WHAT’S INSIDE:

2006 BFSB ANNUAL REPORT

INDUSTRY NEWSREGULATION & SUPERVISON

PEOPLE POWER

JURISDICTION DEVELOPMENTS

LEGISLATIVE DEVELOPMENTSPRIVATE TRUST COMPANIES

FOCUS ON BFSB ACTIVITIES

BAHAMASFINANCIAL SERVICES REVIEW2006, VOLUME 7 | A BFSB PUBLICATION | BFSB-BAHAMAS.COM/REVIEW/

INDUSTRY AT A GLANCE - 2006 & 2005

MESSAGE FROM THE MINISTER 1

MESSAGE FROM THE CHAIRMAN 2

INDUSTRY NEWS PrivyCouncilMeetsinNassau 3

INDUSTRY REGULATION & SUPERVISIONBankSupervisionAndRegulation 4TheFIU:ALocal&InternationalPerspective 6TheInsuranceIndustry 8TheSecuritiesIndustry 9

INDUSTRY SNAPSHOT - PEOPLE POWERExecutiveOfTheYear 9ProfessionalOfTheYear 10AchieverOfTheYear 10FinancialServicesStudentOfTheYear 10FSIDevelopment&PromotionAward 11Minister’sAward 11

JURISDICTIONAL DEVELOPMENTS

PRIVATE BANKINGAbsoluteReturn:BacktotheRootsofPrivateBanking 12

FOUNDATIONSABFSBInterview 14PrivateFoundations 15

PROFESSIONAL BRIEFSM&AActivityinthePrivateBankingMarket 18SegregatedAccountsCompanies 19

LEGISLATIVE DEVELOPMENTSPrivateTrustCompaniesIntroduced 21SegregatedAccountsCompaniesHighlights 22FoundationsHighlights 22

FOCUS ON BFSB ACTIVITIESAboutTheBFSB 23BahamasStrategy&BrandingSurvey 24BahamasFinancialServicesRetreat2006 25ManpowerAssessment 26InternationalIntermediariesMeetinNassau 26FinancialServicesSectorEconomicImpactAnalysis 27BusinessContinuityPlanning 28

COLLABORATION WITH INDUSTRY STAKEHOLDERS 29

BFSB MEMBERS 30

BAHAMAS FINANCIAL SERVICES REVIEW VOL. 7IncorporatingBFSB2006AnnualReport

CONTENTS

IND

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JAN ‘06 The Bahamas receives The Banker Award as Best International Financial Centre

in the Western Hemisphere

SCBintroducesnewSMARTFundModel(SFM005),aprivatebankingstructureforindividuals/families

BFSB releases first printed Annual Report

CentralBankannouncesfurtherliberalisationofExchangeControlRegime

Bahamas Financial Services Retreat – Our Lucaya, Freeport

DraftBillandRegulationsfornewExternalInsuranceActcirculatedforindustryinput.

BahamasBusinessOutlook.BFSB Participates

GAIMUSA–BocaRaton,FL.BFSB Exhibits

TrumpetAwards–Freeport,GB.BFSB Presents

UNpublishesWorldEconomicSituationandProspects2006

FEB ‘06 TheIndependentEvaluationOffice(IEO)oftheInternationalMonetaryFund(IMF)releases

itslatestEvaluationoftheFinancialSectorAssessmentProgramme(FSAP)

TheNassauConference-“WealthManagementinaDiverseWorld”.BFSB Co-Sponsors/Exhibits

SpecialProgrammeforIntermediariesinNassau–focusingontheprivatewealthmanagementsector.BFSB and AIBT Co-sponsor

STEPCaribbeanConference–Bermuda

GovernorGeneralH.E.theHon.ArthurHannapresentstheSpeechfromtheThrone

BFSB appoints a Process Re-Engineering Sub Committee for the Companies Registry

ThePrimeMinisterannouncesCabinetChanges,includinganewMinisterofFinancialServicesandInvestments,theHon.VincentPeetandanewAttorneyGeneral,theHon.AllysonMaynard-Gibson

BFSB Funds and Securities Working Groups submit recommendations to SCB on securities investment manager/advisor registration

BFSB launches its FSI Economic Impact Analysis Working Group

IBCInternationalTrust&TaxSummit–CoralGables,FL.BFSB Exhibits

MAR ‘06 Final Retreat Report & Action Plans released

DisasterPreparednessandResponseAct,2006passedinParliament

West Palm Beach Briefing Visit

FinancialStabilityForum(FSF)holds15thPlenarymeeting–Sydney,Australia.ReleasesitsOFCReviewGroupReportUSAPatriotActisrenewed

USDepartmentofStatereleasestoCongressits2006InternationalNarcoticsControlStrategyReport(INCSR)

GrandBahamaBusinessOutlook–Freeport,GB

FirstDataInternationalsignsnewpaymentprocessingagreementswithBankoftheBahamasInternationalandFidelityBank

AIBT/BFSB/STEP Working Committee continues work on draft PTC Bill & Regulations

BFSB assists Central Bank of the Bahamas with distribution of annual Financial Sector Surveys

Washington Briefing Visit

CMAShippingConference–Stamford,Connecticut.BFSB publishes a Maritime Guide for BMA Booth

Switzerland Briefing Visit

Baker&McKenzieInternationalInsurance,TaxandTrustSeminar–Switzerland.BFSB participates

BFSB circulates Bankruptcy Bill, 2006 and Precursor Chemicals Bill, 2006 for industry input

AmericasRegionCaribbeanOptical-ringSystem(ARCOS)networkexpands

Standard&Poor’saffirmsits‘A-’long-and‘A-2’short-termSovereignCreditRatingsonTheCommonwealthofTheBahamas

BahamasAssociationofComplianceOfficers(BACO)AwardsDinner

APR ‘06 BahamasChamberofCommerceGlobalizationConference.BFSB Presents

IMFreleasesitslatestGlobalFinancialStabilityReport(GFSR)

BFSB circulates draft Competition Bill for industry input

IMFpublishesWorldEconomicOutlookannualreport

BFSB coordinates Bahamas visit by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) re e-readiness and e-strategies

TheBaselCommitteeonBankingSupervision,BankforInternationalSettlementsissuesforpubliccommentupdatedversionsofitsCorePrinciplesforEffectiveBankingSupervisionaswellastheCorePrinciplesMethodology

CentralBankissuesSupervisoryInterventionGuide

BFSB’s Process Re-Engineering Sub Committee for the Companies Registry presents its recommendations to the RGD/OAG

EconomistIntelligenceUnit(EIU)releasesForesight2020–WorldEconomicGrowthReport

BIFSpresentstoPIAWGonitsstrategicplan

BFSB conducts presentation on Regional Overview for Central Bank Staff Training Session

MAY ‘06 BFSB publishes the Bahamas Financial Services Review – Vol. 6

BFSB announces AGM and Elections and invites nominations for vacancies on the Board

Brazil Briefing Visit - Sao Paolo & Rio De Janeiro

BFSB announces plans for the Bahamas Winter Briefing – combined PWM and Funds programme for Intermediaries in Nassau

OECD’sGlobalForumonTaxationreleasesitsReportonTaxCo-operation:TowardsaLevelPlayingField–2006Assessment

CFATFMutualEvaluationofTheBahamas.BFSB Participates

OECDreleasesnewManualonInformationExchange

HillaryDeveauxisconfirmedasExecutiveDirectoroftheSecuritiesCommission

JUN ‘06 BFSB updates its Emergency Contact List

PrimeMinister&MinisterofFinancepresentsNationalBudgettoParliament

BFSB’s Business Continuity Working Group releases a “Basic Steps to Disaster Recovery” guide

Chicago Briefing Visit

13thAnnualFamilyOfficeForum–Chicago.BFSB Cosponsors, Exhibits and Presents

Posedonia2006InternationalShippingExhibition&Conference.BFSB Maritime Guide distributed

MFSIreleasesExecutiveSummaryofitsStrategy&BrandingSurveytoRetreatParticipantsandtoBFSBmembers

BFSB/BICA/BIFS launch plans for an Investment Funds Training Certificate Course

TheUnitedNationslaunchestheGlobalAllianceforInformationandCommunicationTechnologies(ICT)andDevelopment

BahamasTelecommunicationsCompany(BTC)awardsCanadiancompanyNortelaGSMexpansioncontracttotriplethecapacityoftheBTCwirelessnetwork

BFSB hosts Briefing Presentation & Cocktail Reception at Bahamas High Commission in London

UK/Europe Briefing Visit – London, Geneva, Zurich, Lugano & Vienna

BFSB launches Purpose Trust Act review

21st Transcontinental Trust Conference –Geneva,Switzerland.BFSB Presents

Clearing Banks Association (CBA) announcesthat first phase of Automated Clearing House(ACH)tobeinplacebyendof2006

BFSB participates in Bahamas Mission of IDB Team on Private Sector Initiatives

BFSB participates in Rhode Island/Bahamas State Partnership Programme meetings in Rhode Island

JUL ‘06 BFSB launches a review of the Foundations Act 2004

BFSB/AIBT/STEP release draft legislation on Private Trust Companies (Amendments to BTCA and CBA)

BFSB invites nominations for Observers to the 2006 Meeting of the UN Committee of Experts on International Cooperation in Tax Matters, and applies for Observer Status for BFSB representative

TheCentralBankoftheBahamasreleasesreportonGrossEconomicContributionoftheFinancialSectorinTheBahamas

BFSB’s Business Continuity Working Group participates with NEMA in IDB Consultations relating to Natural Risk Prevention project proposed to be funded by Bank.

MinistryofFinancereleasesBahamasGovernmentOnline(BGOL)logoandlaunchesBahamasLawsOnlinesite

BFSB’s Insurance Working Group is reactivated.

ComplianceCommissionoftheBahamasissuesrevisedCodesofpracticeforthevariousindustriesandprofessionsfallingwithinitssupervisorymandate,pursuanttotheFinancialTransactionsReportingAct

BFSB presents on Regional Market to FIU

Domestic Outreach: BFSB Team appears on You and Your Money

AUG ‘06 ORICinvitesindustryinputonlatestversionofExternalInsuranceBillandRegulations

CentralBankreleasesGuidelinesforIndependentNon-ExecutiveDirectorsforindustryconsultation

BFSB Working Group provides input on CFATF Mutual Evaluation Report

CaribbeanCommercialLawWorkshop–CaymanIslands.BFSB co-sponsors

Nomination launched for 2006 FSI Excellence Awards

TheJointForum(BaselCommittee,IOSCO,IAIS)releasesPaperonHigh-levelPrinciplesforBusinessContinuity”forbanking,securitiesandinsurancesectors

BFSB hosts 2 Immigration Roundtables with industry representatives and Ministry of Immigration, Labour and Training

SEP ‘06 BFSB Annual General Meeting & Election of Directors

BFSB launches proposal for FSI Economic Impact Analysis

BFSB coordinates IDB Mission to The Bahamas as First Phase of Technical Cooperation project on FSI benchmarking and strategy development

16thFinancialStabilityForum(FSF)Meeting–Paris,France

IIRAnti-MoneyLaunderingForum–NewYork.BFSB Presents

New York Briefing Visit

OCT ‘06 ABA/ABAMoneyLaunderingEnforcementConference–Washington,DC.BFSB Presents

FSI Student of the Year Programme

Careers Fest 2006 – Sandals Royal Bahamian

BFSB launches its 2006 Essay & Speech Competition

LATAMHedgeFundConference–Miami,Florida.BFSB Exhibits and Presents

FSI Excellence Awards Programme & Banquet

CaribbeanGroupofSecuritiesRegulators

Conference–Nassau;hostedbySCB.BFSB Presents

NOV ‘06 Bahamas Briefing – PWM and Funds Programme for Intermediaries in Nassau

Brazil Briefing Visit – Sao Paulo, Rio de Janeiro

FELEBANConference–RiodeJaneiro,Brazil.BFSB Exhibits

BahamasInstituteofCharteredAccountants(BICA)Week.BFSB Presents

InternationalLawyersNetwork–RegionalMeetingoftheAmericas

PrivateTrustLegislation(amendmentstoCentralBankActandBanks&TrustCompaniesRegulationAct)passesinParliament

BFSB launches its Manpower Assessment Working Group

DEC ‘06 5thAnnualInternationalTrustsCongress,London,England.BFSB Presents

5thAnnualSHOREXWealthManagementForum,Geneva,Switzerland.BFSB Presents

BahamasInternationalFilmFestival(BIFF)

TheFinancialIntelligenceUnit(FIU)releasesdraft“SuspiciousTransactionsGuidelinesRelatingtothePreventionofMoneyLaunderingandtheFinancingofTerrorism.”

BFSB releases draft FSI Immigration Framework, in collaboration with Ministry of Immigration, Labour & Training.

BFSB hosts Presentations Ceremony for 2006 Essay & Speech Competition Winners

BFSB launches its Financial Services Sector Economic Impact Assessment initiative ✪

JAN ‘05 GAIMUSA2005–BocaRaton,Florida.BFSB Exhibits

“FastTrack”GuidelinesforinvestmentfundsthattargetaccreditedorsophisticatedinvestorspublishedbySCB

BFSB consults with SCB and Registrar General’s Department on procedures to facilitate the establishment of investment funds as SACs

BahamasBusinessOutlook.BFSB participates

BFSB consults with members on amendments to the Foundations and Purpose Trust Acts

Bahamas Financial Services Retreat – Four Seasons at Emerald Bay. BFSB members and guests discuss key drivers for the growth of the industry

FEB ‘05 TheNassauConference.Thefocus:“AchievingExcellenceinWealthManagement.

BFSB cosponsors

PWM Special Programme for Intermediaries in Nassau – talks on financial services and the opportunities and challenges for The Bahamas. AIBT and BFSB cosponsor

BahamasasmemberofOASInter-AmericanCommitteeAgainstTerrorism(CICTE)renewscommitmenttocombatandeliminateterrorism–TrinidadDeclaration

FSI Branding Sub-Committee launched by BFSB

BICAhostsCPESeminarsonInternationalFinancialReportingStandards

ImmigrationSub-CommitteelaunchedbyBFSB

PTC Draft Paper released by joint AIBT/BFSB/STEP Working Committee

MAR ‘05 GlobalFamilyOfficeSummit–NewYork.BFSB participates

NewFundsApplicationGuidelinesissuedbySCB

Member Forum: Registrar General Department’s Focus Group on Registry Services

European Briefing Visit - London, Geneva, Zurich, Lugano and Luxembourg

BFSB member firms participate in the Annual Economic Survey of the Coalition of Private Sector Organisations (CPSO)

USDepartmentofStatereleasesitsINCSR2005,reportingonstepstakenbyTheBahamastocooperategloballyonAML/CFTinitiatives

Business Continuity Planning (BCP) Survey disseminated

S&PreleasespositiveCreditReportonTheBahamas,projecting3.5%GDPgrowthin2005

APR ‘05 AlternativeInvestmentSummit-AmeliaIsland,Florida.BFSB Exhibits

Brazilian Briefing Visit – Sao Paulo, Brasilia, Rio de Janeiro

BFSB’s Ebusiness Working Group provides input to MOF/CAC on e-business strategies

Member Forum: European Union Savings Directive Roundtable

CaribbeanFinancialActionTaskForce(CFATF)Plenary-Guatemala

BahamasInstituteofCharteredAccountants(BICA)hostsWorkshoponRiskBasedApproachtoKYCandAuditingRequirements

Member Luncheon Forum: CARICOM Single Market and Economy

4thAnnualInternationalYacht&JetShow,ParadiseIsland,Bahamas

Revised Draft Paper on PTC released by AIBT/BFSB/STEP Working Committee

MAY ‘05 Member Business Seminar: Business Continuity Planning (BCP) Forum

STEPCaribbeanConference-Florida

6thAnnualOffshoreFinancialServicesSummit–London.BFSB presents

European Briefing Visit -London, Switzerland

Member Forum: Strategy Briefing

BahamasInstituteofFinancialServices(BIFS)WeekofSeminars

CentralBankoftheBahamasissues“DraftGuidelinesonthePreventionandDetectionofMoneyLaunderingforLicensees”forindustryconsultation

CPSOreleasesEconomicOutlookSurveyResults

Continued on page 17

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|�

THE GOVERNMENT OF THE BAHAMAS remains committed to providing prudentfiscalpolicy,politicalandeconomicstabilityandtopromotinginvestorconfidence,all

ofwhichareessentialingredientsforafinancialservicesindustry.

FundamentaltotheaforementionedistheuniquespiritofcooperationthatexistsbetweentherelevantstakeholderswithintheindustryandtheMinistry.Thispublicprivatesectorpartnership continues to serve and promote our country. We received the acclaimeddistinctionearlierthisyearofbeingnamed“the leading financial centre in the Western Hemisphere”byTheBankermagazine,anaffiliateoftheFinancialTimesGroup.

Determinedtoensurethatweremainajurisdictionofchoice,theMinistry,withtheassistanceoftheBahamasFinancialServicesBoard(BFSB),appointedPricewaterhouseCooperstoconductaBahamasStrategyandBrandingSurvey.TheresultsofthisSurveyprovidedthegovernmentandstakeholderswithanup-to-dateassessmentofthestateoftheindustry,and the branding of its products. A Working Group, comprised of industry partners,wasformedtoanalysetheSurvey’sresults.IlookforwardwithgreatanticipationtotheGroup’srecommendationstothegovernment.

Thesustainedandco-ordinatedeffortsofBFSB,theAssociationofInternationalBanksandTrustCompaniesinTheBahamas(AIBT),andtheSocietyofTrustandEstatePractitioners(STEP),theCentralBankofTheBahamas,myMinistryandotherassociationsinupgradingrelevantlegislationresultedintherecentamendmentstotheBanksandTrustCompaniesRegulationsActandtheCentralBankofTheBahamasAct.TheserevisionsprovideanattractiveenvironmentforPrivateTrustCompanies.Mysincerethanksandappreciationare extended to these committed individuals who are determined to make a notabledifferencewithintheindustry.Isaluteyourefforts!

Inordertoshapeourfuture,wemusthaveanappreciationofourpast.Whilethereisremarkableevidencetoshowthatprogresshasbeenmade,Iencourageusalltoremainfocusedandresponsivetointernationalchallenges,changingmarketplacerequirementsandtrendsinordertosafeguardtheindustry.Atthesametime,IimploreyoutoremainthecatalystthroughwhichpositivechangeisaffectedtoandwithinthefinancialservicessectorlandscapeofourfairBahamaland.

Sincerely,

Hon. Vincent A. Peet, MPMinisterofFinancialServicesandInvestments

MESSAGE FROMTHEMINISTER

Iencourageusalltoremainfocusedandresponsivetointernationalchallenges...

“

2|BAHAMASFINANCIALSERVICESBOARD

THE BAHAMAS FINANCIAL SERVICES BOARD hascontinuedtheprocessofadvancingtheinternationalprofileofTheBahamasasaleading

internationalfinancialcentre,withthedistinctionofbeingtheleaderinprovidingexceptionalprivatebankingservicesamongitscompetitorsintheWesternHemisphere.

BFSBisawarethatnosinglevariablecanbeidentifiedascriticaltothesuccessfuldevelopmentofafirstclassfinancialservicescentreresultingintheemergenceofthejurisdictionasadestinationofchoicefortheconductofinternationalfinancialbusiness.Certainly,thecommitmentofgovernment,regulatorsandprivatesectorstakeholderstoimprovingthetimelinessandqualityoftheirindividualandcollectiveresponsestothedemandsoftheinternationalinvestordoesplayapartintheoverallsuccess.Thenetresultofsuccess,however,isalsocontributedtobyawiderangeofinitiatives.Thesemayinvolvethesingularactivityofeffectivelytrainingpersonnelbylocalserviceproviders.TheinitiativesmayalsoextendtohighlevelstrategicdevelopmentplanningwhichresultsininternationalpromotionaleffortsdesignedtomarketTheBahamasanditsfinancialproductstotheglobalfinancialcommunity.

Cognizantofthefactthattherehavebeencommendableeffortsonnumerousfrontsduringthepastyearaccordingly,ItakegreatpleasureinexpressingthanksandappreciationtothemembersofBFSBfortheirpersistentcommitmenttoenhancingTheBahamasbrandoffinancialservicesatboththedomesticandinternationallevels.Aproverbfromthewisepostulatesthat,“inalllabourthereisprofit”.Undoubtedly,thesustainedeffortsofthegovernment,privatesectorandregulatorsworkingtogetheronvariouspastyears’endeavourshavebeguntoconfirmnotonlythatopportunitycontinuestoexistfortheexpansionofBahamianfinancialservicesbutthatTheBahamasisinfactcapableofseizingthedayandexploitingthoseopportunitiestoitsadvantage.TheBahamasFinancialServicesBoardandtheindustryatlargearecertainlyindebtedtothosewhounselfishlyhavegiventimeandeffortonavolunteerbasistoassistinmakingthepastyearaproductiveone.TheexceptionaltalentsandinsightsoftheoutgoingChairmanBrunoRobertsandViceChairMichaelPatonhaveprovidedinspirationandleadershipresultingintheyear’sadvances.Havingbothcompletedtheirmaximumfoursuccessive

yeartermsasdirectorsofBFSB,corporategovernancerequirestheirdemittingoffice;incircumstancesastheyare,leavingalegacyofprofessionalism,articulationandknowledgewhichsomehaveobservedhavebecomecomponentscomprisingBFSB’sowndistinctivebrandofservices.Theirdedicationthroughoutthepastyear,alongwiththeavailabilityandcommitmentoftheothermembersoftheBoardofDirectorsandtheBoard’sCEO&ExecutiveDirectorWendyWarren,providedthecontextwithinwhichwecanwithoptimismanticipatecontinuedpositivedevelopments.

BFSBhasthedistinctionofbeingthepremierpromotionalagencyoftheBahamianfinancialservicesindustrytotheglobalcommunity.ConfidencemayrightlybeplacedintheBoardhavingregardtotheexceptionaldepthoftalentrepresentedacrossitsmembershipanditsboardofdirectors.BFSBcontinuestobeabletodrawontheinsightandexperienceoftopexecutivesofmajorstakeholderswhorepresentnotonlydomesticallyrooted,highlysuccessfulfinancialserviceprovidersbutalsolocalbranchesandsubsidiariesofsignificantinternationally-recognisedfinancialinstitutions.Directinputbyindustryspecialistswithsensitivitytointernationalmarketsandthedemandsofatwenty-firstcenturyglobalinvestorwillcontinuetobefundamentaltothesuccessofthejurisdiction.

