The Bermuda Monetary Authority (BMA) has endorsed a recommendation from international supervisory bodies aimed at alerting investment market practitioners about abuses and irregularities uncovered in overseas jurisdictions.

In the interests of investor protection and the safeguarding of Bermuda's reputation as an international business and financial centre, the Authority is using its third quarter bulletin to remind the local industry of the importance of regularly reviewing systems and controls to combat such irregularities and abuses.

The recommendation is that senior management of financial institutions review their existing systems and controls to ensure that: fund managers operate in accordance with the relevant trust deeds and other agreements; there are effective systems to ensure compliance with the provisions of the trust deeds, particularly in regard to any investment restrictions over the types of investments and the permitted level of, say, unquoted or unlisted securities; there is independent, fair and proper valuation of all investments; the arrangements for safe custody of funds' assets are adequate; there is a proper audit trail and adequate record-keeping arrangements in place; there are arrangements in place to ensure the timely booking (and recording) of all trades; there are adequate procedures in place governing personal dealings, including procedures (where personal dealing is not prohibited) requiring the immediate disclosure of such dealings; there are adequate arrangements in place to ensure that these matters are reviewed by both senior management and by internal audit or compliance and/or by external audit.

Some fund management companies in overseas jurisdictions have been fined and sanctioned and have lost accounts, business and their reputations.

The BMA advised that apart from the general fiduciary duty, fund managers, trustees and custodians need to ensure that there are strong and tested internal control procedures to ensure that assets of the funds and collective investment schemes and the interests of investors are adequately protected.

BUSINESS BUC