Legislation that makes it easier to set up investment funds in Bermuda was unanimously passed in the House of Assembly last night.

The Investment Funds Act 2006 effectively puts a new set of laws in place, which would regulate investment funds and fund administrators.

Finance Minister Paula Cox, who successfully piloted the Bill through the House, said the legislation would address more clearly how public funds are regulated and would refine the framework for non-public institutional funds.

She said that Bermuda is very much a competitor in the financial service industry and the legislation makes it possible for the Island to maintain its position in an intensely competitive environment.

“Bermuda has been a well recognised financial centre with a strong fund sector. It is a flourishing business about which we must be very proud.

“There has been much talk about how other centres have grown in the last few years, however we must not lose sight of our position relative to other centres,” she added.

Bermuda currently has 1,200 funds registered, but the Minister said that number is much larger as many funds have sub funds structured as segregated accounts.

Ms Cox said Bermuda had to streamline the incorporation process for investment funds and eliminate unnecessary administrative procedures so that the Island could maintain a competitive edge.

“This legislation brings more clarity and certainty about the process for authorisation which will greatly enhance Bermuda’s competitive edge.

“There will be less time required to set up a fund as the rules are more clearly stated.

“The Bill is another example of Bermuda’s continued efforts to ensure that we maintain the right balance as a reputable international financial centre,” she explained.

The Bill also provides for the regulation of fund administrators.

The Minister said: “Even though fund administrators have not been licensed, it is not true to say that there has been no regulation of these providers.

“Presently fund administrators are regulated as regulated entities under the Proceeds of Crime Act 1977 and are subject to a higher level of due diligence when handling subscriptions and redemptions similar to those imposed on banks, trust companies and investment providers.

“Regulation has become more important to the ongoing successful development of this sector.

“In fact to continue to gain recognition in the global marketplace, the stakeholders of this sector support regulation.

“It is important that these service providers are recognised to have proper personnel operating their businesses with the proper systems in order to continue to secure business from all parts of the world.”

The Opposition United Bermuda Party supported the legislation, but stressed that the Island should not underestimated the competitive nature of the investment fund business.

UBP MPs Grant Gibbons and Cole Simons both made reference to the success of the Cayman Islands in the investment fund industry.

Mr. Simons said the Cayman Islands had 8,000 investment funds, while Bermuda only had 1,200.

“We need to get some of that business back here because the only thing that was keeping us from taking the lead from them was the reputation that Bermuda was over regulated, but now we are competitive.

“There is no reason why the Cayman Islands should continue to have 80 percent of the world’s hedge funds.

“We are just as talented. We have the infrastructure and we just need to make it a priority and move forward and say we are going to snatch some of this business from the Cayman Islands,” he said.

Dr. Gibbons said the legislation — although slow in coming — was a step in the right direction.

“The Bill answers issues the fund sector was looking for. I think it is right that fund administrators are to be licensed now as it is an important part of the overall control of the industry,” he added.