Aswecontinuetogatherandprocessempiricaldataonvariousuniqueaspectsofthenatureandperformanceofourindustry,withaviewtoupdatingcurrentsystemsandstrategiesanddevisingnewonestomaintainacompetitiveedgeamonginternationalfinancialcentres,theanalysisandinstinctsoftheindustry’selitewillcontinuetobeamongthemostvaluableofcommoditiesavailableforourbenefit.BFSBisalsocommittedtoapositionwhichrecognisesthatfirstclasscommunicationscapabilityallowinginvestorsandintermediariesinstantandglobalaccessacrossavarietyofplatformsisnolongerapointofdistinctiontobeachievedamongcompetitors,butanecessarygivenforanyincreaseinfavourableinternationalrecognitionofTheBahamasasaleadinginternationalfinancialcentre.Additionally,asacomplementtothejurisdictionseffortstoensureahighlyskilledBahamianworkforcecapableofeffectivelyinteractingwiththeinternationalcommunity,TheBahamasmustcontinuetoattractandaccommodate,foroptimumperiodsoftime,internationalpersonswhopossessuniquequalifications,skills,businesscontactsandnetworkingcapabilitieswhicharefundamentaltogrowingtheindustryfromwithout.Agrowingindustrywillfosterincreasedcomplexityinthenatureofthe

servicesofferedfromwithinthejurisdiction.Inevitablytherewillbeacorrespondingenhancedopportunityfortheincreaseddevelopmentanddeepeningofcertainskillsetsrequiredbyhighnetworthandultrahighnetworthindividualsandbybluechiporganizationscontinuallyseekingcreativeandreliablefinancialsolutions.Amoresophisticatedworkforcecapableofmeetingthedemandforcomplexsolutionswillitselfbeabletodemandincreasedcompensationforservices,withaspin-offpositiveresultforthebroaderBahamiansociety.Asregardsthecredibilityofourjurisdiction,ofnoteisa

growingtrendtowardsrequiringtransparencyandpredictabilityintheoperationoftheregulatoryregimeswhichsupervisefinancialcentreactivity.Wemustcontinuetoaggressivelypursuethemaintenanceofbestpracticesinafullycompliantenvironmentwhilstsimplifyingtheprocessofintroducingnewbusinesstothejurisdiction.Oncenewbusinesshassettledintothelocalenvironmentwemustbecertaintofacilitatetheexploitationofthegrowthpotentialofeachbusinessbyensuringthattogetherwenotonlyobserveinternationalstandardsofoperationbutareadministeringaregulatorregimerationalizedonprincipleswhicharesensitivetobusinessefficacyleadingtoincreasedprofitability.

Ourformulaforsuccessmustincludeinsistingthatourserviceprovidersareabletomeetregulatoryobligationsandalsostaycompetitiveinahighlyaggressivecommercialenvironment.BFSBwillcontinueitsstrategyoftakingTheBahamastotheinternationalinvestor.OurexperiencethroughoutthepastyearshasstrengthenedourbeliefthatTheBahamasisindeedthebetterchoice.Wemusthoweverbecognizantoftherealitythatoursuccesswillforeverbecontingentontheinternationalinvestorhavinganinformedandcomprehensiveappreciationforwhoweareandwhatweareabletodeliver.

Unquestionably,wearewellpositionedtocaptureandmaintainanevenmoreenviablepositionalongsidegloballeadersinfinancialservices.Ourprogressismeasurable.Ourfutureispromising.Ilookforwardtoourworkingtogethertoensurethehighestresult.•

MESSAGE FROMTHECHAIRMAN Michael Allen

OurexperiencethroughoutthepastyearshasstrengthenedourbeliefthatTheBahamasisindeedthebetterchoice.

“

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|�

JUDICIAL HISTORY WAS MADEinDecember2006whentheJudicialCommitteeofHerMajesty’sPrivyCouncilsatinTheBahamas,attheCourtofAppealinNassau.ItwasthefirsttimethatthePrivyCouncil,aninstitutionincontinuousexistencesincethe17thcentury,hadsatoutsidetheUnitedKingdom,whereitnormallysitsatChambersinDowningStreet,London.

ThePrivyCouncilisthefinalAppellateCourtforTheBahamas.AttorneyGeneralandMinisterofLegalAffairs,theHon.AllysonMaynard-GibsonmarkedtheoccasionduringtheOpeningCeremonyfortheCouncil’svisitandworkinTheBahamas.”TheroleofthePrivyCouncilinthestrengthofourpoliticaldemocracy,andintheacknowledgementandacceptanceoftheruleoflaw,isverysignificant.TheresultingcertaintyandstabilitybroughttoourjudicialsystembythePrivyCouncilareacknowledgedwiththanksandaredeeplyappreciated.”

LordBinghamofCornhill,SeniorLawLordresponded:

“Ourunprecedentedsittingheretodayremindsusthatwhilethecourtsarenottheonly–oreventhemostimportantdepartmentofgovernment–theyhaveacrucialroletoplayandcrucialdutiestoperform.ItisthedutyofthecourtfirstofalltointerpretandapplytheConstitutionofTheBahamas.Thecourtsmustcontributetothepeace,tranquilityandgoodgovernancebyenforcingthelaw,punishingprovenwrongdoersandseekingtoensurethatpublicpowerisexercisedreasonably,fairly,honestlyandforproperpurposes.Theymusttrytoensurethatrightsareprotectedanddutiesperformed.

“Theymustunderwritethewealthandprosperitybyprovidingthatlegalcertainty,clarityandpredictabilitywhicharetheessentialpre-conditionsofasuccessfulinvestment,commerceandfinance,evermoresoinashrinkingworld.Andthecourtsareguardiansoftheruleoflaw.TheimportanceoftheJudicialCommitteeofthePrivyCouncilsittingcurrentlyinNassaucannotbeoverstated.TheJudicialCommitteeofthePrivyCouncilisthehighestcourtofappealforUnitedKingdomoverseasterritoriesandCrowndependencies,andforthoseindependentCommonwealthcountries,TheBahamasincluded,thathaveretainedtheappealtoHerMajestyinCouncilor,inthecaseofRepublics,totheJudicialCommittee.”•

Privy Council Meets In Nassau

For further information please contact:Paul WinderAnbacher (Bahamas) LimitedPO Box N-7768, Ansbacher House Tel: +1 242 502 3689Bank Lane, Nassau, The Bahamas Email: paul.winder@ansbacher.bs

Q Which international private bankunderstands your world?

The answer is nsbacher.

T H E A N S B AC H E R B A N K I N G G RO U P P R I V A T E B A N K I N G | I N V E S T M E N T S | F U N D S E R V I C E S | F I D U C I A R Y

This advertisement is issued by Ansbacher (Bahamas) Limited and is approved by Ansbacher & Co Limited. Ansbacher & Co Limited which has its registered office and principal placeof business at Two London Bridge, London SE1 9RA, is authorised and regulated by the Financial Services Authority in the United Kingdom for deposit taking and investment business.Not all products and services offered by the Ansbacher Group are available from all the jurisdictions in which Ansbacher operates. This advertisement is not directed at anyone whois in a jurisdiction where the promotion of the products or services described are prohibited or where Ansbacher is not licensed to promote such products or services in accordancewith local law. Private banking and investment services are only offered through the Ansbacher Group’s licensed banks in London, the Bahamas and the Channel Islands.

03.2006_Bahamas Financial Services Board_1.qxd 30/03/2006 17:30 Page 1

L-R: Dennis Murray Govan, FirstCaribbean International Bank Bahamas; Suzanne Black, Black & Associates; Leslie Isaacs, Director of Financial Services, Ministry of Financial Services and Investments; Minister Vincent Peet; Sheila Carey, Permanent Secretary, Ministry of Financial Services and Investments; Michael F. Allen, McKinney, Bancroft & Hughes (BFSB Chairman); Wendy C. Warren, BFSB’s CEO & Executive Director; and Michele Yvette Thompson, Ernst & Young, (BFSB Treasurer).

INDUSTRY NEWS

Courtesy Call on Minister of Financial Services & Investments

4|BAHAMASFINANCIALSERVICESBOARD

THERE ARE SEVERAL TOPICALthemesintheareaofbanksupervisionandregulation––areaswhichcontinuetobehighonthepolicyagenda

oftheCentralBankofTheBahamasandlikewisewhichaffectbankmanagementpoliciesandobjectives.AndImightunderscorethatthesemattershaveevenbroaderinfluencefromthestandpointofpromotinggreatersafety,soundnessandstabilitywithinthefinancialservicessector.Beforedoingso,IwouldliketogiveabriefoverviewoftheCentralBank,whichwasestablishedin1974and,apartfromitsmonetarypolicyduties,isvestedwithresponsibilityfortheregulationandsupervisionofbanksandtrustcompanies.TheBahamassupervisorylandscapeunderwenttremendouschangein2000,atwhichtimetheroleandfunctionsoftheCentralBankwerereinforcedinlinewithinternationalbestpractices.

TheBankisafullyindependentregulator;thelawvestsintheGovernorauthoritytolicenseandrevokebankingandtrustlicenseswithinthisjurisdiction.Ourexistingpolicyrequiresfullphysicalpresenceonthepartofallthosewhoseektoofferbankingandtrustservicestothepublic.Intermsofstaff,therearesome51bankingsupervisorsandexaminerswhocarryoutthefullrangeofoversightandsupervisoryworkwithrespecttoourlicensees.

Today,TheBahamasishostto248banksandtrustcompaniesfromsome30countries—underlyingtheimportanceofusensuringthatoursupervisoryregimeispredicatedoninternationalprinciplesandbeststandards.Ofthe248licencees,143areunrestrictedbankandtrustcompanies.

Basel II

ThefirstthemeIwishtoaddressisBaselII,whichisbyfaroneofthemosttopicalsubjectsinrecentyears––andonewhichtheCentralBankhasbeencloselymonitoringascapitaladequacyisanimportantyardstickinassessingthestrengthofabank.TheCentralBankalwayshasbeencommittedtoimplementingacapitaladequacyregimeconsistentwiththepromotionofastronginternationalbankingcentre.This

commitmentisevidencedinstatutorymandatesforourlicenseestomaintaincapitalstandardsconsistentwiththe1988BaselCapitalAccord(whichweimplementedin1992).

Forour143unrestrictedbankingand/ortrustcompanylicensees,thecurrentaveragecapitaladequacyratioof27%iswellabovethestipulated8%minimum—apositionwhichreflects,toalargeextent,theliabilitydrivennatureofinternationalbankinginTheBahamas,coupledwiththeCentralBank’srequirementthataportionofabank’sbalancesheetsbediversifiedintohighquality,liquidfinancialinstrumentswhichattractlowriskweights.

TheCentralBankhasyettoimplementthe1996amendmentstoBaselIrelatedtoMarketRiskandNettingArrangements,butwehaveconductedareviewofourlicencees,anddeterminedthat,approximately25or17%ofourunrestrictedlicenseeshavemorethan10%oftheironandoff-balancesheetassetsinaformsubjecttomarketrisk.TheBank’seffortshaveprogressedtothestagewhereacomprehensivedraftMarketRiskGuidelineisbeingexaminedforpracticalityintheBahamiancontext,andplansareunderwaytosecureaconsultanttoassistintheimplementationandcapacitybuildingexercise.

BeinghostregulatortoanumberofUSandEUbanks,theCentralBankcontinuestomonitorthepositionstakenbythesecountrieswithrespecttoBaselIIimplementationandwehaveobservedthattheUSintendstorequireonlythetop20ofitsbankstoadopttheadvancedapproach,whiletheEUhasmandatedthatallbankingentitieswithinitsborderswillberequiredtoadopttheadvancedapproaches.

WhileourgoalistofullyimplementBaselIIby2010,weanticipatethatourlicenseeswillbeallowedtousearangeofapproaches,asappropriatetotheirsizeandcomplexity,whilealsotakingintoaccounttheapproachesoftheirparentbanks,whereapplicable.And,weexpectthat,forthosestand-alonebankinglicensees,whicharesolelyincorporatedinTheBahamasandwhereTheBahamasservesashomeregulator,thesimplifiedorstandardizedapproacheswillbethemostsuitableintheshortterm.

AlthoughthereareadvantagestotheimplementationofthenewAccord,theBankisalsomindfulofimportantchallenges

relatedtoresourcesandtraining.AndthisunderscorestheCentralBank’songoingeffortstostrengthenitsrelationswithforeignregulatorycounter-partiesviamemorandaofunderstandingandaregularexchangeoflettersbetweenthe“homecountry”regulatorsandourselves.

Consolidated Supervision / International Cooperation

ConsolidatedSupervisioniscloselyrelatedtotheimplementationofBaselIIandsomewhatintertwinedwiththeissueofinternationalcooperation.Asyouareaware,theBaselCommitteeintendsthatBaselIIbeappliedonaconsolidatedbasisforbankinggroups.Manyofourlicenseesbelongtogroupsforwhichconsolidatedsupervisionisalreadythenorm.ThisapplicationwillnotpresentanyparticularchallengesfortheCentralBankeither,aswehavethelegislativeframeworkinplacetoco-operatewithotherregulatorsforthepurposesofpromotingeffectiveconsolidatedsupervision.

Infact,oneofthemajorenhancementstothelegislativeframeworkin2000allowedtheCentralBanktofacilitatetheconsolidatedsupervisionofitslicenseesbypermittingtheirhomecountrysupervisorstoconducton-siteinspectionsinTheBahamasandbyexchangingrelevantregulatoryinformationforspecifiedpurposeswithhomecountrysupervisors––whileprotectingtheconfidentialityofindividualcustomerinformation(includinginformationonindividualcustomers).TheBahamashasfrequentlyaccommodatedonsiteinspectionsbyhomecountryregulators;in2005,wefacilitated6inspectionsandasoftheendofOctober2006,4inspectionshaveoccurred.Howhavewesoughttopromotethisrelationship?IninstanceswheretheCentralBankservesastheconsolidatedsupervisor,wehavefosteredrelationshipswithhostregulatorsvialettersormemorandaofunderstanding.Asconsolidatedsupervisorto3licensees,wemandatethattheoverseasunitsconformtoregulatorystandardsonparwithorabovethatobservedbytheirparents,andtheseinstitutionsaresubjecttoonsiteexaminationsandreportingrequirements.TheBankcurrentlyhasmemorandaofunderstandingwithfivecountries–Panama,Peru,CostaRica,GuatemalaandBrazil.

TheBankisalsoapartytomultilateralmemorandumofunderstandingwithCARICOMmembercountriesandtheCaymanIslands,BritishVirginIslandsandtheNetherlandsAntilles.

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Bank Supervision And RegulationBy WENDY CRAIGG,Governor,CentralBankofTheBahamas

INDUSTRY REGULATION & SUPERVISION

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|5

Continued from page 4

TheBankcontinuestocooperatewithitsinternationalbankregulatorynetworktoensurethatourjurisdictionisnotusedbyundesirablepartiestoescapeproperoversightandequallytoensurethatinstitutionsestablishedandbasedinTheBahamascomplyfullywithinternationallyacceptedstandardsandnormsofbankmanagement.Wehavereceivedandrespondedto33requestsforinformationfromvariousforeignregulatoryauthoritiesfrom20countriesin2005.Thecorrespondingstatsfor2006are26requestsfrom10countries—manyofwhichrelatetosecuritiesmatterswheretheCentralBankworkscloselywithourcolleaguesattheSecuritiesCommission.

Corporate Governance

AthirdthemethatoccupiesthepolicyagendaoftheCentralBankisthatofCorporateGovernance––thatmatrixofrelationshipsbetweenacompany’smanagement,itsBoard,itsshareholdersandotherstakeholders.WeareallfamiliarwiththehighprofilecollapseofcorporategiantssuchasEnron,WorldComandGlobalCrossing,whichhavespawnedanintensefocusoncorporategovernanceworldwide.Ineachcase,thereappearedtobeirregularitiesinaccountingorfinancialreportingaswellasinadequateinternalcontrolsandriskmanagement––shortcomingswhichcausedregulatorstoquestiontheadequacyofregulationandwhethermorecouldhavebeendonetopreventthefailures.Countryresponsestothesechallengeshavecertainlydiffered.Forexample,theUnitedStatestookastatutoryapproachwiththeenactmentoftheSarbanes-OxleyAct(SOX)whichisseenasamoreprescriptiverules-basedapproach,emphasizingsuchareasas:

•CEO/CFOcertifications•assessmentofinternalcontrols

increaseddisclosures•auditcommitteerequirements;and•restrictionsonthetypesofnon-audit

workcarriedoutbyanauditfirmforitsclients.

TheEuropeans,ontheotherhandhavetakenadifferentapproach,onewhichplacesemphasisonvoluntarycompliancewithacodeandtheapplicationofprinciples.Onthelocalfront,theCentralBank,aspartofitsproactiveapproachintheregulationandsupervisionofbanksandtrustcompanies,issuedCorporateGovernanceGuidelines(CGG)inDecember2001toenforceinternationalbestpracticesforthemanagementandoperationofalllicensees.

Theseguidelinesarenotintendedtobeprescriptivebuttoprovidedirectionandoutlinebasiccorporategovernanceprinciplesfromwhichdirectorsandseniormanagementoflicenseescandevelopandimplementprocesseswhichareappropriatetotheuniquecharacterofeachlicensee.Forexample,theBoardofalicenseeisrequiredtocarryoutanannualreviewwhichshouldinvolvetheexaminationofthelicensee’soverallriskprofile,policiesandprocedures,internalcontrols,managementinformationsystemsandaccountingrecords,corporatevaluesandethicalstandards.TheBoardisthentocertifytotheInspectorofBanksandTrustCompaniesthat,usingtheadviceandassistanceofmanagement,ithasassessedanddocumentedwhetherthelicensee’scorporategovernanceprocessiseffectiveandthatithassuccessfullyachieveditsobjectives.

AspartoftheAnnualCertification,theBoardofeachlicenseeisalsorequiredtoreportanymaterialdeficienciesandproblemsthatareidentifiedwiththelicensee,alongwithactionplansandtimetablesfortheircorrection.SupplementaltotheGuidelines,theCentralBankinAugustofthisyearreleased,forconsultativepurposes,aseparateguideline,whichaddressestheroleoftheindependentnon-executivedirectorasitrelatestocorporategovernanceasawhole.

TheCentralBankrecognisesthatINEDsoftenfindthemselvesinadilemma,inthat,eventhoughtheyarelegallyliableinthesamewayasexecutivedirectorsandhavethesamefiduciarydutiestothecompanyaswellasthedutyofskillandcare,theymayattimesfindthemselves

atadisadvantage––lackingthenecessaryinformationtomakequalitycontributionstotheboard.

ApartfromclarifyingtheexpectationsoftheCentralBank,thedraftguidelinesalsospecifyelementsthatconstituteindependence,outlineactivitiesthatINEDsareprohibitedfromperformingbecauseofpotentialconflictofinterest,andidentifyanddiscussissueswhichmayinfluencetheeffectivenessofINEDsontheboard.TheseguidelinesrepresentimportanttoolsintheBank’sarsenalforfulfillingitsmandateofpromotingthesafetyandsoundnessoflicenseesandthefinancialindustryasawhole.

Relations with External Auditors

AfourthareathathasreceivedfocusedattentionbytheCentralBankisthewholeissueofitsrelationshipwithexternalauditors,whichisinitselfvitaltothecorporategovernanceprocess.InSeptember,2006theCentralBankissuedguidelinesontheappointmentofexternalauditorsoflicenseesandtherelationshipbetweentheCentralBankandexternalauditors.Oneoftheobjectiveswastounderscorewaysinwhichtherelationshipbetweenbankauditorsandsupervisorscouldbestrengthenedtotheirmutualadvantage.

Continued on page 6

TheBahamascontinuestobeviewedasaresponsibleandseriousbusinessenvironmentforfinancialservices.

“

SWISS BANKERS SINCE 1873

Values travel through time.

We watch over them.

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6|BAHAMASFINANCIALSERVICESBOARD

The FIU: A Local & International PerspectiveBy ANTHONY M. JOHNSONDirector,FinancialIntelligenceUnit

CONCERNS EXPRESSED BY THE FATFandFSFinJune2000 resultedfromtheperceptionofTheBahamasasa“non-cooperatingjurisdiction”inthefightagainstmoneylaundering,

aswellasperceivedweaknessesinourfinanciallawsandregulatoryframeworkforfinancialservices.TheestablishmentoftheFinancialIntelligenceUnit(the“FIU”)wasoneofmanyfarreachinglegislativeinitiativessubsequentlyimplementedbytheGovernment,inordertomeetthenewregulatoryandAMLstandards.

TheBahamianParliamentapprovedtheFinancialIntelligenceUnitAct,2000(the“Act”)inDecember2000.TheActestablishedtheFIUasanindependent,administrativeagencywithauthorityto:

•ReceivealldisclosuresofinformationmadepursuanttotheProceedsofCrimeAct,includinginformationfromaForeignFinancialIntelligenceUnit(FFIU);

•Orderthefreezingoftransactionsonaccountsforaperiodnotexceeding72hours;

•AttherequestofaForeignFinancialIntelligenceUnitorlawenforcementauthority,includingtheCommissionerofPoliceofTheRoyalBahamasPoliceForce,orderthefreezingofaccounttransactionsforafurtherfivedays;and

•Requiretheproductionofsuchinformation,excludinginformationthesubjectoflegalprofessionalprivilege,thattheFIUconsidersrelevanttofulfillitsfunctions.

Frominception,theFIUwasthefocusofmuchattentionlocallyandinternationally,givenitsfunctionsandthecircumstancesunderwhichitwasestablished.TherewasnoquestionthattheUnithadtoproveitselfcapableofdealingwithitsstatutorymandateaswellaspublicperceptionlocallyandabroad.Inthiscontext,theManagementTeamoftheUnitwascarefully

Continued from page 5

Earlierin2003,theAuditor’sAdvisoryCommittee,comprisingCentralBankrepresentativesandseniormembersoftheauditingprofession,wasformedtoprovideaforumfordiscussiononaccounting,auditingandreportingmatterspertainingtolicensees,andtodayisconsideredtobeakeyresourceintheareaofpolicydevelopment.

Anti-money Laundering

Finally,thethemewhichhasperhapshadthemostsignificantimpactonthearchitectureofbanksupervisionandregulationinthelastsixyearshasbeenthatofanti-moneylaunderingandterroristfinancing.

Astheregulatoryauthorityforbanksandtrustcompanies,theCentralBankhaspursuedastrategysince2000tokeepabreastofinternationalbestpracticesasregardsanti-moneylaunderingandthegrowinglevelofsophisticationbywhichwould-becriminalsseektoinfiltratelegitimatebankingsystems.Inthisregard,theCentralBankembarkedonseveralinitiatives,whichwereprimarilyto:-

•seektoinfluencetheevolutionofinternationalstandardsinthisareathroughparticipationinFATFmeetings

(suchmeetingswouldhaveincludedtheFATFplenaryandreviewgroupmeetingsheldtodiscussrevisionand/ordevelopmentofstandards);

•participateinmeetingsofassessorbodiessuchastheCaribbeanFinancialActionTaskForce;

•enunciateup-to-dateguidelinesforourlicenseesonAMLandterroristfinancing;

•implementacomprehensiveintegratedapproachforoff-siteandon-sitesupervisionoflicenseestobetterfacilitatearisk-basedapproachtoassessthesafetyandsoundnessandAMLcomplianceofourlicensees;

•issueregularanti-terroristwarningstolicensees,requiringthemtorespondtoquestionsastowhethertheyholdorhaveheldaccountsfornamedterroristsuspects;

•issuepublicwarnings(includingaregularlyupdatedpageontheCentralBank’sweb-site)onunauthorizedbanksallegedlyoperatingoutofTheBahamas;and

•articulateandengagethepublicregardingourpolicies,guidelinesanddraftregulations,etc.,inatransparentmannerviaitswebsite.

AML Guidelines

TheCentralBank’sAMLguidelinesforbanksandtrustcompanies,whichwerefinalisedinOctober,2005,incorporateboththemandatoryminimumrequirementsoftheFTRAandindustrybestpractices,andprovideextensiveguidanceonthepropersystemsandprocedurestobeimplementedtosubstantiallyeliminatetheriskofmoneylaunderingandterroristfinancingschemes.Ourlicenseesareexpectedtoadheretotheseguidelinesindevelopingresponsibleproceduressuitabletotheirbusinessinordertopreventmoneylaunderingandterroristfinancing,andtheCentralBankutilizestheseguidelinesinitsassessmentoftheirrespectivesystems.

