

"The main feature of the legislation is it marks the first time a licensing system has been vested in a body other than Government,'' he said. "It brings Bermuda in line with international standards.'' The legislation charges the BMA with the licensing of investment firms and self-employed individuals working in the sector. The Act requires all businesses and firms providing investment services to residents to be licensed by the BMA. It's expected exempt companies will fall under the legislation at some future date.

The BMA will make a decision on whether to grant a licence after investigating the qualifications of the firm and its employees, and whether it has the proper systems in place to provide investment services.

The BMA will also have the authority to suspend or cancel the licence.

Other powers of the BMA will include the ability: to wind up the business of an investment provider under certain conditions; to inspect all business and financial records investment providers will now be required to keep; to require an independent audit of the investment business; Investment sector wants even tougher legislation to obtain information from any current or past employee of the investment business; to require a firm take measures to correct breaches of the legislation and to appoint a custodian manager to safeguard investors' assets; to issue codes of conduct relating to the investment sector as may be required from time to time; to apply to the courts to stop an investment business from committing an offence, or to order restitution to an investor so they end up in the "position in which they were before the transaction was entered into''.

to collect fines of up to $5,000 for breach of the Act from an investment provider without going to court.

The legislation will also establish a Review Committee. Firms will be able to submit appeals to BMA decisions on licences and requirements to the Review Committee.

Mr. Williams said the BMA's investment services division, headed by Mark Crockwell, will be responsible for supervising the sector. The division currently has a staff of five. Sean Kelly, chair of the Bermuda Society of Financial Analysts' advocacy committee, said the organisation was currently awaiting a briefing by the Bermuda Monetary Authority before making its recommendations for additions to the legislation.

"The legislation has been a long time in the making,'' he said. "Now they have to beef it up with codes and standards so the public feels protected and knows that there is a set of formalised procedures for investors to go through if they feel aggrieved.'' Dr. Gibbons said he was holding off on when the legislation will be implemented so exempt investment firms can be included and so additional details -- such as a complaint procedure -- can be worked out.

"What we are doing is getting in the structure of the regulations,'' he said.

"It's a framework document. Some of the other aspects need to be fleshed out in detail.'' He said he expects the legislation to be in force within a year once more consultations with the industry are completed.