Bahamas updates legislation to 'clearly define' financial service providers

The Bahamas government has passed new regulations aimed at updating the framework for coporate and financial services providers in the jurisdiction.

Financial and Corporate Service Providers Regulations and the Financial and Corporate Service Providers Act (FCSP) were approved by parliament in December and together form an internationally compliant framework, which is overseen by the Securities Commission of the Bahamas (SCB) as the regulatory authority.

The legislation updates the two-decades-old legal framework of the prevailing Act in three important areas:

• It provides legal clarity for both corporate and financial service providers;
• It provides much needed legal clarity to the non-bank financial services falling under its remit, in the process creating new entrepreneurial opportunities; and
• It has a significantly greater focus on customer protection and safeguarding the public than the previous Act.

Similar to the Digital Assets and Registered Exchanges Act, 2020 (DARE) which also received Parliamentary approval on 4 November, the SCB began its extensive engagement with the industry in 2016 to develop a modern framework for financial and corporate service providers that is in keeping with international best practices and standards.

With 340 financial and corporate service provider licensees in The Bahamas, the legislation directly impacts Bahamian entrepreneurs, perhaps more than any other financial services legislation.

While the legislation covers corporate services activity, it also captures many of the non-bank financial services activities in which Bahamian entrepreneurs are engaged in but are not required to be licensed by the Central Bank of The Bahamas, nor registered under the Securities Industry Act, 2011, with the Commission.

The FCSP clearly defines the businesses and activities that require a person to be licensed as a financial or corporate service provider. Under the FCSP's activity-centric approach, each financial service will have specific rules tailored to the risks and other needs it represents.

Financial Services covered by the legislation include money lending, money broking, payday and cash advances, credit extension, bill paying services, debt collection, financial leasing, financial and advisory or consultancy services, financial intermediation services, trading in commodities and other financial instruments, custody of digital assets and wallet services providers.

Christina Rolle, SCB's executive director pointed out the significance of the custody of digital assets and wallet service providers, dovetailing with DARE legislation. "The DARE Act establishes the legal framework for a new industry, and the FCSP expressly defines and captures these related services," she said.

"Together, they represent specific opportunities for entrepreneurial Bahamian fintech firms to enjoy the credibility of being licensed and functioning under a comprehensive regulatory regime and participate in the fintech industry that is being forged with DARE."

"Licensees will be required to take all reasonable steps to ensure that information provided to clients is presented fairly and clearly," said Rolle.

"The regulations also require that licensees protect clients' personal data in keeping with the provisions of the Data Protection (Privacy of Personal Information) Act."

"Further, the Regulations will require licensees to ensure their data protection measures adequately address the collection and storage of personal data, prevent unauthorized access to personal data, and allow for the correction of erasing of inaccurate data," she added.