Conclusion

Theverynatureofthesethemeshighlightsthedynamicandeverchanginglandscapeforbanksupervisionandregulation,andunderscorestheresponsibilitywehaveasregulatorsinamajorinternationalfinancialjurisdictiontotakeabroaderviewofeventsindevelopingourarchitecture.TheprincipalobjectiveofregulationinourjurisdictionistoprotecttheinterestofthosewhodobusinesswithourlicenseesandtoensurethatTheBahamascontinuestobeviewedasaresponsibleandseriousbusinessenvironmentforfinancialservices.Webelievethatwehaveinplacearobustregimeandarecommittedtoenhancingourcapacity,strengtheningourprudentialframeworkandenhancingourproductofferingstoensurethatweremaincompetitive.•Wendy Craigg was appointed Governor and Chairman of the Board of Directors of the Central Bank of The Bahamas on June 1, 2005, having served as Deputy Governor and a member of the Board of Directors, since 10th September, 1997.

Prior to her appointment as Deputy Governor, Mrs. Craigg headed the Research Department of the Bank where she commenced her employment with the Bank on 17th July 1978. A career central banker, Mrs. Craigg has been closely involved in a number of initiatives to enhance the delivery of domestic banking services including the ongoing payments system modernization initiative.

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INDUSTRY REGULATION & SUPERVISION

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|7

selectedandtheUnitcommencedoperatingon29thDecember2000withoutfanfare.TheBahamaswaseventuallyremovedfromthevariouslistsin2001asaresultofthisandvariousotherinitiativestakenbytheGovernment.

Egmont Membership

AttainmentofmembershipintheEgmontGroupofFinancialIntelligenceUnitswasoneofthemanystepstakentoensureacomprehensiveframeworkforthepreventionanddetectionofmoneylaundering.TheEgmontGroupistheinternationalumbrellaorganizationforFIUs.

MembershipinEgmontisanunequivocalstatementbyanyjurisdictiontotheworldofitscommitmenttopreventingtheuseofitsfinancialsystemforthepurposeofmoneylaunderingandfinancingofterrorism.Therearecurrently101countriesandterritorieswithmembershipinEgmont.TheBahamasachievedmembershipintheGroupinJune2001asits54thMember,andhasmaintainedanactiveandfullycompliantmembershipstatuseversince.TheBahamas’statureinthisaugustbodyisindicatedbythefactthatitsubsequentlyandsuccessfullysponsoredtheapplicationsofthemajorityofcountriesintheCaribbeanregionformembershipinEgmont.Further,theDeputyDirectoroftheFIUcurrentlyservesastheViceChairoftheOutreachWorkingGroup,Co-RepresentativeforTheAmericasRegion,MemberoftheEgmontCommitteeaswellastheChairpersonfortheImplementationCommitteeforEgmontastheGrouptransitionstoanInternationalOrganizationby2008.

MembershipinEgmontispredicatedoneachjurisdiction’scommitmenttoupholdingtheEgmontGroup“StatementofPurpose”whichisreinforcedbytheGroups’“PrinciplesforInformationExchangeBetweenFinancialIntelligenceUnitsforMoneyLaunderingandTerrorismFinancingCases.”Inthisregard,TheBahamashasspokenclearly.

Responsibility/Mandate

Goodintelligence,i.e.information,iscriticaltotheworkoftheFIU.Inthisregard,one

oftheFIU’smajorfunctionsisitsroleasthenationalagencytaskedwithreceiving,analyzing,obtaininganddisseminatinginformationwhichrelatestoormayrelatetotheproceedsofoffencesspecifiedintheSecondScheduleoftheProceedsofCrimeAct2000andsubsequentlytheAnti-TerrorismAct2004.

MostSTRsfiledtodatewiththeFIUhavebeenreceivedfromfinancialinstitutions,whichare“suspicious”aboutthepossibleuseoftheirfacilitiesbyclientsformoneylaunderingpurposesorterrorismfinancing.TheSTRiscriticallyprocessedbyatrainedAnalyst,additionalrelevantinformation/documentationisrequested,ifnecessary,fromthereportinginstitutionand/oranyotherentityandafinalreportisprepared,recommendinganyfurtheractionasmayberequired,includingreferralbytheDirectorofareporttotheCommissionerofPoliceforfurtherinvestigation.CloselyrelatedtotheprocessofanalysisistheuseofRestraintOrdersandFreezeOrders,respectively,toinvestigatesuspectedtransactionsoraccounts.TheFIUhasauthorityundersection4oftheActtorestrainafinancialinstitutionfromcompletingatransactionforaperiodofupto72hours.Further,theFIUcanorderafinancialinstitutiontofreezeasuspectedbankaccountorfacilityforanadditionalperiodofuptofivedays.InvokingsuchpowersisadecisionwhichisnottakenlightlybytheDirectoroftheFIU.

AnotherimportantfunctionisthatofregistrationofMoneyLaunderingReportingOfficers(MLRO).TheMLROisthe“official”pointofcontactbetweentheFIUandthefinancialinstitution.Withineachfinancialinstitution,theMLROisultimatelyresponsibleforfilingornotfilinganSTRwiththeFIUanditistheMLROtowhomtheFIUwillsubmitProductionOrdersforadditionalinformationordocumentation.Accordingly,theFIUmaintainsacurrentregisterofMLROsandtheirrespectiveinstitutionsandcloselyreviewsthecredentialsofnewapplicantsforregistration.IfanapplicantlacksrequisitecompetencefortheroleofMLRO,theregistrationwillbedeclined.

TheFIUisalsomandatedtoissue“Guidelines”relatingtosuspicioustransactionsfromtimetotime,toassistfinancialinstitutionsinmaintainingvigilanceaswellasstayingabreastofnewtrendsinmoneylaunderingandterrorismfinancing.TheGuidelinescurrentlyineffectwereissuedin2001andarebeingupdatedtobere-issuedveryshortly.TheGuidelinesareprovidedfreeofcharge.Anti-MoneyLaunderingTrainingforthestaffisanotherserviceprovidedbytheFIUtofinancialinstitutionsfreeofcharge.

Performance To Date

TheFIUisnowintoitssixthyearofoperationandhascomeofage.Todate,ithasrisentoallofthechallengesencountered.Theseincludesecuringadequateoperationalfundingfromthecentralgovernment,establishmentofsoundinternalsystemsandcontrols,recruitmentofcompetentBahamianstaff,gainingtheconfidenceofstakeholdersinfinancialservices,defendingagainstearlylegalchallengestotheuseofitsstatutorypowersandattainmentofmembershipforTheBahamasintheEgmontGroupofFIUs.

Thoughsmallerinsize,theagencyhasgainedtherespectandsupportofalltheotherlocalregulatoryagenciesinvolvedinfinancialservicesaswellaslawenforcementandthevariousgovernmentaldepartments.Likeotherregulators,itisfirmlycommittedtoprotectingthereputationofthejurisdictionbyassistinginkeepingthefinancialservicessectorfreeofdirtymoneyandcriminalelements.Theagencyhasnopolicepowers,especiallyforpurposesofinvestigation,however,referralofcasestothePoliceforfurtherinvestigation,basedontheFIU’sanalysis,isanimportantstepinfollowingthetrailofdirtymoneybacktoitssourceorintendedillicitpurpose.

SupportfortheworkoftheUnitamong“financialinstitutions,”asdefinedintheAct,hasincreasedsinceinception,butdoesnotappeartobeuniform,basedonstatisticalrecordsmaintainedbytheUnit.Over90%oftheSTRsfiledwiththeagencytodatehavecomefromthebankingsector.However,thenumberofSTRsfiledmaynotnecessarilyprovideanaccuratemeasureofthelevelofpublicsupportfortheagency.Giventhesizeofthefinancialservicessector,possiblereasonsforthevariationinthelevelofSTRsfiledmayincludealackofappreciationforthepurposeandworkoftheUnit.ManagementandstaffoftheFIUareawareoftheuniqueroleoftheFIUinfinancialservicesandarecommittedtoensuringthattheUnitfulfillsitmandateeffectivelyandefficiently.

Public Perception

Likelocalregulators,theFIUiscommittedtoservingtheindustryaswellasstrictenforcementoftheprovisionsoftheActandtheRegulations.Serviceandenforcement,however,arenotmutuallyexclusiveundertakingsandmaintainingabalancebetweenbothisanever-presentchallengefortheUnit.

Sofar,theFIUhasattainedhighvisibilitywithintheindustry.

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THE FIU Continued from page 6

Sofar,theFIUhasattainedhighvisibilitywithintheindustry.“

�|BAHAMASFINANCIALSERVICESBOARD

Continued from page 7

Thiswasunavoidable,givenitshandsoninvolvementastheonlynationalagency,otherthanthePolice,fortheprocessingofSTRs,aswellasthepromotionalandothersupportreceivedfromindustrybodiessuchasBahamasAssociationofComplianceOfficers(BACO),TheBahamasFinancialServicesBoard(BFSB)andthevariouslocalregulatoryagencies.

Invariousquarters,consequencesoftheUnit’shighvisibilitytodatehaverangedfromfullsupporttolimitedengagement,thelatterpresumablyborneoutofamisconceptionoftheroleoftheUnit.AddressingsuchmisconceptionmayrequireformulationofcreativesolutionsviaacollectivepartnershipbetweentheFIUandthevariousstakeholdersalreadyaforementioned.

Relationships

ThemanystakeholdersinfinancialservicesmeansthattheFIUmustalwaysbemindfuloftheinterestsandneedsofthejurisdictionaswellasthoseofeachgroupforthepurposeofprovidingadviceandfeedback,formulatingorchangingpolicies,developingtraininginitiativesoreventakingenforcementaction.Aswitheverythingelseinbusiness,effectivemanagementofkeyrelationshipsdirectlyimpactsthe

FIU’sabilitytoperformitsfunctions,notwithstandingitsautonomyandstatutorypowerstoactindependently.Basedonfeedbackreceivedfromthevariousgroupstodate,itisfairtosaythattheUnithasachievedasatisfactoryworkingrelationshipwiththemajorityofplayersinvolvedinfinancialservices.

International Monitoring

GlobalizationhasfurtherservedtounderscoretheimportanceoftheBahamas’FIUasaneffectivevehicleforinternationalcooperationaswellasmaintainingstandards.TheformerisfacilitatedviaestablishedprotocolsbetweenFIUs.Oneimportantfeatureistherequirementthatinformationisheldinaveryconfidentialmannerandusedforanalyticalpurposesonlyandmaynotbepassedtootherarmsofgovernment.SuchprotocolsenabletheFIUtoaccessorshareinformationwithitsforeigncounterpartswithoutdelaysthatmaybeassociatedwithformaldiplomatic/legalchannels,oranyreservationaboutpossiblemisuseofanyofitsinformation.Violationoftheseprotocolsholdsseriousconsequencesforajurisdiction’smembership.Inaddition,theeffectivenessofanFIUwithinitscountryorjurisdictionprovidesinvaluableinsightsaboutthehealthofajurisdiction’sframeworkforprocessingofSuspiciousTransactionsReports(STRs).ThisinformationisimportanttoMutual

EvaluationTeamsconductingformalpeerreviewexercisesoncountriesinagivengeographicalregion.ThesereviewsarecarriedoutundertheauspicesoftheFATFand/orFATFRegionalStyleBodies(FSRBs)inordertoascertainajurisdiction’slevelofcompliancewiththeFATF’sFortyplusNineSpecialRecommendationsonpreventionofMoneyLaunderingandTerrorismFinancing.

Reputation Enhanced Initsrelativelyshorthistory,theFIUhasfulfilledandcontinuestofulfillallaspectsofitsmandate.Intheprocess,ithasmadeapositiveimpactonBahamianfinancialservices,thankstothesupportofallstakeholders.Allindicationsarethatthisagencywillcontinuetoevolveastheindustryevolves,andtheEgmontGrouptakesongreaterprominenceinfinancialservicesglobally.•Mr. Johnson is an experienced Bahamian professional, who has been employed in the banking and trust sector for approximately twenty seven years. He has been associated with financial institutions, both onshore and offshore, in the public and private sectors, at senior and middle managerial levels, in various areas such as credit and marketing, operations, regulatory oversight, compliance, risk management, money laundering prevention and corporate secretarial.

THE OFFICE OF THE REGISTRARofInsuranceCompaniesispoisedtoactontheframeworkestablishedbyTheGovernmentonreformsneededforthelocalinsuranceindustry.TheDomesticInsuranceActrecentlywaspassedthroughParliament,andnowisawaitingenactmentintolaw.ThenewActcontainsprovisionsformovingtheregulationofinsurancebusinessinTheBahamasintothetwenty-firstcentury.

StandardsonwhichtheActisbasedareCorePrinciplesoftheInternationalAssociationofInsuranceSupervisors,thesisterorganizationoftheBasleCommitteeforbanks,andtheInternationalOrganisationofSecuritiesCommissions(IOSCO)forsecurities.

ItistheintentionofTheOfficeoftheRegistrarofInsurancetoworkalongwiththeindustrytoraisethestandardsofcorporategovernance,internalcontrols,andprofessionalism.

TheproposednewExternalInsuranceActandRegulationsarenowwithCabinet.Whenpassed,theywillprovideacompetitivelegislativeframeworkwhichwouldreinforcethisjurisdictionasafirst-ratedestinationforcaptiveinsurance.•

The Insurance IndustryBy ROGER BROWNRegistrarofInsurance

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|�

THE BAHAMAS ADOPTED ENHANCED enforcementasitsfocusforsecuritiesregulationin2006.Thiswasinkeepingwiththeinternationalthrusttoeffectivelymanage

therepercussionsoftheincreasinglyglobalnatureofcapitalmarkets,coupledwithitscommitmenttoensuringtheintegrityofthefinancialservicesindustryandthatitisoperatingatacceptableinternationalstandards.

Inthiscontext,theSecuritiesCommissionofTheBahamas(theCommission)hasunderactiveconsiderationtherequirementstobecomeasignatorytotheIOSCOMultilateralMemorandumofUnderstandingonConsultation,CooperationandExchangeofInformationinadvanceofthedeadlineofJanuary1,2010.Astechnologyenablesmarketstotranscendnationalboundaries,regulatorsarecompelledtoequipthemselveswiththestrategiesandtoolstoforestallandminimizecross-bordermarketabuse,anditsby-productsofmoneylaunderingandthefinancingofterrorism.

Onthelocalside,theDisciplinaryCommitteeestablishedpursuanttoSection34(3)oftheSecuritiesIndustryAct,1999,beganfunctioning.ThisCommitteeprovidesfortheexaminationofallegedbreachesofsecuritieslegislation,includingmarketabuse.Givenitsmandate,thisCommitteeconstitutesanimportantweaponintheCommission’sregulatoryarsenalasitallowstheCommissiontopursuesanctionsandotherdisciplinarymeasuresagainstregistrantswhomayhavecontravenedprovisionsinoursecuritieslaws.

TheCommissioniscurrentlydraftingnewsecuritieslegislationtoreplacetheexistingSecuritiesIndustryAct,1999.Inadditiontocreatingamorecomprehensiveregulatoryregime,thedraftlegislationalsoprovidesforenhancementofthedisciplinaryauthorityoftheCommission.TheCommissionissatisfiedthatenforcementisaneffectivedeterrenttomarketabuse.

Enforcementbolstersgoodregulationwhichisessentialtovibrantcapitalmarkets.

Withregardstomarketactivity,thetotalnumberofBahamas-basedinvestmentfundsgrewonlymarginallyovertheninemonthperiodended30September,2006–from749to760orsome1.5%.Thevalueofthesefundsincreasedby7.2%orUS$12.76billiontoatotalof$190.69billion,duringthesameperiod.ThisfigureisexpectedtoreachtheUS$200billionlevelbytheendoftheyear.

Thenumberofregisteredmarketparticipantsshowedlittlechangeduringthefirstninemonthsof2006.Investmentfundadministratorsincreasedfrom59to60,broker-dealersincreasedfrom65to67,andsecuritiesinvestmentadvisorsfrom40to43.

Goingforward,theCommissionwillkeepasapriorityafocusonevolvinginternationalstandardsforsecuritiesregulationinordertoensurethattheirimpactonthegrowthanddevelopmentofTheBahamasispositive,contributingtothemaintenanceofourpositionasaleadinginternationalfinancecentre.•

The Securities IndustryBy HILLARY DEVEAUX,SecuritiesCommissionofTheBahamas

ThefollowingaretherecipientsofBFSB’s2006ExcellenceAwards.

EXECUTIVEOFTHEYEARPAUL J.I. MCWEENEY

A25-yearveteranofthebankingindustrywithexperienceininternationalmarketsandinhisnativeBahamas,Mr.McWeeneybecametheyoungestManagingDirectorofaClearingBankinTheBahamaswhen

hewasnamedtothatpostatBankofTheBahamasInternational(BOBI)in2000attheageof39.Inthenearlysevenyearssince,hehasguidedtheBanktoadramaticincrease

inprofitabilityandmadeitaleaderintheprovisionoffinancialservicesforBahamians.Hisfinancialservicescareerbeganin1981withChaseManhattanBankN.A.,whereherosetothepostofSecondVicePresidentfollowingpostingsinseveralinternationalbranches.HejoinedBankofTheBahamas,stillinitsinfancy,asSeniorCreditManagerin1993,andwaspromotedtoDeputyManagingDirectorin1996.Fouryearslater,hebecameManagingDirector.

Underhisdirection,theBOBIhasenjoyedphenomenalgrowth,settingrecordsandestablishinganumberoffirsts.Assetshaveclimbedsteadilyfrom$279milliontonearly$600million.Intwoshareofferings,onepreferred,onecommon,hebroadenedownershipandhelpedraisecapitaltosustaingrowth.Mr.McWeeneyisImmediatePastChairmanoftheClearingBanksAssociationaswellasImmediatePastPresidentoftheBahamasInstituteofFinancialServices.HeisalsoChairmanoftheNationalPaymentsCouncil,amemberoftheGovernment’s

FinancialServicesConsultativeForum,theBlueRibbonCommissiononNationalHealthInsurance,theSteeringCommitteeonGovernment’sOnlineInitiative,andtheBusinessImprovementDistrictCommittee,andonMFSI’sBrandingCommittee.CivicPositionsincludethechairmanshipofSt.Augustine’sCollegeandmembershipintheYoungPresident’sOrganisation.HealsoservesasHonoraryConsuloftheDominicanRepublic,DiplomaticCorps.

Hisvisionhaswoninternationalrecognitionforthebank–andforTheBahamas.In2005,BankofTheBahamasbecamethefirstbankinthiscountry’shistorytowintheprestigiousBrackenAward,presentedbyTheBanker,amemberoftheFinancialTimesGroup.In2006,BankofTheBahamasbecamethefirstBahamianbanktowinasimilarcountrybankoftheyearawardpresentedbyEuromoneymagazine.Alsothisyear,PaulMcWeeneywasnamedBankeroftheYearbyJonesCommunicationandtheToastmastersClub1600.•

INDUSTRYSNAPSHOTPEOPLE POWER

INDUSTRY REGULATION & SUPERVISION

TheCommissionissatisfiedthatenforcementisaneffectivedeterrenttomarketabuse.

“

�0|BAHAMASFINANCIALSERVICESBOARD

PROFESSIONALOFTHEYEARLISA DENISE GIBSON, TEP

CurrentlyservingasComplianceManagerforAnsbacher(Bahamas)Limited,LisaGibsonhasresponsibilityforensuringthatproceduresareinplacetoenablebusinessunits

tocomplywithcurrentlegislationandregulations.ShemonitorscompliancewithsuchproceduresandproducesregularreportstoHeadOfficeinLondonandtotheBoardofDirectors.AlsoservingasAnsbacher’sMoneyLaunderingandReportingOfficer(MLRO),shehasoversightforallanti-moneylaunderingactivitiesandisthekeypersonintheBankfortheimplementationofrelatedstrategiesandpolicies.Previousemploymenthasincludedaccountingandconsultancy

servicesforfamily-ownedbusinessesaswellasSeniorAuditManagerwithPricewaterhouseCoopers.

LisaGibsonjoinedAnsbacher(Bahamas)Limitedin2001asClientAccountingManager,inchargeofclientfinancialstatements.WhenthepositionofComplianceManagerbecameavailablein2005,shejumpedattheopportunitytoexperienceamorechallengingareaintheBank.Forafewmonths,sheperformeddutiesinbothcapacities,untilAnsbacherfinaliseditschoiceforherreplacementintheClientAccountingManagerposition.Thiswasachallenge–tolearnhernewroleandtocontinuewithherpreviousresponsibilities,butshedemonstratedcompleteprofessionalism,increasingherworkhourstoaccomplishassignedtasks.Heremployersdescribeherasadiligent,industriousemployeewhotakesonanychallengegiventoher,andperformsatthehighestlevel,eveniftasksareoutsideofherassignedresponsibilities.Thishasbeen

demonstratedonnumerousoccasionswhenshehasbeenrequiredtotakeonmultipleroles,coveringforstaffoutonstudyleaveasanexample.Sheisanoutstandingprofessionalwhoiscreditedwithassumingaleadershiproleinanycircumstance;althoughparticularlydemonstratedinherfieldofcompliance,Ms.Gibson’scolleaguessaythatherknowledge,confidence,researchcapabilitiesandanalyticalskillsallprovidealeveloftrustinherstrongjudgementonnon-complianceissuesaswell.Ms.GibsonrecentlycompletedtheInternationalAnti-MoneyLaunderingandComplianceDiploma(withMerit)andisoneexamawayfromcompletingherBachelorsinLaw(LLB).ShehasbeenaCertifiedPublicAccountantsince1989.Thisyear,sheobtainedherTrustandEstatePractitionersdesignationfromtheSocietyofTrustandEstatePractitionersbywayoftheExperiencedPractitionersroute.InadditiontoSTEP,shealsoisamemberoftheBahamasInstituteofCharteredAccountantsandtheBahamasAssociationofComplianceOfficers.•

ACHIEVEROFTHEYEARGERMAINE E. SIMMONS-DEAN

Ms.Simmons-DeanisaSeniorAssistantClientAdvisoratUBS(Bahamas)Limited,andhasbeenworkingwiththeEuropeanDeskforthepast5years.AsaSeniorAssistant,sheco-

managesclientportfolios;processespaymentandsecurityordersandconfirmationsandclientstatements;andmaintainstheclientdatabase.Additionally,herresponsibilitiesincludepreparationforclientvisitsandmeetings;proposals(e.g.bonds);accountopenings;orderdealings(e.g.foreignexchange,moneymarkets,deliveries/receipts,FTD&Buy/Sellorders);andKYCupdating.AspartoftheITprojectteam,she

participatesinconductingtestingonbehalfoftheWealthManagementdepartment.

Describedasadedicated,hard-workingemployeewhodeliversevenwhenunderextremepressure,sheisalwaysfocusedandkeenonprofessionaldevelopment.Heremployerssaysheisanexcellentteamplayerwhoishappytoshareknow-howandknowledgewithothers;inthisconnectionshehasbecomethefirstpointofcontactfornewteammembers.

SincejoiningUBS,shehasdemonstratedgreatloyaltytowardsthecompanyandwasacriticalemployeeforherdepartmentduringaperiodwhenitlostkeystafftocompetitors.Sheiscreditedwithacapacityforlearningfromsetbacksandturningtheseintopositiveaction.Exhibitingtopprofessionalbehavior,Ms.Simmons-Deanisextremelyclientfocusedwithasoundunderstanding

oftheclientneeds.Veryknowledgeableonregulations,shestrivestounderstandcomplexissuestothelastdetail,andhasprovidedcross-functionalsupporttootherareaswhenneeded,aswellastotheCEOandSeniorManagement.

