The next time that you consider shopping for an investment product or consult with your pension provider, you may be pleasantly surprised (or overwhelmed) by the disclosures and information available to you.

On March 31, 2010, the Bermuda Monetary Authority (the Authority) released its Consultation Paper aptly entitled Securing Enhanced Protection for Investors: Revised Code of Conduct for Investment Providers (the full paper is publicly available to anyone who wishes to review it on the BMA website www.bma.bm).

Serious attention (and serious working hours) was given to producing this paper on this so very important subject. The results are a collaboration between the Authority and a Working Group representative of the local investment and pension industry.

Why now, why this detail?

The BMA conducted a review into the disclosure practices prevalent through the local industry of investment providers (note that investment providers means both the investment industry and the pension industry).

Their result - a finding of quite widespread deficiencies - common to a number of investment providers. The project was then expanded to include a review of the entire General Business Conduct and Practice Code of Conduct under the Investment Business Act 2003.

In the words of the BMA: The current Code provides general guidance to investment providers - whether dealing with personal or institutional investments, including pension funds - as to their conduct in dealing with clients. The Code covers such areas as:

• Avoiding misleading or deceptive representations.

• Avoiding or disclosing conflicts of interest.

• Providing periodic information/performance reports.

• Disclosure of remuneration and commissions.

• Generally helping clients to make informed investment decisions.

Consistent with good international practice, the enhanced code incorporates more explicit guidance in all these areas, and in particular on the form and content of information provided by licensed entities to their clients.

Through the use of specific templates, it is envisaged that this will foster greater consistency in reporting and provision of information to investors.

The enhanced Code also provides greater clarity about the Authority's expectations in terms of acceptable behaviour from licensed investment providers, while ensuring that firms are clear about their obligations and conduct in relation to their clients.

Clarity, not confusion. What should you expect in the future?

The Code focuses on four clearly defined areas for elevated standards of client care - see the article on April 24, 2010 for more detail.

1. Investment Provider professional conduct

2. Client relationships

3. Portfolio management

4. Conflicts of interest

What will this mean for you, Mr or Ms Local Investor?

Let's look at an example of a composite individual profile compiled from hundreds of experiences in the investment industry, seen personally, reported in the media and third party anecdotes, securities fraud and investment industry arbitration cases from ordinary everyday investors. Keep in mind, this is a composite profile, folks, please.

Aunt Sylvia is tired of getting only 1.2 percent on her fixed deposits in the bank and decides that she wants to 'invest in the market'. She keeps hearing about her friends who are getting 12-15 percent returns, guaranteed, from a fellow they met on a cruise; just coincidentally, he happens to live and work here (on an interim basis).

She is close to retirement, lives very carefully with only two years to go on her mortgage. There is a little studio rental attached to her house; she has a decent job, although there are office rumours about impending redundancies.

She has real heartaches facing her in the future. Her spouse has not been in the best of health, has just been diagnosed with early Alzheimer's. She is also subsidising a grandniece, who lives with them. She has about $275,000 to her name and some local shares, neither of which are generating much income these days.

This investment seems like a good idea; it might even pay for her next cruise! The meeting: Her friend arranges a meeting with the cruise fellow who is an investment expert, she is told. He seems very nice, sharply dressed, good manners, very self assured.

She asks about his experience; where has he worked before; does he have any licences? There are no diplomas on the walls, not like you see in a doctor's office.

His business card says he is an investment adviser and financial planner. He answers the questions by launching into descriptions of the kinds of investments that he thinks are just great for her.

When she tells him she is a little nervous about the idea of investing as she is on a careful budget, he just smiles and says: "Fine, no problem."

He shows her a few pie charts and statistical performance lead lines, mutual fund fact sheets, talking all the while about stocks and bonds, topdown investment analysis, and rates of return. She is an intelligent lady, but it is still overwhelming, plus she does not recognise any of the mutual fund companies.

Then, because her friends are s comfortable with this fellow, in the manner of someone who has decided to placed her trust, she says: " I don't know that much about stocks and bonds/ investments, you just pick something good for me."

Great, let's get started, he says - 12 percent of $200,000 will generate $24,000 a year in additional income.

The sales process.

With that pronouncement, Mr. Financial Salesperson gets the application going. After listing her name, address, age, and her assets: bank accounts and home, a few pieces of paper, including preprinted contracts, are signed, a couple of mutual fund fact sheets are tucked in her folder, a few reassurances are made that her money will be safe with him, the sale process is complete.

When she asks how much he is charging, he says nothing - the investing is free; a little money just gets taken out as we go along, when the investments really outperform the market, he gets paid.

"But don't you worry, this is a great idea for you. And oh, something else to think about to get that really great return," he says. We have a special on taking out a further charge on your mortgage; you can then invest that money in the market. After all, if the interest on your mortgage is at seven percent and I can get you 12 percent in the investment market, you've just made your money work twice for you.

Is there anything wrong with this picture?

Trust in the investment industry is still at an all time low. Many investors are completely disenchanted with their advisers. There are various current studies floating in etherware stating that as many as 70 percent of investors will change investment providers this year.

The revisions to the Investment Business Act are a very good thing for the small investor. Investors must feel confident that the investment provider representative they are working with is qualified, transparent, ethical, and conflict free, and that the firm he/she is employed by is putting your interests first. It is just that simple.

Next article: We discuss the red flags raised in the investing process in our composite case described above.

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP- Bermuda is an international Certified Financial Planner™ practitioner in private wealth management. She specialises in independent fee-only cross border investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 296-3528 at Patterson Partners Ltd.