Frequently Asked Questions about Investment Funds and Securities

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Q: Do the laws of The Bahamas require investment funds to be regulated?

Yes, a fund which satisfies the definition of an investment fund under the Investment Funds Act, 2003 (the "IFA") shall not carry on or attempt to carry on business unless it licensed or registered under the IFA.

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Q: Who is responsible for the regulation and administration of the IFA?

The Securities Commission of The Bahamas (the "Securities Commission") is responsible for regulating investment funds and for maintaining a general review of the operations of investment funds and parties related to investment funds in The Bahamas.

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Q: What is an "investment fund" under the IFA?

Under the IFA, an investment fund is a company, partnership or unit trust that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits or gains arising from the acquisition, holding, management or disposal of investments AND which has a nexus to The Bahamas either by:

(i) its incorporation, formation or registration (as applicable);
(ii) its administrator is a company incorporated or registered pursuant to the laws of The Bahamas or which administrator has a place of business or uses an address in The Bahamas;
(iii) in the case of a unit trust, its trust instrument is governed by the laws of The Bahamas or its trustee is a company incorporated or registered pursuant to the laws of The Bahamas or which has a place of business or uses an address in The Bahamas; or
(iv) in the case of a partnership its partnership articles are governed by the laws of The Bahamas or its general partner is a company incorporated or registered pursuant to the laws of The Bahamas or which general partner has a place of business or uses and address in The Bahamas.

Such funds are also referred to as "Bahamas-based" funds. Funds whose only nexus to The Bahamas is via its investment manager or investment advisor (that is, such investment manager or investment advisor is incorporated, registered or operating in The Bahamas) is a non-Bahamas based investment fund.

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Q: What is a regulated investment fund?

A regulated investment fund is one which is licensed or registered under the IFA.

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Q: Are there different types of regulated investment funds?

Yes, there are four different classes or types of investments funds under the IFA, namely:

(i) professional funds;
(ii) SMART (Specific Mandate Alternative Regulatory Test) funds;
(iii) standard funds; and
(iv) recognized foreign funds

Professional, SMART and standard funds are all regarded as "licensed" funds and the recognized foreign fund is a "registered" fund. A recognized foreign fund is one where (i) its equity interests are listed on a prescribed securities exchange and not licensed in The Bahamas (ii) it is licensed or registered in a prescribed jurisdiction and not suspended from operation or (iii) it is incorporated or established and is in good standing in a prescribed jurisdiction.

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Q: Are investment funds required to have a minimum number of directors?

An investment fund which is a company is required to have a minimum of two directors.

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