Sheisanactivememberofthefirm’sHighPotentialPool,andhasdisplayedinterestinotherculturesandworkingpractices,withparticularhighinterestinemploymentdiversity.UBShasadvisedthatshewillbecomeanInternationalAssigneeona2-yearsecondmentinSwitzerlandinearly2007.ShehasaBAinInformationSystemsAdministrationandhascompletedvarioussector-relevanttrainingprogrammes,includingtheSeries7,andtheIntroductiontoMutualFundsandQualityCustomerServicecourses.SheisamemberoftheInternationalAssociationforAdministrativeProfessionals(IAAP).•

FIN.SERVICESSTUDENTOFTHEYEARAISHA MELVINA JOHNSON

AgraduateofC.R.WalkerSeniorHigh,whereshecontinuouslyattainedthePrincipalsListdistinction,Aishaalsowasrecognizedduringhersecondarylevelschoolyearsforhelpingstudentswho

wereconsideredunderachievers.SheservedasaStudyHallTutorfor4years.WhileatC.R.Walker,shealsowasontheStudentCouncil,a1998Debutante,1998ClassValedictorianand1998HeadGirl.HeracademicachievementsincludedHonourable

MentionforOutstandingBGCSEresultsandshereceived9outof12ClassAwardsatGraduation.Duringherschoolyears,AishaalsoparticipatedinnumerousactivitiesincludingtheAlphaKappaAlphaconferenceforyoungwomen,andtheCollegeoftheBahamasConferenceofYouthLeaders.

AishaearnedearlyacceptanceintotheCollegeoftheBahamas,andalsoreceivedtheApprenticeshipScholarshipofCreditSuisse(Bahamas),whichallowedhertoattainherAssociatesofArtsdegreeinBanking-withcredit-whileworkingparttimetogainexperience.Atthecompletionoftheapprenticeshipprogram,AishaworkedfulltimewithCreditSuisseforayearbeforeenrollingintheBachelorofArtsProgram

inBankingandFinanceatCOB.Whilecontinuingtoworkfulltime,shecompletedthisdegree,andgraduatedintheSpring,2006.BetweenApril-June,2006sheworkedwithCreditSuisse-Zurich,obtainingexposuretobackofficefunctionsandaccountmanagement.AishahascompletedtheSeries7courseandplanstotaketheSeries7examsabroadtobecomeinternationallycertified.ShealsoplanstostudytowardstheCFAdesignation.

ShecurrentlyisaSeniorSecuritiesExecutoratCreditSuisse(Bahamas)Ltd.Heremployersdescribeheras“havingsharporganizationalskillsandtheabilitytomultitaskverywell,”andas“demonstratinganambitionforexcellence”.•

INDUSTRY SNAPSHOT - PEOPLE POWER

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|��

FSIDEVELOPMENT&PROMOTIONAWARDBANK OF THE BAHMAS

This young and progressive institution bornin 1988 has advanced financial servicesfor individuals and for institutions, and hasbroughtprestigioushonour toTheBahamasfinancialservicessectorthroughback-to-backawardsforCountryBankoftheYearfromTheBanker,2005-2006,andEuromoney,2006.No Bahamian bank had ever won either ofthosecovetedawardsbefore.

NoBahamiancommercialbankhadeverofferedtrustservicesforBahamiansbeforeBankofTheBahamasrecognisedtheneedandlauncheditstrustsubsidiaryintheyear2000.NobankhadissuedVISApre-paidandgiftcards;norofferedthree-dayclearanceofUSdollardeposits;norchequeimagingaspartofitsonlinebankingproduct;nordreamedofopeningabranchinSouthFloridatoservetheneedsofBahamianswhodobusinessthereeverydayoftheyear.Thislastmovealone,nearlyfiveyearsfrominitialapprovalinprincipletowhatisexpectedtobetheopeningdateinearly2007,causedare-writeofregulatorylaws,pavingthewayforotherfinancialinstitutionstofollowitsleadandmakingconductingbusinessabroadeasierforall.TheexplanationoftheBank’ssuccesscanbesummedupintheonewordtitleofits2006AnnualReport:Innovate.From“outofthebox”thinkingto“overthetop”training,fromamulti-milliondollarinvestmentinsophisticatedsoftwarethatisallowingittore-trainandre-positionstaffformoremeaningfulcareers,BankofTheBahamashasdemonstratedthebenefitsofinnovationinfinancialservices.

Highlightsthatreflectsectordevelopmentinclude:

•Conductingthefirstmajormortgagefair,involvingpartnersinrealestate,insurance,furnitureandotherhomeownerneedsandgeneratingthousandsofmortgageapplicationrequests,2004;

•Writingmoremortgagesleadingtomorebroad-basedhomeownershipthananyotherbankinTheBahamas,2005;

•IPOandtworightsofferings,onepreferredshares,onecommon,tobroadenshareholderbase;

•Steadilyincreasingshareholdervaluewithequityincreasingfrom$19millionin2000to$95millionin2006;

•CreatingBusinessDevelopmentDepartmentratherthantraditionalmarketingdivision;

•Recognisingthatpartnershipsempower(BTC,Mt.Tabor,MailBoxes,Etc.);

•Introductionofprivatebankingservicesscheduledforlate2006.

Despiteitsyouthandrelativelysmallsize,BankofTheBahamasreachedoutintheaftermathofHurricanesFrancesandJeanneinTheBahamasandKatrinaintheU.S.,leadingatelethonfund-raisingdrive,anddonatingover$100,000tohurricanereliefeffortsinoneyear.

Froma2%marketshareonlyafewyearsagoto8%today,from$279millioninassetstonearly$600millionsixyearslater,BankofTheBahamashasdemonstratedthatcaringaboutcommunity,nurturingstaff,growingthroughteamworkandmeetingcustomerneeds–evenbeforetheyarerecognisedbycustomersthemselves-helpnotjustthebusinessofoneinstitution,butthegrowthofthesectoritself.•

MINISTER’SAWARDPHILIP STUBBS

Since2002,theMinisterofFinancialServicesandInvestmentshaspresentedthisawardaspartoftheFinancialServicesIndustryExcellenceAwardsprogramme,recognisingstellar

performancewithintheindustry.The2006RecipientwasMr.PhilipStubbs,ManagingPartnerofErnst&Young.Inannouncinghisselection,theMinisterdescribedMr.StubbsassomeonewhohashelpedtoensurethatthefinancialservicessectorinTheBahamasremainsstrongandthatitcontinuestogrowanddevelop.“Heisanencouragingmentortothoseyoungerpersonsenteringintotheaccountingprofession,exemplifyingthevaluescelebratedbythisawardandisafittingexampleofthespiritofcommitmenttoexcellenceforthissector,”saidtheMinister.Mr.StubbsattendedtheGovernmentHighSchoolandtheAtlanticProvincesAssociationofCharteredAccountants,Halifax,NovaScotia.HeisamemberoftheExecutiveBoardofErnst&YoungBahamas-Bermuda-CaymanAreaPracticeswithover35yearsofexperienceinaccounting,auditingandbusinessadvisoryservices.

Mr.StubbsisamemberofboththeCanadianandBahamasInstituteofCharteredAccountantsandhasservedonvariousInstituteCommitteesaswellasservinginthepastasCouncilmember,treasurerandsecretary.HeisamemberoftheKiwanisOver-the-HillClubandwasPresidentofthatorganisationfrom1982to1983.HealsoservedasLieutenant-GovernorofMeritforKiwanisClubsinTheBahamasfrom1986to1987.Mr.StubbsisTreasurerandanExecutiveBoardMemberoftheChildren’sEmergencyHostel,andamemberofthePublicDisclosureCommission.•

FCF Board Committee, comprising sub groups of Careers Fest, FSI Student of the Year, and Industry Awards. L-R: Wendy Warren (BFSB); Suzanne Black (FCF Board); Cyprianna L. Bethel (FSI Student); Errolee Conliffe (Careers Fest- MFSI); Robin Hardy (Careers Fest); Joan Pinder (FSI Student); Kim Bodie (Industry Awards); Nadine Frazer (FSI Student); Dexter Fernander (Careers Fest-MOF); Anastacia Johnson (Industry Awards); Michaela Theophilus (Industry Awards); and Catherine Gibson (FCF Board).

�2|BAHAMASFINANCIALSERVICESBOARD

DURING THE FIFTEEN YEARS beforetheburstofthestockmarketbubblein2000,relativeinvestingbecametheundisputabledogmaandwasconsideredtheonlyrational

waytomanagemoney.Privatebanksthatfollowedthelesstroddenpathofabsolutereturnwereconsideredarelicfromthepastandunfittomanage“serious”money.Theheavylossesincurredbypassivemanagersduringthe2000-2003periodandpublicinterestbroughtbytheNobelprizeawardedtoworksonbehaviouralfinancehavebroughtagreaterawarenessofrealinvestors’needsandareturninfavourofabsolutereturn.

The Benchmark

TheModernPortfolioTheorydevelopedbyHarryMarkowitzin1952andFana’sEfficientMarketsHypothesisgainedacceptancewiththepublic.AcademictheorieshavegoneoutofUniversitycampusestobecomestandardinvestmentpracticewithmostassetmanagers.Indeed,underpressurefrominstitutionalinvestorsandpensionfundswantingamorequantitativeapproachtoassetmanagementthatwouldprovideinvestorswiththecomfortofobjectivityandturninvestmentintoascience,investmentprofessionalsduringthemideightiesbeganadoptinginvestmentmodelsbasedonrelativeperformance.

Anumberofstudiestendtoshowthatmostassetmanagersareunabletobeattheirrelevantmarketindex(forinstancetheS&P500indexforaUSequitiesmanager)overthelongtermandasaresultindiceshavebecometheultimateperformancebenchmark.Indexedfundssimplyaimtoreproduceindexweightings,thereforeobtainingsimilarperformance,whileeventhemostactivemanagersdefinetheirinvestmentobjectiveintermsofoutperformanceinrelationtotheindex.

Basedonfiguresandstatistics,therelativeapproachappearsreassuringthankstoitsapparentobjectivity.Ithasbeenadoptedatlighteningspeedbybanksthathavewidelyappliedittotheirinstitutionalclients.

Later,andinordertoharmoniseandrationalisetheirinvestmentprocesses,banksextendedthisapproachtoinvestmentfundsandprivateclients,unawarethattheywere

creatingamajormisunderstandingwiththeirinvestors.

Diverging objectives

Withrelativeassetmanagement,successismeasuredintermsofunder-orover-performanceinrelationtothe/abenchmark.Resultsaredeemedsatisfactoryiftheyaresuperiortothebenchmark,regardlessofwhethertheyarepositiveornot.Everyinvestmentdecisionistakenrelativelytothemarket,intermsofunder-oroverweightingand,fortheassetmanager,therisk-freepositionistobeinvestedinexactlythesamewayastheindex.ThisisakeyelementasitestablishesadivergenceofinterestswiththeinvestoronwhichIwillelaborate.

Asfarasprivatebankingisconcerned,thisnewapproachhasrockedcenturiesoftradition.Relationshipmanagershavestruggledtoexplaintotheirclientsthereasonsforsuchachange,accustomedastheyweretogivingprioritytocapitalpreservationandatraditionalabsoluteperformanceobjective.Confrontedwiththeapparentirrefutabilityofthemathematicaldemonstrations,clientsfinallyconvertedtothedemandsofthisnewthoughtpolice,withoutalwaysbeingentirelyconvinced.Unfortunately,ifthedivergenceofobjectiveswasnotclearwhenmarketswererising,theywereevidentwhenthestockmarketcollapsedin2000.

Followingthemostrecentandoneofthelongestanddeepeststockmarketfalls,institutionalandprivateinvestorswererapidlyforcedintotherealisationthattheirobjectiveswerenotrelativebutratherabsolute.Whilsttheassetmanagermightbesatisfiedwithonlylosing28%againstthe30%falloftheindex,thiscertainlywasuntruefortheinvestorforwhombeatingthebenchmarkwasnotagreatcomfort.Afterall,attheendoftheday,theinvestor’sbottomlineisalwaysindollars,francsoreurosandnotinpercentagesofanintangibleindex.AsWarrenBuffetverytrulysaid:“Youcannoteatarelativesandwich”.

Thedisappointmentsurroundingrelativeinvestingoccurredwithinstitutionalclientsthathadrequestedachangeintheinvestmentphilosophyfromthebeginning.Insurancecompaniesandpensionfundsquicklylearntthattheirliabilitieswerealsoabsolute,sincetheyareobligedtopayoutpensionsandinsuranceclaimsindollars,eurosorfrancs.Themannerinwhichtheyaretomanagetheirassetshastomatchtheirliabilities.

Adapt the bank to the client rather than the opposite

Inourview,themainexplanatoryfactorforthisdisappointmentcanonlybebasedonthefactthatrelativeinvestingremainsatheoreticalconstructionthatmightwellbeappealingforitsapparentobjectivityandacademicbackingbutitjustdoesnotmeetinvestors’realexpectations.Inotherwords,becauserelativeinvestingmighthaveanumberofadvantagesforthefundmanager,it’sjustnotwhattheinvestorneeds.

Oftenenough,financialindustrieshavetendedtoimplementinvestmentprocessesbasedonorganisationalorrationalisationreasons,ratherthanhavethemcorrespondtoclients’needs.Thebetterapproachcouldbepreciselytheopposite:banksshouldonlyimplementtheirinvestmentstrategyafterhavingtrulyunderstoodtheirclients’investmentneeds.Inouropinion,banksshouldadoptagoalofabsoluteperformancesimplybecauseitcorrespondstoinvestors’realexpectationsbecauseofthepriorityitputsoncapitalpreservation.

Inordertoachievethisgoal,thereissadlynomathematicaldemonstration,nosure-hitformula,butratheracombinationofinvestmentcommonsense,constantmonitoring,talent,andanumberofguidelines:

1.Clarifytheobjective.Thefirstandforemostruleissimplytosetthepropercoursebeforeleavingharbour.Inotherwords,theclient’sobjectiveshavetobeclearlydefinedbeforeevenbeginningthemanagementofaportfolio.Iftheobjectiveisabsolutereturn,thentherisk-freepositioniscashandcannotbetheindex.

2.Aligninterests.Toensurethatallinterestsarefullyaligned,managersshouldbeappraisedandrewardedinrelativelytothisobjective.

3.Minimiselossesandcontrolvolatility.Thismightseemobvious,butthebestwaytowinisfirsttoavoidlossofcapital.Inordertoachievethis,itisimportanttoutiliseextensivelyhedgingtechniquesandriskmanagement.Italsomeansthat,althoughlong-termobjectivesareimportant,short-termmovementsarealsoimportant.Afterall,asquotedbyKeynes:“Inthelongterm,wearealldead”.

Continued on page 13

Absolute Return: Back to the roots of Private BankingBy MIGUEL GONZALEZ,ManagingDirector,SYZ&COBank&TrustLtd.

JURISDICTIONAL DEVELOPMENTS

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|��

Continued from page 12

4.Adoptanactiveandnon-indexedstyle.Ifamanagerthinksthemarketisgoingtodrop,thenheshouldactaccordingly.Mostassetmanagersareimposedstrictinvestmentguidelinesthatobligethemtobe100%investedatalltimesorthatrequirelowtrackingerrors.Whilethisensuresthattheperformancewillnotdiffertoomuchfromtheindex,itactuallypreventsanyprotectionofcapitalwhenmarketsfall,asmanagerscannotselltheassetsandplacethemincashpositions.Ofcourse,anactivestyleisnotaguaranteeagainstwrongdecisions.Butifaclientweretoexcuseerrors,hewillfrownonalackofaction.

5.Usealternativeproducts(or“hedgefunds”)orstructuredproducts,whichallhaveabsolutereturnobjectives.Conventionalinvestmentmethodscanonlyyieldprofitswhenmarketsrise.Alternativefunds,however,candeliverpositiveresultsevenwhenmarketsstagnateorfall,throughavarietyofstrategiesthatincludeshortsellingandarbitragetechniques.Structuredproductsallowupsideexposuretofinancialmarketswithoutdownsiderisk.

Easier said than done: Obviously,suchaninvestmentphilosophyismoredifficultanddemandingfortheassetmanager.Indeed,ratherthanmathematicalformulaeitcanonlyrelyontalent,averylimitedcurrency.Moreover,itsuffersfromasizeconstraint:activeassetmanagement,hedgefundsinvestingandhedgingtechniquesarealltrickiertoimplementinlargeamounts,duetoliquidityproblems.Thisiswhyhedgefundstendtocloseaccessoncethey’vereachedacertainsize.Inthiscase,andcontrarytobelief,smallcanbebeautiful.

Althoughmoredifficult,sucha“humanist”approachisclearlythewayofthefutureasitistheonlywaytosatisfyinvestors’needs.Insertingthehumanfactoratthenucleusofthefinancialequationisthebasisofanewfieldinacademicresearch:theso-called“behaviouralfinance”,whichrecentlycameunderthespotlightwiththeNobelEconomyprizeawardedin2002toKahnemanandSmithfortheirworkinthisfield.Adoptinganabsolutereturnmodelbynomeanimpliesgoingbacktotheold-fashionedprivatebankingofyesteryear,butsimplytoputthehigh-techtoolsandtechniquesavailabletodayattheserviceofarealisticobjectiveandtoplaceinvestorsbackwheretheybelong:rightatthecentreofabank’sattention.•

Miguel Gonzalez is the Managing Director of SYZ & Co. Bank & Trust Ltd. and is Head of Client Relationship and Investment Management. After graduating in Economics and Law from the University of Geneva in Switzerland, Miguel Gonzalez began his career with CGBC S.A., now Fortis Banque (Suisse) S.A. in Geneva as Client Relationship Manager. Between 1997 and 2001, he worked at Pictet Bank & Trust Ltd. as Vice President before joining the Swiss banking group SYZ & Co. in 2001.

Founded in 1996 by Eric Syz, Alfredo Piacentini and Paolo Luban, SYZ & Co. has, in just a few years, built a reputation as a highly respected asset management specialist in Switzerland. SYZ & Co. offers a new approach to asset management based on investment performance combined with personalized service. While benefiting from all the resources of the SYZ & Co. Group, SYZ & Co. Bank & Trust Ltd. is an independent legal entity from the Swiss-based bank. In addition to the Bank’s headquarters in Geneva, the Group also has offices in Switzerland in Zurich, Lugano, Locarno, as well as abroad in Milan, London, Luxembourg, Salzburg and Nassau.

BFSB 2004-2006 Directors: Front Row: Ken Brathwaite, Paul Winder, Michael Paton, Wendy Warren, Suzanne Black, Sean Longley; Back Row: Christian Coquoz, Andrew Law, Bruno Roberts, David Sussman, Alyson Yule, David Thain.

�4|BAHAMASFINANCIALSERVICESBOARD

THE BFSB INTERVIEWBFSB interviews Linda G. Williams, Manager, Private Banking at CIBC Trust, whose company has formed more Foundations than any other service provider in The BahamasBFSB: What is the process for setting up a Foundation here in The Bahamas?

Linda Williams:The‘practical’sideofestablishingandadministeringaFoundationcanbeaverysimpleprocessandissimilartothatofaninternationalbusinesscompany(IBC).TheFoundationCharterorArticles,whichgovernstheadministrationoftheFoundation,canbetailoredtosuittheClient’sneeds,beitestateortaxplanning,confidentialityorcharitablepurposes.Thisdocumentcanbeassimpleorascomplicatedasdesired.OncetherelevantdocumentshavebeenfiledwiththeRegistrarGeneral,aCertificateofRegistrationwillbeissued.

BFSB: Why do your clients find the Bahamian Foundations attractive?

LW: WehavefoundthatourClientsfindthebenefitsandflexibilityoffoundationsquiteattractiveasitallowsthemtohavemorecontrolinthemanagementofthefoundation.TheFounder(whomaybetheClient)mayprovidetotheFoundationCouncilwritteninstructionsforthemanagementofandthedispositionofthefoundation’sassets.TheFounderorpersonappointedalsohastheauthoritytodirectinvestments,makedistributionsetc.withoutpriorapprovalfromatrustee.InmostcasesoneormoreIBCs(whichareplacedunderthefoundation)areusedtoholdtheassets,whichprovidesevenmoreflexibilityinadministration.

SomeClientsmaynotliketheideaofgivingupownershiporcontroloftheirassets,sothefoundationisaviablealternativetotrustswiththesamebenefits.Clientsarealsopleasedwiththereducedtimeintheexecutionoftheirrequestsastheydonothavetowaitforthetrusteecommitteetodeliberate.

BFSB: Are there many applications for the use of Foundations?

LW:Wecurrentlymanageanumberoffoundationsthatwereestablishedfor:-

•estateplanning/forcedheirshipissues•charitablepurposes•toholdthesharesofoperatingcompanies

WealsohaveaclientwhohasafoundationinPanamaandwhoisnowconsideringhavingitredomiciledherewhichwebelievecanbedonequiteeasilyinordertohavea‘onestopshop’.

BFSB: Can you provide some more details on the Foundation Council?

LW: Sections14and40ofthelegislationdealwiththis.TheFoundationCouncilmayconsistoftwoormorenaturalpersonsoralegalpersonandoneormorenaturalpersonsoralegalpersonbyitself.TheFoundationCouncilmustconsentinwritingtoactassuch.

OnememberoftheFoundationCouncilmaycallameetingoftheCouncil,whichrequiressevendays’noticeinwritingtotheFounderandeverymemberoftheFoundationCouncil.

BFSB: What are the major points to be considered when establishing and administering a Bahamian Foundation?

LW:Listedbelowaresomeoftheconsiderations(notexhaustive):

•AFoundation’sregisteredofficeinthe

BahamasshallbetheaddressoftheSecretarytotheFoundation,towhichallcommunicationsandnoticesmaybeaddressed.(13)(1)

•AnappointedSecretarytotheFoundationshouldconsentinwriting(12(2)(b)

•EveryFoundationmustholdatleastonemeetingoftheOfficersasitsAnnualMeetinginadditiontoanyothers(35)(1)

•SevendaysNoticeandAgendashouldbesenttotheFounder,membersoftheFoundationCouncilandanyothersupervisoryperson.(35)(2)

•MinutesorcopiesoftheminutesofproceedingsofanymeetingoftheofficersofaFoundationshallbekeptattheregisteredofficeoftheFoundation.(39)(1)

•ABeneficiarywhohasaninterestinaFoundation’sassetsshallbenotifiedinwritingbytheOfficersofhisinterest(41)(1)

TheOfficersofaFoundationshall(unlesswaivedinwritingbytheFoundationCouncilorothersupervisoryperson)everyyearatameetinglaybeforetheFoundationastatementofaccountsalongwithareportbytheOfficerswithrespecttothestateoftheFoundation’saffairsinrelationtotheachievementoftheobjectivesoftheFoundation.(43)(1)(2)Editors Note:

ThepassageofFoundationslegislationwasconsideredamilestoneforthefinancialservicessectorbecauseTheBahamasbecamethefirstcommonlawjurisdictionwithlegalprovisionforfoundations.GovernmentandtheprivatesectoridentifiedthenewproductasanimportantcomponentoftheoverallstrategyforthedevelopmentofthesectorinTheBahamas.

FoundationsrepresentanexpansionofTheBahamas’capabilitytoserviceanewclientbaseandthejurisdiction’scommitmenttoremainrelevanttonewandpotentialclientsdomiciledincivillawcountries.

