The Government of Bermuda has announced that certain funds registered with the Bermuda Monetary Authority which have been unintentionally ca...

The Government of Bermuda has announced that certain funds registered with the Bermuda Monetary Authority which have been unintentionally caught by disclosure rules under the European Savings Tax Directive in Switzerland will be removed from its scope under amendments to fund regulations. While Bermuda is not directly affected by the Directive, funds domiciled in Bermuda can be adversely impacted if they have paying agents located in EU member states or third party countries (such as Switzerland) that have signed up to the legislation. Bermuda’s Finance Minister, Paula Cox, has recently confirmed that funds exempted from Bermuda’s Collective Investment Scheme Regulations 1998 would be out of scope for the purposes of the directive in Switzerland. There are currently 1,220 funds regulated under Bermuda's Collective Investment Scheme Regulations 1998 which would fall within the scope of the Swiss home rules, but modifications to the CIS Regulations by the Bermudian government will mean that that non-retail funds offered only to sophisticated investors can seek exemption from the regulations. As a result, this will enable about two-thirds of regulated funds registered with the BMA to apply for exemption from regulation when the amended CIS regulations come into force at the end of the year. The measure will alleviate fears of an exodus of funds to rival jurisdictions, notably the Cayman Islands which, as a third party to the European Savings Tax Directive, was able to negotiate to exempt about 98 per cent of its funds from the reporting obligations of the directive.