InitiativessuchasthiskeepTheBahamasattheforefrontofprivatewealthmanagement,notonlyinthe“international”world,butinfinancialcentresgenerally.•

Linda G. Williams is employed with CIBC Trust Company (Bahamas) Limited and currently holds the position of Manager, Private Banking. She is a member of STEP and an ACIB. CIBC Trust is a subsidiary of Canadian Imperial Bank of Commerce, a major Canadian Bank.

Clientsarealsopleasedwiththereducedtimeintheexecutionoftheirrequestsastheydonothavetowaitforthetrusteecommitteetodeliberate.

“

JURISDICTIONAL DEVELOPMENTS - FOUNDATIONS

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|�5

THE FOUNDATIONS ACT 2004(the“Act”)cameintoforceinTheBahamasonOctober22nd,2004.TheActprovidesforthecreationofaprivatefoundation

inTheBahamas.Foundationshavetheiroriginsincivillawcountries,wheretheChurchwasa“DivineFoundation”andhadthelegalcapacitytomanageassetswithwhichitwasendowed.Thesepublicfoundationswerenon-profitcharitableorganizationscreatedbyindividualsforthebenefitofsocietyasawhole.

In1926,LiechtensteincreatedtheFamilyFoundationbytheLawofPersonsandCompanies.FamilyFoundations,unlikepublicfoundations,weredesignedforthepersonalbenefitofmembersofoneormorefamilies.BasedontheFamilyFoundation,in1995(LawNo.251995)thegovernmentofPanamadevelopedthePanamaPrivateInterestFoundation,andalthoughthePanamaPrivateInterestFoundationservedasaconceptualmodelfortheprivatefoundationinTheBahamas,theBahamianfoundationlawismoredetailed.

What is a Foundation?

TheActdefinesaprivatefoundation(the“Foundation”)asanentityestablishedbyafoundationcharter(the“Charter”)andwhichisregistered.Itisalegalentity,isresidentanddomiciledinTheBahamasandisabletosueandbesuedinitsownname(s.3).Onceassetsaretransferredbythefounder(the“Founder”)totheFoundationbywayofanendowment,theyceasetobelongtotheFounderanddonotbecomethepropertyofanybeneficiaryuntiltheyaredistributed.TheFoundationmanagestheassets,investingthemorotherwise,inaccordancewiththeobjectsorpurposesspecifiedintheCharterbytheFounder(s.3).

Purpose of a Foundation

TheFoundationcanbeusedasavehiclefortheholdingofprivateassetsendowedontheFoundationforthebenefitofidentifiedpersonsorclassesofpersons.TheFoundationmay,ifnecessaryforthepropermanagementoftheassets,buyandsellassetsandengageinanyotheradministrativeactivitynotprohibitedbylaw;however,businesstransactionsmustbesecondaryto

themainpurpose(s)oftheFoundation(s.4).

Establishment

InordertoestablishaFoundationinTheBahamastheremustbe:(i)afoundationcharter(oradulyexecutedwill);(ii)registration;and(iii)theissuanceofaCertificateofRegistration.Oncetheserequirementsarefulfilled,theFoundationisformed.

The Charter

TheActrequirestheCharterdocumentoftheFoundationtoinclude(s.6):

1.thenameoftheFoundationwiththeword“Foundation”inEnglishorinaforeignlanguage(atthediscretionoftheRegistrar)asthelastwordofthename;thenameoftheFoundationisrestrictedbytheAct;itcannotincludecertaintermssuchas“limited”(s.17);

2.thenameandaddressoftheFounderoriftheFounderisalegalpersonthenumberandplaceofregistrationofthelegalpersonandtheaddressinTheBahamasforserviceofdocumentsontheFounder;

3.thepurpose(s)andobjectsoftheFoundation;

4.theendowmentoftheassetstobetheinitialassetsoftheFoundationuponregistrationandastatementofthoseassets;

5.thedesignationofthebeneficiaryortheidentificationofabodybywhichthebeneficiarycanbeascertained,orastatementthatthefoundationhasbeenformedtobenefitthepublicatlarge;

6.astatementastowhethertheFoundationhasbeenestablishedforanindefiniteperiodorforadefiniteperiod;andifforadefiniteperioditmuststatethelengthoftheperiod.

7.thenameandaddressinTheBahamasoftheSecretarytotheFoundation(the“Secretary”)andtheaddressoftheregisteredofficeinTheBahamasoftheFoundation,whichmustbethesameaddressastheSecretary;

8.astatementthattheFoundation’stotalassetsarenotlessthanUS$10,000.00ortheequivalentinanothercurrency;and

9.thesignatureoftheFounderinthepresenceofanotarypublicortheSecretaryoriftheFounderisalegalpersonthesignatureoftheauthorisedperson(s)inthepresenceofanotarypublicortheSecretary.

TheChartermayincludeinteraliathereservationofrightsorpowerstotheFounder.

Articles

TheFoundationArticles(the“Articles”),alsocalledRegulationsorBylaws,areoptional.IftheFounderchoosestohaveArticles,theycanprovide,interalia,for:

1.thedistributionofassetsmade,ortobemade,bythegoverningbodiesoftheFoundation;

2.theidentificationofanyinitialbeneficiariesoranytobedesignatedatalaterdateoftheFoundation;

3.theidentificationoftheremainingbeneficiaryuponawindingupoftheFoundation;and

4.theregulationofanygoverningbodiesoftheFoundation.

Registration

ToregistertheFoundation,thedocumentsthatmustbesubmittedtotheRegistrarwiththeapplicationforregistrationandfeesare:

1.astatementsignedbythesecretaryorattorneythatincludesthefollowingparticulars:theFoundationname,thedateoftheCharter,theFoundationpurpose(s)andobjects;thenameandaddressoftheFounder,Secretary,theFoundationCouncil(the“Council”)andregisteredoffice;astatementthattheFoundation’sassetsarenotlessthanUS$10,000.00ortheequivalentinanothercurrency;

2.alistcontainingthenamesandaddressesofthefirstofficersoftheFoundation;

3.astatutorydeclarationbytheSecretaryorassistingattorneyofcompliancewiththeAct.

ItisimportanttonotethattheCharterandArticlesdonotneedtobefiledwiththeRegistrar.

Officers

PriortoRegistration,theFounder(s)mustappointatleastoneperson(naturalorlegal)tobeanofficer(an“Officer”orintheplural“theOfficers”)oftheFoundation.AnOfficeroftheFoundationmaybealegalperson.TheActliststhosepersonswhocannotbeOfficers,suchasanundischargedbankrupt(s.10).

Continued on page 16

Private FoundationsBy HEATHER THOMPSON,Partner,Higgs&Johnson

JURISDICTIONAL DEVELOPMENTS - FOUNDATIONS

�6|BAHAMASFINANCIALSERVICESBOARD

Continued from page 15

TheOfficers,intheabsenceoftheCouncil,arethegoverningbodyoftheFoundation.Theirdutiesareprimarilyadministrativeratherthanfiduciaryinnature.

OfficersmustexercisereasonablecareandskillintheconductoftheaffairsoftheFoundation,includingexercisingduecareandskillinthemanagementandinvestmentoftheFoundationassets,andmustactinaccordancewiththeCharterandArticles.NoofficeroftheFoundationshallbepersonallyresponsibleforanyliabilityoftheFoundationunlesstheliabilityisincurredasaresultofhisowngross(s.33(1)negligence,wilfuldefaultormisconduct,fraudordishonesty.Acourtalsohasdiscretiontorelieveanofficerfromliability(s.33(5).

Secretary

ASecretarymustbeappointedinrespectoftheFoundation;theSecretaryisanofficeroftheFoundation.IfapersonceasestobeSecretary,anyliabilityincurredbyhimwhileactingasSecretaryisstillenforceableagainsthimbytheFoundation.TheSecretarymustbeeither(i)dulylicensedasaprovideroffinancialandcorporateservicesundertheFinancialandCorporateServiceProvidersActorasatrustcompanyundertheBanksandTrustCompaniesRegulationAct.TheregulatoryoversightoftheFoundationwillbeconductedbytheRegulatorthathaslicensedtheSecretary(s.2(14).

Foundation Council

IftheCharterprovidesforaCouncil,itmayconsistoftwoormorenaturalpersons,alegalpersonandoneormorenaturalpersonsoralegalpersonbyitself.TheCouncilmustensurethattheFoundationcomplieswiththeprovisionsoftheCharter,theArticlesandtheAct.TheOfficersarerequiredtofollowtheinstructionsoftheCouncil.TheCouncilhasthepowertoaccessthebooks,recordsandaccountsoftheFoundation.Ithasthefurtherrightto(s.15):

1.beinformedofallmeetingsoftheOfficers;

2.attendandbeheardbutnotvoteatmeetings;

3.beincludedinthecirculationoftheFoundationbusinessdocumentswhentheyarecirculatedtotheOfficers;

4.beinformedofanydelegationofpowerstoOfficers;

5.appointanauditor.

OfficersandauditorsoftheFoundation(andrelatedparties)arenoteligibletobe

appointedasmembersoftheFoundationCouncil(s-14(3).

Registered Office

Priortoregistration,theFoundationmusthavearegisteredofficeinTheBahamas,whichistobetheaddressoftheSecretary.Capacity

ThevalidityofanactdonebytheFoundationcannotbechallengedonthegroundthatitisoutsidetheambitoftheCharter.However,amemberoftheFoundationorabeneficiarycanbringproceedingstopreventactswhicharebeyondthecapacityoftheFoundation(s.26).

Meetings

TheFoundationisrequiredtoholdatleastonemeetingoftheOfficerseachyear(the“AnnualMeeting”)(s.35(1)).TheFounder(s),membersoftheCouncilandanyothersupervisorypersonarerequiredtobenotifiedoftheannualmeeting.

Beneficiary’s Right To Information

AbeneficiarywhohasaninterestinallorsomeoftheFoundation’sassetsmustbenotifiedinwritingbytheofficerofhisinterestandisentitledtoreceiveinformationonrequestfromtheFoundationregardingthefulfilmentoftheobjectsoftheFoundationandtoinspectandcopytheconstitutionaldocumentsoftheFoundation,anyauditreportandanyminutesofanymeetingsoftheofficersoftheFoundationCounciloranyothersupervisorybody.

AbeneficiarymayapplytothecourtforanorderofcomplianceiftheFoundationdoesnotsupplytherequestedinformationorallowinspectionofthedocuments.

Astheassetsofafoundationareitsown,itappearsthattheentitlementofthebeneficiariestoinformationisakintothoseofbeneficiarieswithavestedinterestunderatrust.

Financial Records

TheActrequirestheFoundationtokeepproperbooksofaccountattheregisteredofficeorsomeotherlocationdesignatedbytheofficerswithrespectto:

1.allsumsofmoneyreceived,expendedanddistributed;

2.allsalesandpurchases;3.allassetsandliabilities(s.42).

TheActprescribestheinformationwhichmustbesetoutinthebooksofaccount(s.43,s.44,s.45,46)andthesigningoftheFoundation’sbalancesheet(s.47).

Seal

AFoundationmay,butisnotrequired,tohaveasealforuseinTheBahamas(s.29).IftheFoundationhasaseal,itmustbeaffixedinthepresenceofanofficeroftheFoundation.

Confidentiality

AnypersonconnectedwiththemanagementoftheFoundation,i.e.anOfficer,aprotector,amemberoftheFoundationCouncil,amemberofanyothergoverningbodyofafoundation,anyothersupervisoryperson,acounselandattorneyforafoundationoranauditorofafoundation,hasadutyofconfidentialitytotheFoundationandthebeneficiariesandabreachofthedutywillmeanthatsuchpersonsmaybeliableonsummaryconvictiontoamaximumfineof$50,000.00ortoimprisonmentforatermnotexceeding3years.

Forced Heirship

TheAct(s.68)containssimilarprovisionstothoseintheTrusts(ChoiceofGoverningLaw)Act,withrespecttothenonrecognitionandenforcementofforcedheirshipclaims.

Life of Foundation

AFoundationmaybeestablishedforanindefiniteoradefiniteperiod.

Indemnification

TheActprovidesfortheindemnificationofeveryOfficer,CouncilMember,othersupervisorypersonandprotectoroftheFoundationwhoactshonestlyandingoodfaithagainstallcosts,charges,losses,expensesandliabilitiesincurredbyhimintheperformanceofhisduties;theamountrequiredfortheindemnificationattachesasalienonthepropertyoftheFoundation,whichhaspriorityoverotherclaimsoftheFoundation(s.65).Theindemnityisnotavailablewheresuchpersonhasbeenguiltyofgrossnegligence,wilfuldefaultormisconduct,fraudordishonesty.

In Terrorem Provisions

TheActpermitstheCharterorArticlesoftheFoundationtoprovideforabeneficiarytoforfeithisbenefitifhechallengestheestablishmentoftheFoundation,theendowmentoftheFoundation’sassets,theCharterorArticlesoranydecisionoftheCouncilorothersupervisorypersons(s.66).TheActalsoprovidesfortheadministrationofassets,redomiciliation,liquidation,restorationandtheabilitytoallowfor

Continued on page 17

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|�7

Continued from page 16

instrumentsofdispositiontoabeneficiarytoincluderestrictionsagainstalienation.

Certificate of Good Standing

ACertificateofGoodStanding(the“Certificate”)canbeobtainedfromtheRegistrarwhichcertifiesthatthenameoftheFoundationisontheregisterandthattheFoundationhaspaidallapplicablefees.TheCertificatewouldalsoindicatewhetherornottheFoundationisintheprocessofbeingliquidated,woundup,dissolvedorremovedfromtheregister.

Removal and Restoration to the Register

IftheRegistrarhasreasontobelievethattheFoundationregisteredundertheActnolongersatisfiestherequirementssetoutins.4(1)and5,theRegistrarmustserveontheFoundationanoticethatthenameoftheFoundationmayberemovedfromtheregister.TheActthenprescribesaprocedurewhichallowstheFoundationtorespondtothenotice.Failingasatisfactoryreply,theRegistrarwillremovethenameoftheFoundationfromtheregister(s.54).

Thereisalsoaprocessforrestoration(s.55).

Penalty

Anofficerofafoundationwillbeguiltyofanoffencepunishableonconvictionbyafineof$10,000orimprisonmentfor2yearsorbothifhe:

(a)falselyrepresentsthefinancialpositionoftheFoundationtoanyone;

(b)withholdsfinancialinformationtowhichanypersonisentitled;and

(c)falsifiesanydocumenttobedeliveredtotheRegistrarorrequiredtobepreparedinrespectoftheFoundation(s.72).

Uses

Thereisnodoubtthatprivatewealthadviserswillseemanyadvantagestotheuseoffoundations.Theseinclude:charitablepurposes,estateplanning,preservationoffamilywealthandconfidentiality.

Conclusion

TheActhaspositionedTheBahamasasoneofthefirstcommonlawjurisdictions

toenableprivatefoundations.Privatefoundationscanbeviewedasahybridofcompaniesandtrusts,combiningthebestassetprotectionelementsofeach.•Heather L. Thompson is a partner at Higgs & Johnson in Nassau with extensive experience in foundations, international trust and company administration, counselling individual and corporate clients on the creation of trusts and ownership structures, and giving advice to trust companies on the development of new services and issues arising in trust administration.

She has served as a consultant on several important pieces of financial services legislation, including Acts relating to Purpose Trust, Foundations and Private Trust Companies.

Continued from page 3

UK-basedFriendsofTheBahamaslaunchesplansforScholarshipProgramme

BudgetCommunicationinpresentedinParliament

BillstoamendthePurposeTrustandFoundationsActaretabledinParliament

JUN ‘05 TranscontinentalTrustsConference–Geneva.BFSB participates

European Briefing Visit

Chicago Briefing Visit

NorthernBahamasAMLConference–GrandBahama.BFSB presents

AIBT/BFSB submit comments on Central Bank’s AML Guidelines

BFSB Issues Memorandum on EUSD

FATFPlenary-Singapore

EUSDGreenLightNoteadoptedbyEUCouncilofMinisters

GroupofFinancialServicesRegulators(GFSR)releasesHandbookonInformationSharingArrangementsinTheBahamas

CaribbeanFinancialActionTaskForce(CFATF)–IMF/WorldBankTrainingSeminarforEvaluations–SanJose,CostaRica

EgmontGroupofFinancialIntelligenceUnitsPlenary–Washington,DC

OffshoreGroupofBankingSupervisors(ORBS)AnnualMeeting–CaymanIslands

JUL ‘05 EuropeanUnionTaxSavingsDirectivecomesintoeffect

CentralBankoftheBahamasinvitesparticipationinSurveyonEconomicActivity(SEA)forfirsthalfof2005

AmendmentstoPurposeTrustandFoundationsActarepassedinParliament

BFSB launches Nominations Process for 2005 FSI Excellence Awards

AUG ‘05 Strategy Briefing hosted by BFSB

BFSB Funds Sub Group commissions a Legal Opinion on the Impact of the EUSD on the Bahamas Funds Sector.

7thAnnualCaribbeanCommercialLawWorkshop.BFSB cosponsors

SEP ‘05 BFSB AGM

Brazilian Briefing Visit – Sao Paulo

STEP/ITCAhostsPolicySymposium:BeyondtheLevelPlayingField–London.BFSB presents

OECD’sPre-MeetingwithNonMemberEconomiesontheGlobalForumonTaxation

LegaleaseConference-BritishColonialHilton-Nassau.ThetwodayeventfocusesonPracticalIssuesinCompanyandTrustAdministration

Anti-MoneyLaunderingAudit&ComplianceForum,NewYork.BFSB presents

Member Forum: International Cooperation

Foundations Guide is published by BFSB

OCT ‘05 BIFSAnnualAwardsCeremony

Tax Symposium – “Tax as a Driver of Wealth Management”. Cosponsored by BFSB, BBA, BICA, BSFA

SeatradeInt’lMaritimeConvention–London.BFSB Exhibits (with BMA)

Careers Fest 2005. Hosted by BFSB, Rotary Club of East Nassau, Rotary East, and the Ministries of Education, Finance, and Financial Services and Investments

Annual Financial Services Industry Excellence Awards Banquet

InternationalTrust&TaxPlanningSummit,CoralGables.BFSB Exhibits

FATFPlenary–Paris,France

NOV ‘05 BICAWeek

Eastern Europe Briefing Visit

OffshoreAlertDueDiligenceConference,MiamiBeach.BFSB presents

1stAnnualFamilyOfficeforLatinAmericanFamilies.BFSB Exhibits

OECDGlobalForumonTaxation-Melbourne

MFSIlaunchesitsStrategy&BrandingSurvey.BFSB co-ordinates industry participation

DEC ‘05 InternationalTrustCongress–London.BFSB presents

BahamasInternationalFilmFestival(BIFF)

•

��|BAHAMASFINANCIALSERVICESBOARD

JURISDICTIONAL DEVELOPMENTS - PROFESSIONAL BRIEFS

BANK CONSOLIDATION IS AcontinuingtrendintheCaribbeanandtheBahamianprivatebankingindustryasaresultofmergerandacquisition(“M&A”)activity.Inanefforttogainmarketshareanddiversifytheirproductsandservices,manyoftheplayersintheprivatebankingindustryareseekingopportunitiestogrowtheirportfolioofbusiness.Theprivatebankingindustryhasbeenviewedasafragmentedonewithplayerseitherbeingsmalltomediumsizedprivatewealthspecialistsoroffshootsoflargerinternationalgeneralbankingoperations.Thisperceptionischangingasinternationalbanksseektomoveintothisstableandhighmarginbusinesstoachieveeconomiesofscaleeitherbyacquisitionororganicgrowth,therebyputtingpressureonsmallcompetitorstoconsolidate.

OverthepastthreeyearstheBahamianprivatebankingindustryhashaditsshareofM&Aactivities.Thetablebelowoutlinesmergersandacquisitionsthattookplacebetween2003and2005.ThisincludestheBankofN.T.Butterfield&SonLimited’s

acquisitionoftheentiresharecapitalofLeopoldJoseph(Bahamas)Limitedin2003.2003alsosawScotiatrustBahamas’(“Scotiatrust”)acquisitionofMeesPierson(Bahamas)Limited,makingScotiatrustoneofthelargestprivatebanksinthecountrywithover$193billioninassets.LocalM&A

activityintheBahamianmarketduring2006wasontherisewithtransactionssuchastheannouncementbyUBSduringMayof2006thatitwouldacquiretheassetsofBrazilianbased,PactualOffshoreBankandTrustCompany(“POBT”)viaaUS$2.5billionpurchasetoformanewentity,BankUBSPactual.ThistransactionwascompletedonDecember4,2006withthenewbankoperatingunderthenameUBSPactualafterhavingreceivedallnecessaryapprovalstofinalizethetransaction.TwobankswithapresenceintheBahamashavebeeninacquisitionmode.InMayof2006,theBankofNovaScotiaacquiredElSalvador’sfourthlargestbank,BancodeComerciofor$178millionandinJuneannouncedthatitwouldbuyCostaRica’sfourthlargestbank,Interfinfor$293.5million.DuringJulyHSBCHoldingsPlcagreedtopay$1.77billionforGrupoBanistmo,whichhasover$9.12billioninassetsandoperationsinfiveCentralAmericancountriesandColombia.Finally,onDecember27,2006BarclaysPLC(“Barclays”)announcedthesaleof599,401,230ofitsordinaryshares

inFirstCaribbeanInternationalBank(“FirstCaribbean)toCanadianImperialBankofCommerce(“CIBC”).TheamountpayablebyCIBCofUS$989millionwassettledentirelyincash.Barclaysintendstoofferitsremaining66,600,137ordinarysharesinFirstCaribbeaninasubsequentmandatory

offertobemadetoallshareholdersofFirstCaribbean.

M&AactivityintheglobalprivatebankingandwealthmanagementindustryisalsoboomingaccordingtoresearchreleasedbyKPMGInternational,with258dealscompletedin2005,anincreaseof80percentonthepreviousyear,whichwasitselfarecord.Thislevelofactivityislikelytopersistastheresearchalsofoundthatover90percentofprivatebanksbelievethattherearegoodgrowthprospectsfortheindustryoverthenextthreeyearsand89percentareeitheractivelyseekingacquisitiontargetsor

wouldconsideracquiringiftherightopportunityarose.

Thestudyisthethirdintheannualseries“HungryforMore–Acquisitionappetiteandstrategyintheglobalprivatebankingandwealthmanagementindustry”andisbasedoninterviewswith147privatebanksaroundtheworld.TheunderlyingsurveywasconductedbytheEconomistIntelligenceUnit.

Thehugeincreaseofcorporateactivityinprivatebankingistheresultofaperfectstormofcontributingfactors.Therehasbeenanexplosionofpersonalwealth,particularlyinAsia,continuinggrowthinprivatebankingrevenuesandincreasedregulatorypressuresleadingtoadesiretoseekouteconomiesofscale.Privatebankshavetendedtoreactintwoways.Thefavourablemarkethasallowedmanytogroworganically,butnearlyathirdofprivatebanksreported

acquisitionsoverthepastthreeyears.Theseacquiringbankshavenotrestedontheirlaurels,theytendtobeserialdealmakers,completingonaveragealmostadealeveryyear.

Continued on page 19

M&A Activity in the Private Banking MarketBy SIMON J. S. TOWNEND and DIVEANE BOWE,Partners,KPMG

Mergers between 200�-2005

NAME MERGEDWITH/ACQUIRED SURVIVINGENTITY

200�

BSJInt’lBank&TrustCo.Ltd. UPBank&TrustLtd. BSJInt’lBank&TrustLtd.

BankofButterfield(Bahamas)Ltd. LeopoldJoseph(Bahamas)Ltd.ThorandBank&TrustLtd.

BankofButterfield(Bahamas)Ltd.

UnitedEuropeanBank&Trust(Nassau)Ltd.

BNPParibasPrivateBank&Trust(Bahamas)Ltd.

UnitedEuropeanBank&Trust(Nassau)Ltd.1

2004

J.P.MorganTrustCo.(Bahamas)Ltd. TheChaseManhattanTrustCop.(Nominees)Ltd.

J.P.MorganTrustCo.(Bahamas)Ltd.

J.P.MorganTrustCo.(Bahamas)Ltd. MorganGuarantyNominees(Bahamas)Ltd.

J.P.MorganTrustCo.(Bahamas)Ltd.

BankofAmericaN.A ITKTrustCo.Ltd. BankofAmericaN.A.

2005

BankofAmericaN.A ITKTrustCo.Ltd. UBSTrustees(Bahamas)Ltd.

ThetableaboveonlyreflectsmergersandacquisitionsbetweenlicenseesofCentralBankofTheBahamasandexcludesothermergersandacquisitionsoutsidethejurisdictionthatmayimpactBahamianlicensees.CertainmergersandacquisitionstookplaceattheparentcompanylevelofseveralBahamianlicenseesnotlistedherebutforwhichnoobviouschangetothestatusoftheBahamianlicenseeisapparent.Occasionally,thenameofalicenseemaychangetoreflectnewparentage.

1EditorsNote:AsaresultofthemergerofUEB(Switzerland)withBNPParibas(Suisse)SA,UnitedEuropeanBank&Trust(Nassau)LimitedchangeditsnametoBNPParibas(Bahamas)Limited,effectiveasofOctober2,2006.

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|��

Continued from page 18

Thehighlevelsofactivitywillonlyincreaseiftheseventypercentofnon-acquisitivebanksjointheM&Amarket.

Domesticacquisitionsratherthaninternationalacquisitionscontinuetodominatethesectorat78percentofalldealsin2005.Theaveragedealsize(ignoringthefivelargestdeals)remainedconstantfromthepreviousyearatUS$103million.AlthoughAsiaisthehottestregion,littleinternationalmoneyisflowingintotheregion.Mostoftheplayersalreadyhaveafootprintintheregionandvirtuallyalltheactivitycomprisesregionalordomesticdealsinanattempttoincreasemarketshareandeconomiesofscale.TheburstofactivityintheM&Amarketalsoraisesitsownchallenges.Vendor’spriceexpectationsiscitedbyhalfoftherespondentsasanobstacletoM&Aactivityandofthedealsthatfailedtobeconsummatedfouroutoftenofthesealsofalteredontheseller’spricedemands,thehighestsinglecauseoffailure.Integrationissuescausedalmostaquarter(23percent)toflounderandcontinueto

beanissuefordealsthatwerecompleted.Fullytwothirdsofrespondentslostsomeproportionoftheacquiredcompany’sclientbasewithinoneyearofcompletingtheirlargestacquisition.39percentofprivatebankslostover10percentcustomerbase.

Integrationissuesareakeyriskfactorforthewealthmanagementindustry,thekeydangerbeingthatifyougetitwrongclientswillwalk.However,itdoesnotappeartohaveimpactedtheoverallperformanceofdealsasmorethan80percentofrespondentssaidtheirrecentacquisitionshadincreasedshareholdervalue.Despitealltheactivitywehaveseentherewillbeconsiderablymoreconsolidationintheprivatebankingmarketasthereisawallofmoneystilltohitthemarket.Almost22percentofrespondentsexpecttospendmorethanUS$1billiononacquisitionsoverthenextthreeyears.SowhatdoesallofthissuggestforTheBahamas?ThereisnodoubtthatTheBahamasrepresentsaveryimportantcogintheglobalprivatebankingwheel.Thereareanumberofsmallerplayerswithexcellentclientportfolioswhowilleitherseekoutbuyersorattractthesame.Atthelargerend

ofthescale,thereisnodoubtthattherewillbemoreconsolidationtocome;forexampleviamergerorduetonon-corebusinessesoftheinternationalretailandcorporatebankingentitiesbeingspunoff.TheoddsareinfavourofmoreM&AactivitytocomeinTheBahamasfinancialservicesarena.•Simon is an FCA, a qualified CF practitioner with the Institute of Chartered Accountants in England and Wales, and member of The Bahamas Institute of Chartered Accountants. He is responsible for KPMG’s regional corporate finance services, and has wide experience, having been involved in corporate finance advisory services in 20 countries in the Caribbean.

Certified Public Accountant Diveane Bowe has more than 14 years of professional audit, accounting, and advisory experience gained with KPMG member firm offices in Atlanta, Georgia and Nassau, Bahamas. His work has included a wide range of businesses with an emphasis on providing auditing and advisory services for clients in the banking, investment and mutual funds industries.

A SEGREGATED ACCOUNTS COMPANY(“SAC”)maynowberegisteredinTheBahamas,thankstothecomingintoforceoftheSegregatedAccountsCompaniesAct,2004(“SACAct”).TheBahamasfinancialservicesindustryhasembracedthisnewvehicle,andincreasingnumbersofSACshavebeenregisteredinTheBahamas.SACsarecreaturesofstatuteandhavemodernorigins.Theywerecreatedtoresolveadeficiencyinthecaptiveinsuranceindustryincertaininternationalfinancialcentres.Therent-a-captivestructurewasunabletoguaranteethatassetsprovidedbyaparticipantcompanytotherentedcaptivewouldnotbeusedtocoverunjustifiedclaimsofanotherparticipantcompany.SACsallowedfor“risk”fencingwithintherentedcaptive.

Alongwithsuccessinthecaptiveinsuranceindustry,SACshavefoundpopularuseintheinvestmentfundindustry.PriortotheutilizationofSACs,umbrellafundsweresetupbyincorporatingseparatesubsidiariesforeachsub-fund,whichwereheldinaparentholdingvehicle.Eachseparatesubsidiarywasdesignedtokeepassetssegregatedandprotectedfromanactionorclaiminaninsolvencybycreditors.SACsallowforasinglelegalentitytooperateinawayequivalenttoacorporategroupcomprisingparentandsubsidiaries.TheBahamasfinancialservicesindustryhasprovidedforadditionaluseoftheSACstructurein

privatewealthmanagement,bypermittingcompaniesotherthaninsurancecompaniesandinvestmentfundstoregisterasSACs.

Characteristics of an SAC:AnSACisaderivativeformofthetraditionalcompany,andTheBahamasCompaniesActandInternationalBusinessCompaniesActapplymutatismutandisinrelationtoanSAC;anSACmustbeincorporatedasacompanybeforeitisregisteredasanSAC.

Likeatraditionalcompany,anSAChasanOfferingMemorandumandArticlesofAssociation.Additionally,anSAChasaGoverningInstrument.AGoverningInstrumentisdefinedbytheSACActasoneormorewrittenagreements,instruments,MemorandumorArticlesofAssociation,prospectuses,resolutionsofdirectors,registersorotherdocuments(includingelectronicrecords),settingouttherights,obligationsandinterestsofaccountowners.Theterm“accountowners”isthenamegiventotheregisteredholdersofsharesintheSAC.

Thesharesaretypicallylinkedtoasegregatedaccount.TheGoverningInstrumentmustbegovernedbythelawsofTheBahamas.Likeatraditionalcompany,anSACisasinglelegalperson.However,alongwithageneralaccount,anSAChassegregatedaccounts.AsegregatedaccountiscreatedwhenitisnamedintheGoverning

Instrument.AssetsandliabilitiesarelinkedtothesegregatedaccountwhentheyarelinkedtoitintheGoverningInstrument.Whileeachsegregatedaccountisnotalegalpersonseparatefromthe

company,theSACActpermitstheoperationofinternaltransactionsandcontractsbetweensegregatedaccountstobetreatedinthesamemannerasifenteredintobythecompanyandathirdparty.Further,eachsegregatedaccountmayitselfenterintotransactionsandestablishcontractswiththirdparties.Thebenefitofhavingsegregatedaccountsisthatassetsandliabilitieslinkedtoonesegregatedaccountarestatutorilyseparatedfromassetsandliabilitieslinkedtoanothersegregatedaccount.Inanactionorclaiminaninsolvency,accountownersandcreditorsofasegregatedaccountwillnothaveaccesstoassetsofanyothersegregatedaccounts.Accountownersandcreditorsarelimitedtoassetslinkedtothesegregatedaccountthattheyhavespecificallytransacted/contractedwith.

Requirements of an SAC: BecauseanSACmaylimittheambitofanactionorclaiminaninsolvency,anSACisrequiredtoinformpersonswithwhomitdealsthatitisanSACandmustidentifythespecificaccounttowhichthetransactionrelates.

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Segregated Accounts CompaniesBy DAVID F. ALLEN,Associate,McKinney,Bancroft&Hughes

20|BAHAMASFINANCIALSERVICESBOARD

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Further,itmustincludeareferencetothefactthatitisanSAConitsletterheadandinitscontracts.DirectorsaremadepersonallyliablebytheSACAct,iftheyfailtodisclosethecompany’sstatusasanSAC.AnSACmustmaintainaregisterofaccountowners,whichisnotopentopublicinspection,providedanaccountownerisentitledtoreceiveacopyoftheinformationintheregisterpertainingtotheaccountowner’sinterestintheSAC.ItmustfileanannualdeclarationstatingthatthecompanyisincompliancewiththeSACActandpayprescribedfeeswhichareadjustedaccordingtothenumberofsegregatedaccounts.Itmustalsomaintainrecordsinaccordancewithgenerallyacceptedaccountingprinciples.Suchrecordsmustbemadeavailableatleastonceayeartoeachaccountowner,unlesswaivedbytheaccountowner.Itisthedutyofdirectorstokeeptheassetsandliabilitiesofeachsegregatedaccountandthegeneralaccountseparateandseparatelyidentifiablefromassetsandliabilitiesofeachothersegregatedaccountandthegeneralaccount.

Procedure to Register an SAC:AkeyrequirementofregisteringacompanyasanSACisthatithasaGoverningInstrument.CreatingtheGoverningInstrumentwouldlikelyentailstructuringtheMemorandumandArticlesofAssociationtoincludethedesignation“SAC”or“SegregatedAccountsCompany”asapartofthecompany’sname,includingadefinitionforSAC,creatingclassesofshareslinkedtosegregatedaccountsandprovidingforvariousindemnityandwindingupprovisions.IfthecompanyisanInvestmentFund,itsOfferingMemorandumwouldbeamendedsimilarlytotheaboveandSACriskinformationaddedtomeetthelegalrequirementofadequatelyinforminginvestors.

ThenatureofanadditionalstepintheregistrationofanSACdependsonwhetherthecompanyhascarriedonbusinesspriortoregisteringasanSAC.Ifthecompanyhascarriedonpriorbusiness,itmustreceiveconsentfrom75%ofitsshareholdersand75%ofitscreditors.Aletterofconsentshouldbeexecutedbytheshareholdersandcreditors.Itisrecognizedthatshareholdersandcreditorsmay,however,considertheregistrationofthecompanyasanSACdetrimentaltotheirinterestinanactionorclaiminaninsolvencybylimitingtheiractionorclaimtoassetsofaparticularsegregatedaccountratherthanhavingaccesstoalltheassetsofthecompany.Ontheotherhand,securingtheconsentofshareholdersandcreditorscouldalsoproveaninsurmountableobstacledependingonthenumberofshareholdersandcreditorsassociatedwiththerelevantcompany.In

ordertoaddresstheconcernsofminorityshareholders,ifatleast20%ofshareholdersandcreditorsobjecttotheregistrationofthecompanyasanSAC,theymayapplytotheBahamasCourtstoannultheregistrationofthecompany.AfurtherrequirementisthataStatutoryDeclarationbedraftedandsignedbytwodirectorsofthecompanysettingoutthefollowing:-

1.Theassetsandliabilitiesofthecompanyasatadatewithinthreemonthspriortothedateoftherequest;

2.Adescriptionofanytransaction/eventwhichhashappenedbeforetherequestforregistrationorisexpectedtohappenbetweenthedateofthestatementofassetsandliabilitiesandthedateofregistrationofthecompany;suchthatonthehappeningoftheeventtherewouldbeamaterialchangetotheassetsandliabilitiesasdisclosed;

3.Thenamesofsegregatedaccountsthecompanyintendstooperateandtheassetsandliabilitieswhichthecompanyproposestoassigntoeachone;

4.Adeclarationthatonregistration:thecompanyandeachsegregatedaccountwillbesolvent;thatnoknowncreditorswillbeprejudicedandthatknowncreditorshavebeenadequatelynotifiedofliabilitiestobetransferredtothesegregatedaccountandhaveconsentedinwritingtothecompanyproceedingtoregister;

IfthecompanyhasnotcarriedonbusinesspriortoregistrationasanSAC,itdoesnotrequiretheconsentofshareholdersandcreditorsoraStatutoryDeclaration.TheconsentofthePrimaryRegulatormustbereceivedbeforeregistrationofacompanyasanSAC.ThelistofPrimaryRegulatorsisasfollows:-

1.Ifthecompanybusinessisinvestmentfunds,writtenconsentmustbeobtainedfromtheSecuritiesCommissionortheInvestmentFundAdministrator;

2.Ifthecompanybusinessisissuingsecurities,writtenconsentmustbeobtainedfromtheSecuritiesCommission;

3.Ifthecompanybusinessisinsurance,writtenconsentmustbeobtainedfromtheRegistrarofInsurance;

4.IfthecompanyisasubsidiaryofaBankorTrustcompanynotlicensedbytheCentralBank,writtenconsentmustbeobtainedfromtheCentralBankofTheBahamas;

5.Ifthecompanyisanyotherbusiness,writtenconsentmustbeobtainedfromthePrimaryRegulatorprescribedbytheMinister.

Finally,aletterofrequestmustbesenttotheRegistrarofCompaniesrequestingregistrationofthecompanyasanSACwithevidenceoftheconsentofthe

requisitePrimaryRegulatorandacopyoftheGoverningInstrumentattached.Ifthecompanyhascarriedonpriorbusiness,theconsentofshareholdersandcreditorsandtheStatutoryDeclarationshouldalsobeattached.Theletterofrequestmustcontain:-

1.Thenameoftheproposedcompanywhichincludestheexpression“SAC”or“SegregatedAccountsCompany”;

2.Thenatureofthebusinessofthecompany;

3.TheaddressoftheregisteredofficeofthecompanyinTheBahamas;and

4.Thedateofincorporationofthecompany.

The Registrar of Companies:TheRegistrarofCompaniesisrequiredtomaintainaregisterofSACs.UponapplicationandpaymentoffeesprescribedbytheRegistrarofCompanies,iftheRegistrarofCompaniesissatisfiedthatthecompanycomplieswiththeSACActandthatconsentfromtherequisitePrimaryRegulatorhasbeenobtained,itwillregisterthecompanyasanSACandpublishintheGazettenoticeoftheregistrationofthecompany.Afterregistration,theRegistrarwillissueacertificateshowingthedateofregistrationandplaceacopyofthecertificateonthepublicfile.

The Segregated Accounts Representative: ASegregatedAccountsRepresentativemayberequired,wherethePrimaryRegulatorisespeciallyprescribedbytheMinisterresponsibleforcompanies.TheSACmustkeepparticularsoftheSegregatedAccountsRepresentativeintheregisterofdirectorsandofficersofthecompany.TheSegregatedAccountsRepresentativemaybe:alicenseeundertheBanksandTrustCompaniesRegulationsAct;alicenseeundertheFinancialandCorporateServiceProvidersAct;alicenseeundertheSecuritiesIndustryAct;alicenseeundertheInvestmentFundsAct;alicenseeundertheInsuranceActoralicenseeundertheExternalInsuranceAct.ItisthedutyoftheSegregatedAccountsRepresentativetomakeawrittenreporttothePrimaryRegulatorwithinthirtydaysofreachingtheviewthatitislikelyasegregatedaccountorthegeneralaccountofanSACwillbecomeinsolvent,thattheSAChasfailedtocomplywithtermsoftheSACActorthattheSAChasbecomeinvolvedincriminalproceedings.

Conclusion:SACsofferagreatervarietyofoptionstofinancialplannersthantraditionalcompanies.Theyallowforassetstobesegregatedandprotectedwithinsegregatedaccounts.TheBahamascaptiveinsuranceindustryandinvestmentfundindustry,especially,havebenefitedgreatlyfromtheuniqueattributesofthisrecentlyestablishedvehicleforuseininternationalfinancialcentres.•

JURISDICTIONAL DEVELOPMENTS - PROFESSIONAL BRIEFS

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|2�

LEGISLATIVE DEVELOPMENTS

Complementing private express trusts, purpose trusts and foundations

THE BAHAMAS HAS INTRODUCED acomprehensiveapproachtoPrivateTrustCompanies(PTC)thatfullyandappropriatelyincorporatesPTCsintothecountry’srobustfinancialsystem.PrivateTrustCompanieshavebecomeapreferredtoolinthestructuringoftheestateandinheritanceplanningneedsoftheveryhighandultrahighnetworthfamiliesandcanprovidethefamilieswithagreaterlevelofinvolvementovertheinvestmentofthetrustassets.Thelegislationclarifiesandservestointroduceaclientfriendlyoptionfortheuseofthisestateplanningtool.

Underthelegislation,aBahamianPTC,likeotherstructuressuchastheBahamianfoundation,willnotrequireregulatoryapprovalorexemptionfromregulation.ThePTCneedonlyarrangeitsaffairswitharegulatedBahamianserviceproviderorRegisteredRepresentative.ARegisteredRepresentative,asdefinedinthelegislation,isabankortrustcompanyoralicensedfinancialandcorporateservicesproviderapprovedbytheCentralBankoftheBahamasfortheprovisionoftheseservices.ThisfeaturedistinguishestheBahamianPTCfromthosethatareavailableinanumberofotherjurisdictionsandallowsforexclusiveinteractionbetweentheclientanditsRegisteredRepresentativewithoutadditionalregulatoryinvolvement.Asaresult,clientinformationneedonlybedeliveredtotheofficesoftheclient’sserviceprovider.Further,thelegislationclearlysetsouttheroleandresponsibilityoftheRegisteredRepresentative.

Inadditiontoitslightregulatorytouchandprovidingaccesstoabroadrangeofserviceproviders,theBahamas’PTClegislationhasanumberofotherdistinguishingfeatures:

•Theremaybemorethanonedesignatedperson;theyarerequiredtoberelatedbyconsanguinityorotherfamilyrelationshiptoeachother.

•ThePTCmaybeestablishedduringorafterthelifeofthedesignatedperson(s).

•ThePTCmayactastrusteetotrustssettledbypersonsrelatedbyconsanguinityorotherfamilyrelationshiptothedesignatedpersonoroneofthedesignatedpersons.

•ThePTCmayactastrusteetoexistingtruststhatmeettheabovementionedcriteria.

•Thebeneficiariesofatrustadministered

byaPTCarenotrestrictedtofamilymembersofthedesignatedpersonordesignatedpersons.

•DirectorsofthePTCarenotrequiredtoberesidentinTheBahamas.

•ThePTC,inselectingitsRegisteredRepresentativeinTheBahamas,mayalsodetermineindiscussionwiththeRegisteredRepresentativewhetheritisbestthattheRegisteredRepresentativeservesasDirector,SecretaryorBahamasAgenttothePTC.

•ThereisnorequirementforaSpecialDirectorwheretheRegisteredRepresentativeisaBahamianbankortrustcompany.Otherwiseadirectorofgoodreputationandwhopossessesatleastfiveyears’experienceinadisciplinerelevanttotheadministrationoftrustsisrequired.Relevantdisciplinesincludeoneormoreoflaw,finance,commerce,investmentmanagementoraccountancy.

•WhilethegrowthofPTCsmayspurtheestablishmentoffamilyofficesinTheBahamas,thereisnorequirementforaPTCtoestablishaphysicalpresenceinthejurisdiction.

Fromthefamilywithoperatingcompaniesandcharitablefoundations,tothewealthyclientfromacivillawcountry,thePTCmaybetheidealsolutiononanumberofdifferentlevelsincludingcontrol,influence,privacy,continuity,flexibility,educationandempowermentandcostefficiency.Thenon-charitablepurposetrustisthemostfrequentandoftenconsideredthebestoptionforholdingthesharesofaprivatetrustcompany.TheBahamianPurposeTrustActconfirmsthatavalidpurposeofaBahamianpurposetrustistoholdthesharesofacompany.Inmanyways,afoundationprovidessimilarfeaturestothatofapurposetrustandforcertainclientsmaybetheidealstructuretoholdthesharesoftheprivatetrustcompany.

Alternatively,acompanylimitedbyguaranteecouldbetheownerofaprivatetrustcompany,whichaddressestheissueofownershipandofferscostsavings.TheBahamasIBClegislationprovidesforsuchastructureorvehicle.

Market Responsiveness

ProvidingspecificlegislationaddressingthemannerinwhichprivatetrustcompaniesmaybeestablishedandoperatedinTheBahamasroundsoutaseriesofstepsundertakeninrecentyearstorespond,inacomprehensiveandcompetitivemanner,totheneedsofthefamily.Market

responsivenessisakeyfocusofthejurisdiction.

TheBahamashasbeenverycarefultoensurethatitslegislativeandadministrativeframeworksarecontinuallyrefinedinordertoretainitswealthmanagementleadershipwithitsstrongprivatebankingandestateplanningindustriesservingasthebackboneforthesector.

Thisleadershiphasbeenreflectedinanumberofdevelopmentsoverthepast10years.

•InnovativeTrusteeAct1998whichprovides,interalia,theretentionbythesettlorofcertainpowers;

•TheBahamas’modelofanunrestrictedfundadministrator,introducedin1995,setthestandardforthedelegationofauthoritytoaregulatedfinancialservicesprovider.Thispermitsthemostefficientmechanismforthelicensingandlaunchofinvestmentfunds;

•SegregatedAccountsCompanies(alsoknownasPCC)maybeusedinboththeinstitutionalandprivateclientspheres.

Morerecently,inadditiontotheintroductionofpurposetrusts,TheBahamashasamendedtheperpetuityperiodenablingfamiliestoplanforfivegenerationsbyinstitutingaperiodoflifeorlivesinbeingplus21or150years.ImprovementshavealsobeenmadetotheInternationalBusinessCompaniesAct,asthejurisdictionseekstomaintainalegislativeframeworkthatiscomprehensiveandrelevant.

Attheendof2004,TheBahamasalsobecamethefirstpremierCommonLawjurisdictiontointroduceFoundations.ThisestateplanningtoolenjoysgreatfamiliarityincivillawcountriesandmaynowbeestablishedinTheBahamasforprivate,charitableorcommercialpurposes.

TheBahamianfoundationrespondstotheneedsofclientsbyproviding,interalia,avehiclethatisdomiciledinTheBahamas,isthelegalandbeneficialownerofitsownassetsandhasunlimiteddurationwithparticularlyusefulestateplanningfeatures.Thesefeaturesincludethechoiceofgoverninglaw,assetprotection,thereservationofcertainpowerstothefounderandtheabilitytoappointaprotector.

2006legislativedevelopmentshaveincludedreviewsofthePurposeTrustAct2004,aswellastheFoundationsAct,2004.In2007,BFSBplansacomprehensivereviewofalltrustlaw.•

The Bahamas Introduces Private Trust Companies

22|BAHAMASFINANCIALSERVICESBOARD

ASACisacompanywhichisregisteredundertheSegregatedAccountsCompaniesAct2004.TheSACmaycreateseparateaccountswithassetsandliabilitieswhicharesegregatedfromtheassetsandliabilitiesattributabletoeveryotheraccountandalsofromthecompany’sgeneralassetsandliabilities.•Asegregatedaccountisnotalegalperson

distinctfromtheSAC.•ASACmustinformanypersonwithwhomit

dealsthatitisaSAC.•ASACmustidentifythesegregatedaccount

whichisconnectedtoaparticulartransaction.•AllassetslinkedbyaSACtoasegregated

accountshallbeheldbythecompanyasaseparatefundwhichwillnotbepartofthegeneralaccountofthecompanybutheldexclusivelyforthebenefitoftheaccountownersoftheparticularsegregatedaccount.Thoseassetswillbeavailabletomeettherightsoftheaccountholdersandsatisfytheliabilitiesconnectedtotheparticularsegregatedaccount.

•TheSACwillrecordwhatassetsareinitsgeneralaccountandsuchassetsshallbetheonlyassetsofaSACavailabletomeetthegeneralliabilitiesoftheSAC.Assetsinthegeneralaccountwillnotbeavailabletosatisfyliabilitywhichislinkedtoasegregatedaccount.

•Therightsandobligationsofaccountownersinasegregatedaccountarecontainedinagoverninginstrument.Thegoverninginstrumentmayprovideforconditionswhichmustbecompliedwithinorderforapersontobecomeasegregatedaccountholder.Thegoverning

instrumentmayalsoprovideformanagementofthesegregatedaccount,appointmentsofoneormoremanagers,andtheorderlywindingupoftheaffairsandterminationofthesegregatedaccount.

•ThegoverninginstrumentmustbegovernedbythelawsofTheBahamasandthepartiestoitmustsubmittothejurisdictionofthecourtsofTheBahamas.

•TherightsandobligationsofcounterpartiesdealingwiththeSACareevidencedintheformofcontracts.

Structures:

AcompanyregisteredasaSACmustbegovernedbytheCompaniesActortheInternationalBusinessCompaniesActandthatcompany(i)mustbeengagedinthebusinessofeither(a)investmentfunds(b)issuingsecuritiesor(c)insurance,or(ii)isasubsidiaryofaBankorTrustCompany(andnotlicensedbytheCentralBank),or(iii)isengagedinabusinesswheretheMinisterresponsibleforCompanieshasprescribedaprimaryregulator.NocompanylicensedundertheBanksandTrustCompaniesRegulationActmayregisterasaSAC.

Registration:

ASACmustfilearequestwiththeRegistrartoberegisteredasaSACcontainingtheprescribedinformationandaccompaniedbytheconsentoftheprimaryregulatoroftherelevantbusiness.Wherethecompanyhasconductedbusiness

priortotheapplicationforregistrationastatutorydeclarationcontainingprescribedinformationmustalsobefiledwiththeprimaryregulatoralongwithevidenceoftheconsentof75%oftheintendedaccountholdersand75%ofthewouldbecreditorsoftheSAC.TheRegistrarwillissueacertificateofregistrationoncompletionofregistration.

Requirements:•ASACRepresentativewhomonitorsandreports

ontheactivityoftheSACmayberequiredwheretheprimaryregulatorisespeciallyprescribedbytheMinisterresponsibleforcompanies.

•ASACmustmaintainaprivateregisterofaccountowners.

•ASACmustfileanannualdeclarationstatingthatthecompanyisincompliancewiththeSegregatedAccountsCompaniesAct.

•ASACmustmaintainrecordsinaccordancewithgenerallyacceptedaccountingprinciples.Recordsmustbemadeavailableatleastonceayeartoeachaccountowner,unlesswaivedbytheaccountowner.

•ASACmustpayprescribedfeesbasedonthenumberofaccounts.

Segregated Accounts Company Highlights

LEGISLATIVE DEVELOPMENTS

AFoundationisadistinctlegalentityregisteredundertheFoundationsActof2004.Onceregistered,afoundationisdeemedtoberesidentanddomiciledinTheBahamas.Foundationsmaybeestablishedforprivate,commercialorcharitablepurposesprovidedsamearelawfulandincludethemanagementofitsassets.Foundationsarecreatedbythewillofthefounderorbythefounderexecutingacharterwhichmay,butneednot,befiledintheRegistryofFoundations.

Features: •Foundationsmaybeusedforestateplanning,

taxplanning,preservingfamilywealth,segregatingassets,perpetuatingcorporategovernancephilosophy,subordinatingdebts,separatingvotingandeconomicbenefits,investinginprivatecompanieswithapooreconomicperformance,owningprivatetrustcompaniesandestablishingcharities

•Foundationsmaybeusedformostpurposesforwhichtrustsandcompaniesarepresentlyused

•Foundationsmaybeusedtoavoidforcedheirshipinotherjurisdictions

•Foundationshavecreditorprotectionprovisions•FoundationsareexemptfromBahamian

taxesandbusinesslicencefees,stampduties(exceptingBahamianrealestatetaxes)andexchangecontrols

•FoundationsmayredomiciletoorfromTheBahamas

•Articlesareoptional.IfnoArticles,Actapplies•Confidentialitywithregardtofoundation

informationmustbemaintained•Foundermaybeanaturalorlegalpersonanda

nomineefoundermaybeusedtopreservetheclient’sconfidentiality

•Theproceduresforappointingbeneficiariesmaybeincludedinthecharterratherthanthenamesofthebeneficiaries,thuspreservingtheiranonymitywhenthecharterisfiledintheRegistry

•Foundationsmaybeestablishedforafixedorindefiniteperiod.Foundationmaybeformallyliquidatedorrevoked

•Chartermayreservepowerstothefounder,includingthepowertoamendorrevokesame

•Chartermayappointotherofficersinadditiontothesecretary,whosedutieswillbemainlyadministrative

•Chartermayincludeinterroremprovisions•Fiduciaryandotherresponsibilitiesareusually

vestedinafoundationcouncilorsimilargoverningbodyandfoundationmayalsohaveaprotectororcommitteeofprotectors

•Foundationcouncil,whereappointed,shallcompriseonelegalpersonortwoormorenaturalpersonsoronelegalpersonandoneormorenaturalpersons

•Booksandrecordsmustbekept,butauditsareoptional

•Beneficiarieswithvestedinterestsentitledtobenotifiedofinterestsandtoreceivecopyofcharterandaccounts

•Founder,membersoffoundationcouncilandprotectorsalsoentitledtoinspectaccounts

•Duediligenceinrespectoffounderandbeneficiariesrequired

•Instrumentsofdispositionmayincluderestrictionsagainstalienation

Registration Formalities : •Registrationstatementcontainsnameof

foundation,dateofcharter,purposesandobjects,dateofarticles(ifany),detailsoffounder(couldbenominee),secretaryandfoundationcouncilorothergoverningbodyorsupervisoryperson,addressofregisteredoffice,periodforwhichestablishedandvalueofinitialassets.

•Onlyadditionalfilingrequiredisstatementcontainingparticularsofanyamendmentstoinitialregistrationstatement.

•Foundationsmusthaveinitialassetsof$10,000.00whichmustbemaintained.

•FoundationsmusthavearegisteredofficeandsecretaryinTheBahamas.SecretarymusteitherbelicensedundertheFinancialandCorporateServiceProvidersActorbeatrustcompanydulylicensedinTheBahamas.

Fees:

•$500.00ifregisteredinfirstquarterofcalendaryear;

•$375.00ifregisteredinthesecondquarterofthecalendaryear;

•$250.00ifregisteredinthethirdquarterofthecalendaryear;

•$125.00ifregisteredinthefourthquarterofthecalendaryear.

•Subsequentannualfeeis$500.00.

Foundations Highlights

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|2�

FOCUS ON BFSB ACTIVITIES

BFSB, LAUNCHED IN APRIL ����,representsaninnovativecommitmentbytheGovernmentofTheBahamasandthefinancialservicesindustrytofurtherthedevelopmentofTheBahamasasaninternationalfinancialcentre.TheBoardisamultidisciplinarybodythat,throughtheactivecontributionofgovernment,professionalindustryassociationsandindividualmemberfirms,haspursuedanactiveagendaforimprovementinthejurisdictionandknowledgeofthebenefitsofTheBahamasforinternationalfinance.

Memberfirmsaredrawnfromthebanks,brokerdealers,trustandinvestmentadvisoryservices,insuranceandmutualfundadministrationaswellaslegal,accounting,realestateandotherprofessionals.

New Board of Directors

The2006AnnualGeneralMeetingwasheldonSeptember6,atwhichtimesmemberselectedtheBoardofDirectorsfor2006-2008.AtthefirstmeetingoftheBoard,DirectorselectedtheOfficers.

MichaelAllenisthenewBFSBChairmanandCraig“Tony”GomezisthenewDeputyChairman.TheBFSBBoardiscomprisedoftwoclassesofdirectors.Thoseelectedintheirindividualcapacityinclude:MichaelAllen,EarlCash;ChristianCoquoz;AlanDavidson;MichaelFarrant(Secretary);AnthonyFerguson;CraigGomez,MiguelGonzalez;DennisGovan;MichelleNeville-Clarke;AndreasRentschler;AndrewRaenden;CharleneStorr;ArthurStrommer;DavidSussman;MicheleThompson(Treasurer);WilliamWhitaker;PaulWinder;andAlysonYule.TheBoardalsoconsistsofindividualswhoareelectedtorepresentprofessionalindustryassociations(“PIAs”).BFSBhasalwaysrespectedandvaluedtheroleplayedbyPIAsandwelcometheircontributionasdirectorsontheboard.

ThoseassociationselectedtoserveontheBoardare:JanMezulanik,AssociationofInternationalBanks&TrustCompanies(AIBT);CheriseCox-Nottage,BahamasAssociationofComplianceOfficers(BACO);IvylynCassar,BahamasAssociationofSecuritiesDealers(BASD);WayneMunroe,BahamasBarAssociation(BBA);PeterMuscroft,BahamasGeneralInsuranceAssociation(BGIA);KendrickChristie,BahamasInstituteofCharteredAccountants(BICA);SuzanneBlack,BahamasRealEstateAssociation(BREA);DavidSlatter,CFASocietyofTheBahamas(CFASB);PaulWinder,SocietyofTrustandEstatePractitioners(STEP).

LeslieIsaacs,DirectorofFinancialServices,MinistryofFinancialServicesandInvestments,andWendyWarren,inhercapacityasBFSB’sCEO&ExecutiveDirectorserveaspermanentrepresentativesontheBoard.

BFSB’soperationalframeworkincludesanumberofkeycomponentsrelatedtoitsoverallmandate,primaryamongwhichareJurisdictionalDevelopmentincludingperspectivesonpolicysetting&implementationinthefinancialservicesindustry;Communications&Marketing;andCoordinationwithIndustryStakeholders.Thishasallowedatargetedapproachtoprogrammeandprojectdevelopment.TheBoardin2006agreedonitskeyareasoffocus,including:institutionalcapacitybuilding;compliance&corporategovernance(independent&externalevaluationsoffinancialsystems;internationalcooperationonnon-taxmatters;internationalcooperationontaxmatters);brandingtodrivegrowth(reputationmanagement,buildinginternalbrand,internationalrecognition,marketing&communication);marketaccessanddevelopment(tradeprotocols);infrastructure;strategy/businessmodel;manpowermanagement(education&expertise);competitiveness(legislation,regulatoryreform);sectorspecificdevelopmentfocus;

andcrossfertilisationofinternational&domesticmarketsandmarketparticipants.Arisingfromtheabove,specificprojectswereundertakenaspartofJurisdictionalDevelopment:

•StrategicPlanning•BrandingReview•FSIEconomicStudy•ManpowerManagement•BenchmarkingforCompetitiveness•AML&Regulation•BusinessDevelopmentInitiatives,

includingpolicy,legislativeandadministrativeimprovementsin: PrivateWealthIndustry InvestmentFunds&Securities Insurance CorporateServices

•BusinessContinuityPlanning•MemberSeminars•MemberServices

IntheareaofCommunication&Marketing,BFSB’sactivitieshavefocusedonbuildingrelationships,addressingtherequirementsofdifferingmarketsegments,internationalfinancialcentrepositioninganditsfinancialcentrefocusoutreach:

•Building RelationshipsoBahamasBriefingoBriefingVisitsoConferences

•Product EmphasisoBahamasFinancialServicesReviewoFoundationsGuideoLegislationFactSheetsoMaritimeFactSheetoNewsletters

•International Financial Centre PositioningoMediaRelationsoTheBankerAwardoWebSiteDevelopment

•Financial Centre FocusoCareersFest

Continued on page 24

About The BFSB Mission Statement:BFSB, established in 1998, represents an innovative commitment by the government & the financial service industry to promote the development of the financial services industry. The effortsof BFSB are focused on ensuring that the country’s regulatory and business environment are suitable for both clients and the international stature of The Bahamas as a member of the community of nations. Its stated mission is two-fold:

•To act as a catalyst for the continued development of the Bahamas as an international financial center and be the principal communication arm of the industry.

Collaboration is seen as critical for the success of all BFSB projects. BFSB’s strength increases with the participation of all of its members.

BFSB Board of Directors. Front Row, left to right: Peter Muscroft, Andreas Rentschler, Craig Gomez, Wendy Warren, Michael Allen, Earl Cash (Dr), William Whitaker; Second Row, left to right: Dennis Govan, Michelle Neville-Clarke, Leslie Isaacs, Suzanne Black, Alan Davidson; Back Row, left to right: Michael Farrant, David Sussman, Alyson Yule, Jan Mezulanik. Not pictured: Ivylyn Cassar; Kendrick Christie; Christian Coquoz; Cherise Cox-Nottage; Anthony Ferguson; Miguel Gonzalez; Wayne Munroe; Andrew Raenden; David Slatter; Charlene Storr; Arthur Strommer; Michele Thompson; and Paul Winder.

24|BAHAMASFINANCIALSERVICESBOARD

FOCUS ON BFSB ACTIVITIES

Continued from page 23

oDomesticMediaOutreachoIndustryExcellenceAwardsoMinistersAward

TheFinancialCentreFocus(FCF)initiativeisco-ordinatedincollaborationwiththeProfessionalIndustryAssociations.TargetingthosecomponentsconsideredessentialforthecontinuedsuccessofTheBahamasasaninternationalfinancialservicescentre,FCFisanongoingpubliceducationandawarenessoutreachthatfocusesondevelopmentsintheindustry;theimportanceofhighservicestandards;relationshipsbetweenthefinancialservicesindustryandthecommunity;andprofilingindustryrolemodels.Throughtheseinitiatives,BFSBhopestoattractfocusedandqualifiedyoungBahamianstothesector;promotecontinuedtrainingofindustryprofessionals;andencourageallindustryparticipantstokeepabreastofchangesinthesector.CollaborationwiththeGovernment,Regulators,GovernmentAgencies&RelatedBodies,andwiththeProfessionalIndustryAssociationshasbeenanimportantcomponentofBFSB’sengagementofallindustrystakeholdersinongoinginitiativesforthedevelopmentofthesector.

BFSB Committees/Working Groups:•BrandingWorkingGroup•BusinessContinuityPlanningWorkingGroup•CommercialLawReviewCommittee•Compliance/CorporateGovernanceCommittee•Conferences&BriefingVisitsSub-Committee•E-BusinessWorkingGroup•EconomicImpactAssessmentWorkingGroup•FinancialCentreFocusCommittee&Sub-Committees•FiscalStructure&OperationsReviewCommittee•FoundationsReviewWorkingGroup•FundsSectorWorkingGroup•GovernmentRelationsCommittee•Immigration&LabourCommittee•InsuranceWorkingGroup•Legislation&BenchmarkingCommittee•ManpowerAssessmentProgramme(MAP)WorkingGroup•MemberBusinessSeminarsWorkingGroup•MemberDevelopmentandOutreachCommittee•Mentorship,Orientation&TrainingCommittee•ProfessionalIndustryAssociationWorkingGroup•PromotionalMaterials&PublicationsCommittee•PurposeTrustReviewWorkingGroup•Registry(RGD)ServicesWorkingGroup•ReputationManagement,MediaRelationsandMessagingCommittee•

THE MINISTER OF FINANCIAL SERVICESandInvestments,theHon.VincentA.Peet,M.P.appointedajointpublicprivatesectorcommitteetoassesstheresultsofTheBahamasStrategyandBrandingSurvey.TheCommitteehasprovidedanInterimReporttoGovernment,andisexpectedtoreleasethefinalReportatthe2007BahamasFinancialServicesRetreatinJanuary.UndertakenbyPricewaterhouseCoopersonbehalfoftheGovernment,andincollaborationwithBFSB,thesurveywasdesignedtoevaluate:

•TheBahamas’reputationasanIFC•Itsabilitytoprovidekeyservices•WhycustomersuseTheBahamasas

wellaswhynot•WhetherTheBahamasneedstoexpand

itsbaseofservices

ThesurveyreflectedtheBahamas’commitmenttoexcelinthedeliveryoffinancialservices.Whilethegovernmentandindustrywerepleasedthatthejurisdictionwasnamedthe“BestInternationalCentreintheWesternHemisphere”byawellregardedindustrypublication,bothpartiesrecognisethevalueandimportanceofintelligentplanning.BFSBlooksforwardtocontinuedpartnershipwithGovernmentinthedevelopmentofanewfiveyearstrategicplan,basedontheresultsofthesurvey.

Morethan220seniorrepresentativesofthefinancialservicesindustry,bothinternationallyanddomestically,participatedintheStrategy&BrandingSurvey,andanexecutivesummaryoftheresultswasreleasedduringtheyear.AkeyfindingwasthatthefinancialservicesindustryinTheBahamasboastsanumberofstrengthsuponwhichthesectorcanbuildafocusedandcompellingbrandpositionanddevelopasoundbusinessstrategy.

Thecorestrengthsoftrustandfiduciary,privatebankingandcorporateservicesrankedinthetoptierwhencomparedwithinternationalfinancialcentresofsimilarsize.Politicalstabilitywasperceivedasoneofthejurisdiction’simportantadvantages,anditsregulatoryregimeranked

inthetoptieramongsttheIFCssurveyed.Otherpointsofimportanceincluded:

•ThestrongreadinessofrespondentstorecommendTheBahamasintheareaofwealthmanagement,particularlyintheareasoftrust,privatebanking,andcorporateservices.

•TheintentionsofthemajorityofparticipatinginstitutionstofocusongrowingtheirBahamianbusinessesoverthenextthreeyears,withtheremainderexpectedtomaintainthepresentlevelofbusiness.

•TheperceptionthatTheBahamasisdealingeffectivelywithseveralthreatsfacingIFCsingeneral.

•ThebeliefbythemajorityofsurveyrespondentsthatTheBahamaswillcontinuetoplayanimportantroleinthefutureofglobalfinancialservices.

Themajorityofsurveyrespondentswerefromtheprivatebankingindustry.Participantsrangedfrom“giants”withAssetsunderManagementinexcessof$100billiontonicheplayersintheindustrywithAssetsunderManagementlessthan$100million.Therewasabalancedrepresentationoforganizationsbetweentheselevelsofthespectrum.•

Bahamas Strategy & Branding Survey

Providing Comprehensive Legal Expertise

to Institutional and Private Clients Worldwide

for Over 50 Years.

Nassau Of f i c eP.O. Box N-272Shirley St reet & Victoria Ave n u eNassau, New ProvidenceThe Bahamas

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GT BFSB Ad Rev2.qxd 4/25/06 10:58 AM Page 1

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|25

FOCUS ON BFSB ACTIVITIES

THE BAHAMAS FINANCIAL SERVICES RETREAT isoneofseveralinitiativesundertakeninrecognitionofthecriticalimportanceofengagingallindustrystakeholdersonaregularbasisforopendiscussionsonfinancialservicessectorissues.Theannualeventprovidesanidealopportunitytoshareinformationonthestrengths,weaknesses,threatsand

opportunitiesfacingtheindustry.Arisingoutofthe2006BFSRetreat,BFSBundertooktolookatseveralspecificareasasitdevelopeditsprogrammeofworkgoingforwardand,importantly,positioneditselftoprovideinputforthenext5-yearStrategicPlanforFinancialServices.BFSBrecognisedthatconcreteactionmustbetakenbyboththegovernmentandtheprivatesector,andthatthereisaneedtoactinatimelyfashionasglobaldevelopmentswilldictateasmallernumberofinternationalfinancialservicecentresintheworld,withthecompetitionmorefocussed.

Someshorttermandmediumtermareasofengagementagreedonincluded:

•WorkwithMFSItodevelopthesecond5-YearStrategicPlanforFinancialServices,completewithanationalcommunicationsstrategyonamutuallyagreedimageandmessaging.Thisshouldincludeproductdevelopmentbasedonperceivedmarketneeds

•Lookatmechanismstogenerateandpromoteefficiency,expertiseandqualityservicewithinthesector–i.e.thedevelopmentofacultureofexcellence.Takeaccountofrelevantinitiativeswithintheeducationalsystem.Workwithrelevantstakeholderstodeterminerequiredskillsetsandgapsandpromotenecessarytraining

•ContinuetofinetuneBFSB’songoingexternalcommunicationsplan.Analyseanecdotalandempiricaldataasafirststepindevelopingafacts-basedprogrammebestsuitedtoenhancingtheinternationalpresenceofthejurisdiction.Tomaximiseeffectiveness,matchspecificareaswithspecificproduct

offerings.Utiliseexternalresources(existingandnewBahamasMissions,e.g.)topromotethesector,andpursueenhancedrelationswiththeMinistryofTourism

•Considerhowbesttoensurecurrentandcomprehensiveknowledgeofinternationaldevelopmentsandthreatsimpactingthefsi.Benchmarkproductsandservices

•Enhanceexistinginitiativestoensurethatthefsiisunderstooddomestically,withparticularemphasisonitseconomiccontribution,promotinga“buyin”bythelocalpopulace.PromoteBahamianownershipofthesector

•Developprogrammestopromotebroadunderstandingofthesectorbyrelevantgovernmentministriesanddepartments,includinginformationsharingthroughPositionPapersanduseofparliamentaryseminarmechanisms.Maintainongoingrelationswithallrelevantgovernmentagencies,providingatwo-waystreetfordialogueandconsultations.Applythe“PPP”approachbroadlytofacilitatecollaborationandimplementationofideas

•Recognisingthattaxtreatiesandtaxtreatynetworksdoimpacttradeinfinancialservices,evenfornon

participatingcountries,developrelevantresearch/benchmarkingmechanisms.Promote/facilitateparticipationininternationaldialogueatpublicandprivatesectorlevels.

•Monitor/analyseexternaldevelopments

toensurereadinesstoprovideinputonstepsnecessarytomaintainthecompetitiveedge.Continuetoprovideamechanismforprivatesectorinputtogovernment-andviceversa–asplansdevelopfortheconsolidatedregulatorylandscape

Morethan100government,regulatoryandindustryrepresentativestookpartinthestrategyandbrandingsessionsduringthe2006Retreat,tohelpensurethejurisdictioncontinuestodirectitseffortsinthemostresponsiveandeffectivemanner.

Theinvolvementofseniorgovernmentofficialsreflectstheclosepublicandprivatesectordialoguethatexistsinthecountry.Policymakersandregulatorsarecommittedtocreatinganenvironmentdesignedtoencouragethecontinuedgrowthofthesectorthroughongoingregulatoryrefinements,marketsensitivelegislationandefficientservice.

2007 Retreat

ThefourthannualBahamasFinancialServicesIndustryRetreatwilltakeplaceattheEmeraldBayFourSeasonsResortinExumaonJanuary19to21,2007.Asusual,participantswillfocusonthestrategicdevelopmentofthesector.Oneofthemajorhighlightsoftheeventwillbeapresentationbyrenownedinternationalspeaker,Mr.BruceZagaris,whowilladdressattendeesoftheplenarysessiononthetopic:“ThePotentialforSmallIslandJurisdictionstoUseInternationalAgreementsasaFinancialServicesEngine:ImplicationsfortheBahamas”.

AroundtablepaneldiscussionwillfollowwithafocusontradeprotocolsaffectingFinancialServices.TheBahamasStrategy&Brandingsurvey,releasedatthe2006Retreatwillalsobeamajorfocusduringtheplenarysessions.

OtherimportantmattersthatwillbediscussedduringsmallbreakoutsessionsincludeJurisdictionBrandDevelopment,Compliance&CorporateGovernance,ManpowerAssessment,CapitalMarketsandPrivateWealthManagement.•

Bahamas Financial Services Retreat 2006

26|BAHAMASFINANCIALSERVICESBOARD

FOCUS ON BFSB ACTIVITIES

IN THE FALL,theBahamasFinancialServicesBoard(BFSB)hostedtwenty-oneintermediariesfromEuropeandNorth&SouthAmericatoa“BahamasBriefing”.Overthreedays,BFSFandco-hosttheMinistryofFinancialServicesandInvestmentsexposedtheinternationalgueststothefinancialservicesindustryofTheBahamas.

TheBriefingalsoprovidedtheopportunityforthevisitorstobeexposedtothelifestylesoftheislands,astheprogrammeincludedaseriesofsocialactivities.

TheWorkingSessionsfocusedontheprivatewealthandfundssectorsofTheBahamas,withcorporatesponsorsfrombothindustriesactivelyengagedinidentifyingtheinvitedintermediariesandspearheadingover35industrypresentations.TheserangedontopicsfromFoundationsandPrivateTrustCompaniestoInvestmentFundsandSegregatedAccountsCompanies.ThecorporatesponsorswerejoinedbyGovernmentMinistersandFinancialServicesIndustryRegulatorswhospoketopolicyandregulatoryissuesimpactingbothsectors.TheseincludedthePrimeMinister;Minister

ofFinancialServicesandInvestment;MinisterofForeignAffairs;AttorneyGeneralandMinisterofLegalAffairs;MinisterofStateforFinance;GovernoroftheCentralBankoftheBahamas;InspectorofBanks&TrustCompanies,CentralBankoftheBahamas;ExecutiveDirectoroftheSecuritiesCommissionoftheBahamas;andLegalCounseltotheSecuritiesCommission.

Thefeedbackreceivedfromthetwenty-oneintermediariesconfirmedBFSB’sbeliefthattheBahamasBriefingprogrammeisanessentialpartoftheorganisation’sexternalcommunicationsandbusinessdevelopmentoutreach.BahamasBriefingsservetheusefulpurposeofgainingfirst-handfeedbackonindustrydevelopmentfrompractitionersinthemarketplace.Additionally,intermediariesgenerallynotonlyreportontangibleresultsoftheirmeetingswithcorporatesponsorsoftheprogramme,butalsospeaktothevalueofinteractingandpartneringwitheachothertopromotethemanyadvantagesofTheBahamas’financialproductsandservices.•

International Intermediaries Meet in Nassau

Supporting Agencies:

CentralBankoftheBahamasMinistryofTourism

Corporate Sponsors:

AbacoClubatWindingBayAnsbacherBahamasLimitedBancadelGottardoButterfieldBank(Bahamas)LimitedButterfieldFundServicesCreditAgricoleSuisse(Bahamas)LimitedCreditSuisse(Bahamas)LimitedErnst&YoungFirstCaribbeanInternationalBank(Bah)Graham,Thompson&Co.

Higgs&JohnsonKlonaris&Co.LennoxPatonMcKinney,Bancroft&HughesOceanicBank&TrustLimitedPictetBank&TrustRoyalBankofCanadaTrustCompany(Bah)SGHambrosBank&Trust(Bahamas)Ltd.SwissFinancialServicesSYZ&Co.Bank&TrustTempletonGlobalAdvisors

FOLLOWING THE 2006 RETREAT,BFSBrecognizedtheneedtoconductacomprehensiveassessmentoffinancialservicessectormanpowerneeds,andtoaddressdevelopmentstrategiesthatwillensurethejurisdictionremainscompetitiveintheprovisionofinternationalfinancialservices.

Inexploringthisproject,BFSB’sPIAWGundertookdiscussionswiththeBahamasInstituteforFinancialServicesaswellaswiththeCollegeoftheBahamas,concentratingonskillssetsneededforthesector.Duringtheyear,BFSBlearnedofTheSkillsBill,an18-monthUK-wideprogrammeofworkdesignedbytheFinancialServicesSkillsCouncil(FSSC)toprovidesolutionstotheskillsissueswhichaffecttheperformanceoffinancialservicesbusinessesintheUnitedKingdom.Akeycomponentofthisexerciseisanemployerresearchproject.

Bysettingoutwhatskillsemployerswanttheirpeopletohaveandplanninghowthenecessaryeducationandtrainingwillbefundedandsupplied,theFSSCaimstoequiptheindustrywiththeskilledworkforceitneedstobuilduponandmaintainitsworldleadingstatus.

AnotherimportantcomponentoftheSkillsBillprogrammeofworkwasareportdevelopedbyOxfordEconomics(OE)fortheFSSC–“UKFinancialServices:FiveyearsForward.”OxfordEconomicshasdirectexperienceinproducingmanpowerassessmentsfromthebeginningstagesallthewaythroughtoanactionplantorespondtoshortagesinthemarket.

Inordertofacilitateadialoguewithmembers,OEhasagreedtopresent,onagratisbasis,tothe2007BahamasFinancialServicesRetreat.Onrequest,theRetreatreportwillbepresentedinmodularfashion,i.e.anoutlineoftheobjectivesoftheassessment,deliverables,andthevariousstepsinvolved.•

Manpower Assessment

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|27

FOCUS ON BFSB ACTIVITIES

Financial Services Sector Economic Impact AnalysisDURING THE LAST QUARTER oftheyeartheBahamasFinancialServicesBoardcontractedwithOxfordEconomics(OE)toassesstheeconomicimportanceoffinancialservicesanditsassociatedactivitiesinTheBahamas.TheresultswillbedeliveredattheBahamasFinancialServicesRetreatinJanuary.BFSBisseekingtoobtainacomprehensivepictureofthefinancialservicesindustry’scontributiontoTheBahamas;specifically,thedirect,indirectandimputedimpacts.WendyWarren,BFSB’sCEO&ExecutiveDirectorsays,“Webelievethecontributionofthefinancialservicesindustrygoesbeyondeconomics.Thepositiveandlong-standingsocialimpactoftheindustrymustbeidentified.”

OxfordEconomicswillalsoattempttocapturewhatTheBahamasmightbewithoutthepresenceoftheinternationalfinancialservicessector.TheresearchprojectwillprovideBFSBwithempiricaldata,enablingittoengageinwiderangingcommunicationwithallstakeholdersregarding(i)thelongstandingandsignificantsocio-economiccontributionofthesectortothenationand(ii)theneedforcontinueddevelopmentandgrowthoftheindustry.Further,thegrowthandcontributionofthesectorwillbemonitoredthroughannualcomprehensivereporting.Onthislastpoint,thecontractwithOxfordEconomicsincorporatesa

capacitybuildingcomponent,toensurethatgoingforwardtheDepartmentofStatisticswillbeabletoupdatethedataandbuildinformationintotheirestablishedresearchmechanisms.“Effectively”,saysMs.Warren,“wedonotvisualisethisasaone-timestudy,butassettingthegroundworkforanessentialnationalinitiative.”

TheprojectarosefromaBFSBWorkingGroupthathadbeenengagedinreviewingvariousoptionstobestutiliseexistingdataandlookedattheindirectcontributionsthatarenotbeingtrackedatthepresenttime.Discussionsinitiallybeganatthe2004BahamasFinancialServicesRetreat,atwhichtimethePrimeMinisterhadraisedthequestionofhowbestBFSBcouldpromotetheimportanceofthesector,withcontinuingdialogueatthe2005and2006Retreats.Attheendofthelatter,itwasagreedthatthisshouldbeapriority“actionitem”for2006.BFSBwasabletocontractOEonlythroughthefinancialsupportofmemberfirmsandotherindustrystakeholders.

Already,afairamountofdataisavailable,boththroughtheCentralBank’sannualsurveysandsomeconcealedinthenationalaccountsestimatesproducedbytheDepartmentofStatistics.Bothagenciesaresupportingthisexercise,asaretheSecuritiesCommissionoftheBahamas,andtheOffice

oftheRegistrarofInsuranceCompanies.Inadditiontothequantitativeanalysisbeingprepared,OxfordEconomicsalsowillprovidequalitativeperspectives,bywayofanarrativeontherolethatFSIplaysinsupportingthebroadereconomyandcertainsectorsinparticular.

OxfordEconomicsisoneoftheworld’sleadingprovidersofeconomicanalysis,forecastsandconsultingadvice.Foundedin1981asajointventurewithOxfordUniversity’sbusinesscollege,OxfordEconomicshasanexcellentreputationforhighquality,quantitativeanalysisandevidence-basedadvice.Forthis,itsdrawsonitsownstaffof30highly-experiencedprofessionaleconomists;adedicateddataanalysisteam;globalmodelingtools,andarangeofpartnerinstitutionsinEurope,theUSandintheUnitedNationsProjectLink.OxfordEconomicshasofficesinPhiladelphia,London,andOxford,andprovidesdetailedanalysisandbriefingsondevelopmentsandprospectsacross70industrialandcommercialsectorsinover70countries.•Working Group Members: Julian Brown, Anthony Ferguson, Clarice Ferguson, Paolo Filippini, Tanya Holder, Dominique Lefevre, John Rolle, Tenniel Rolle, David Thain, William Wallace, Leona Wilson, Peggy Winder.

Economic Impact Assessment Workling Group. Left to right: Paolo Filippini, Tenniel Rolle, Wendy Warren, Tanya Holder; and Julian Brown. Not pictured: Anthony Ferguson, Clarice Ferguson, Dominique Lefevre, John Rolle, David Thain, William Wallace, Leona Wilson, Peggy Winder

2�|BAHAMASFINANCIALSERVICESBOARD

FOCUS ON BFSB ACTIVITIES

THE BUSINESS CONTINUITY PLANNINGWorkingGroup(BCPWG)hostedaBCPSeminaronSeptember27,aspartofBFSB’songoingBusinessSeminarSeries.OpeningRemarkswerepresentedbyMr.MichaelHalkitis,ParliamentarySecretaryintheMinistryofFinance.HepointedoutthatoperatingdisruptionscanoccurwithorwithoutwarningandthatbecauseoftheimportantroleplayedbyfinancialinstitutionsintheeconomyofTheBahamas,itisimportanttheirbusinessoperationsareresilient.Theeffectsofdisruptionsinservicemustbeminimizedinordertomaintainpublictrustandconfidenceinthejurisdiction’sfinancialsystem,hesaid.

BFSB’sCEO&ExecutiveDirectorWendyWarrenalsoprovidedwelcomingremarks,pointingoutthatensuringtimelybusinessrecoveryintimesofdisruptionisanessentialcomponentinthedeliveryofhighqualityfinancialservices.Inthisregard,TheBahamashasanexcellentrecordoverthealmost100yearsofdeliveringfinancialservices.

Workingsessionsincluded:

•LessonsLearned/TheBahamasResponse-CaymanExperiences-APrototypeBahamasResponse:WesternDistrictDisasterManagementGroup-NationalRecoveryCentre–Possibilities

•DisasterPreparedness:Technical

AspectsofPlanning•RegulatingforDisasterPreparedness:

WhatisexpectedofFinancialServicesIndustryLicensees?

•NationalPlanningInitiatives•InfrastructureReadiness

TheeventwascosponsoredbyCableBahamas,CentralBankoftheBahamas,CIBCTrustCompany(Bahamas)Ltd.,theNationalEmergencyManagementAgency(NEMA),PictetBank&TrustLtd.,andProvidenceTechnologyGroup.Presentersincluded:

RobertMyers,Owner&Operator,CaribbeanGroupofCompanies,WesternDistrictDisasterManagementWorkGroup;AndreKnowles,RegionalSalesDirector,CableBahamas;RichardDolewski,Vice-PresidentForTechnicalandContingencyServices,Mid-RangeRecoveryCentre(Canada);Michael

Foot,InspectorofBanks&TrustCompanies,CentralBankoftheBahamas;TrevorBethel,ActingManager-MarketSurveillance,SecuritiesCommissionoftheBahamas;RogerBrown(Dr),Registrar,OfficeoftheRegistrarofInsuranceCompanies;Carl

Smith,UnderSecretary/CabinetOffice-Director,NationalEmergencyManagementAgency(NEMA);l.AntonioStubbs,Sr.VicePresident,ChiefTechnology&InformationOfficer,BahamasTelecommunicationsCompany;PrestonA.Rahming,Engineer,WaterSupplyDivision,Water&SewerageCorporation.

OneofthekeygoalsofBFSB’sBCPWGisthegreaterintegrationofthebusinesscontinuityplansofindividualfinancialservicesfirmsandthatofthegovernmentofTheBahamasandagenciesprovidingkeyinfrastructure.•

Business Continuity Planning

Professional Industry Association Workling Group. Left to Right: Suzanne Black (BREA); Dianne Bingham (STEP); Kendrick Christie (BICA); Wendy Warren (BFSB); Nadine Frazer (IIB); Robin Hardy (BGIA); Anastacia Johnson (AIBT) and David Slatter (CFA Society).

BCP Working Group. Left to Right: Sammy Gardiner, Ralph Forskin, Andre Knowles, Wendy Warren, Brian Moodie. Not pictured: Michael Fields, Larry Glinton, Laurenne McDonald, Charles McKenzie, Adrian Medford, Caroline Moncur, Andrew Pike, Mario Smith

BAHAMASFINANCIAL SERVICES REVIEW VOL. 7 | INCORPORATING 2006 ANNUAL REPORT|2�

COLLABORATION WITH INDUSTRY STAKEHOLDERS

GOVERNMENT•OfficeoftheAttorneyGeneral•MinistryofFinance•MinistryofFinancialServices&Investments•MinistryofForeignAffairs•MinistryofImmigration,Labour&Training•MinistryofTourism

REGULATORS•CentralBankoftheBahamas•ComplianceCommissionofthe

Bahamas•FinancialIntelligenceUnit•InspectorateofFinancialandCorporate

ServiceProviders•RegistrarofInsuranceCompanies•SecuritiesCommissionoftheBahamas

GOVERNMENT AGENCIES& OTHER RELATED BODIES

•FinancialServicesConsultativeForum•GrandBahamaPortAuthority•DomesticInvestmentBoard•CoalitionofPrivateSector

Organisations•RegistrarGeneral’sDepartment

PROFESSIONAL INDUSTRY ASSOCIATIONS / TRAINING INSTITUTES

•AssociationofInternationalBanks&TrustCompanies•BahamasAssociationofComplianceOfficers•BahamasAssociationofSecuritiesDealers

•BahamasBarAssociation•BahamasInsuranceBrokersAssociation•BahamasInternationalInsuranceAssociation•BahamasGeneralInsuranceAssociation•BahamasInstituteofCharteredAccountants•BahamasInstituteofFinancialServices•BahamasRealEstateAssociation•CFASocietyoftheBahamas•InsuranceInstituteoftheBahamas•SocietyofTrustandEstatePractitioners

Coordination with Industry Stakeholders

KEY ACCOMPLISHMENTS IN 2005 & 2006

•Strategy&BrandingSurveycompletedwithresultsreleased•RGDInternetAgentSystemenhanced,significantlyreducing

responsetime•FundsOnlineIncorporationProcessestablished•FoundationsEstablishmentProcesscompleted•TrainingProgramwithLabourDepartment•ImmigrationPolicyenunciatedforFSI•PointPersonsforFinancialServicesappointedinImmigration&

LabourDepartments

•PrivateTrustCompanieslegislationpassedinParliament•PurposeTrustAmendmentsdeveloped•GSMInternationalRoamingExpanding•BlackberryservicelaunchedSept6,roamingagreements

pending•Furtherinfrastructureimprovementspending

Coordination with Government

Central BankExchangeControl&PoliciesreFCSP,AMLRecognition&Guidelines,EligibleIntroducers,GeographicUpdates

Securities Commission of The BahamasRecognitionofKeyJurisdictions,ApproachtoMaster/FeederFunds,InvestmentManagers&physicalpresencerequirements,operationalbestpracticeguidelines,SMARTFundModel005&SFMsReportingRequirements,EUSD

Registrar of InsuranceOperationalProtocols,ReviewofapplicationprocessReviewofExternalInsuranceActRegulations

FIU & All RegulatorsRegulardialogueondevelopments&feedbackreceived

Coordination With Regulators

BANKS & TRUST COMPANIES

Ansbacher(Bahamas)Limited

ArnerBank&Trust(Bahamas)Ltd.

ATCTrustees(Bahamas)Limited

BancadelGottardo

BancadelSempione(Overseas)Limited

BancoBoavistaInteratlantico,S.A.

BancoVotorantimS.A.–NassauBranch

BankLeuLimited,NassauBranch

BankofNovaScotiaInternationalLimited

BankofNovaScotiaTrustCo.(Bah)Ltd.

BankofTheBahamasInternational

BankBostonTrustCompanyLtd.

BankHofmann(Overseas)Ltd.

BanquePriveeEdmondDeRothschildLtd.

BanqueSCSAlliance(Nassau)Ltd.

BGPBancadiGestionePatrimonialeSA

BNPParibas(Bahamas)Limited

BSIOverseas(Bahamas)Limited

BlubankLtd.

ButterfieldBank(Bahamas)Limited

CaysideTrustCompanyLimited

CIBCTrustCompany(Bahamas)Limited

Cititrust(Bahamas)Limited

CommonwealthBankLimited

CornerBank(Overseas)Limited

CreditAgricoleSuisse(Bahamas)Limited

CreditSuisse(Bahamas)Limited

CreditSuisseInvestmentBank

CreditSuisseNassauBranch

CreditSuisseTrustLimited

CreditSuisseWealthManagementLimited

CuscatlanInternationalBank&TrustLtd.

DartleyBank&TrustLimited

DeltecBank&TrustLimited

EFGBank&Trust(Bahamas)Ltd.

ElcoBank&TrustCo.Ltd.

ExpertaTrustCompany(Bahamas)Limited

FidelityMerchantBank&TrustLimited

FinterBank&Trust(Bahamas)Limited

FirstCaribbeanInternationalBank(Bahamas)

FTCTrustCo.(Bahamas)Ltd.

GonetBank&TrustLimited

GuarantyTrustBankLimited

HangSengBank(Bahamas)Limited

HottingerBank&TrustLtd.

InternationalMerchantBankLtd.

JPMorganTrustCompany

JuliusBaerBank&TrustLtd.

LombardOdierDarierHentschPrivateBank&TrustLtd.

MetropolitanBank(Bahamas)Limited

MMGBahamasLtd.

NationalBankofCanada(International)Ltd.

OceanicBankandTrustLimited

PascheBank&Trust

PictetBank&TrustLtd.

PrivateInvestmentBankLtd.

RoyalBankFinancialGroup

SantanderCentralHispanoBank&Trust

Scotiabank(Bahamas)Limited

SentinelBank&TrustLimited

SGHambrosBankandTrustBahamasLtd.

SYZ&Co.Bank&Trust

TheHongkongandShanghaiBankingCorp.

ThePrivateTrustCorporationLimited

TheSt.JamesBank&TrustCompanyLtd.

TheWinterbothamTrustCompanyLimited

TransamericaBank&TrustCompanyLtd.

UBS(Bahamas)Limited

UnionBancairePriveeNassauBranch

BROKER DEALERS / SECURITIESINVESTMENT ADVISORS

ArgusAdvisors

AccuvestLimited

AllianceInvestmentManagementLtd.

BearbullInternationalLimited

ColinaFinancialAdvisors

FTCAssetManagement(Bahamas)Ltd.

GEMGlobalEquitiesManagementS.A.

GenevaPrivatePortfolioManagementLtd.

LOMSecurities(Bahamas)

MaritimeSecuritiesLimited

NordicaGroupofCompanies

RMFInvestmentProducts(Bahamas)Ltd.

TempletonGlobalAdvisorsLimited

TillermanSecuritiesLtd.

273CapitalManagementLimited

VanDaalenInternationalLtd.

FINANCIAL & CORPORATE SERVICES PROVIDERS

BahamasCo-operativeLeagueLtd.

Black&AssociatesLimited

BluewoodManagementLtd.

CaledoniaCorporateManagementGroup

InternationalProtectorGroup

Management&ServiceCompanyLimited

MercuryCorporateManagementLimited

MontaqueSecuritiesInternational

MossackFonseca&Co.(Bahamas)Limited

OffshoreManagersLimited

RegisteredAgentServicesLtd.

Sovereign(Bahamas)Limited

TheBonnycordGroupLimited

TridentCorporateServices(Bahamas)Ltd.

WindermereCorporateManagementLtd.

WorldwideCorporateServicesProviders

INSURANCE (Domestic / International)

BahamasFirstHoldingsLtd.

BritanniaConsultingGroup

ColinaImperialInsuranceLimited

J.S.Johnson&CompanyLtd.

RoyalStarAssuranceLtd.

SummitInsuranceCompanyLtd.

INVESTMENT FUND ADMINISTRATION

ButterfieldFundServices(Bahamas)Ltd.

CitcoFundServices(Bahamas)Ltd.

DPMMellon(Bahamas)Limited

GenesisFundServicesLimited

SwissFinancialServices(Bahamas)Ltd.

PROFESSIONAL SERVICES & ATTORNEYS

Alexiou,Knowles&Co.

Callenders&Co.

ChancellorsChambers

Dupuch&Turnquest&Co.

Fitzgerald&Fitzgerald

Gibson&Company

Gibson,Rigby&Co.

Graham,Thompson&Co.

HalsburyChambers

Higgs&Johnson

Higgs&Kelly

Holowesko&Company

JeromeE.Pyfrom&Co.

King&Co.

Klonaris&Co.

LennoxPaton

McKinney,Bancroft&Hughes

Seymour&Co.

ACCOUNTANTS

BDOMannJudd

Deloitte&Touche

Ernst&Young

FTConsultantsLtd.

GomezPartners&Co.

KPMG

PannellKerrForster

PricewaterhouseCoopers

E-BUSINESS & INFORMATION TECHNOLOGY

CableBahamasLimited

Emagine(Bahamas)Ltd.

IBMBahamasLimited

InternationalPrivateBankingSystems

ProvidenceTechnologyGroup

SystemsResourceGroupLimited

MEDIA, MARKETING, PR, PUBLISHING

DBACommunicationsInc.

DigitalIsleCommunicationsGroup

EtienneDupuch,Jr.Publications

TheCounsellorsLimited

TheNassauGuardian(1844)Ltd.

ThymeOnlineLtd.

REAL ESTATE

BahamasRealtyLimited

OTHER MEMBERS

BahamasInternationalSecuritiesExchange

ColinaFinancialGroup

InventagesWHealthManagementInc.

StarCapitalSecuritiesLtd.

BFS

B M

EMB

ERS