The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

“Significant revisions” are being sought to the Securities Commission’s draft guidelines on maintaining accounting records, with Bahamian financial providers fearing they currently place the industry “at a competitive disadvantage”.

The Bahamas Financial Services Board (BFSB) is set to draft a letter to the regulator setting out the sector’s concerns, Tribune Business can reveal, after a group of financial and corporate services providers met with Aliya Allen, its chief executive, to outline the “undue” burden the proposed requirements would impose.

The Securities Commission’s draft guidelines for the ‘Management of Accounting Records’, issued for consultation last month, require “reliable records” for International Business Companies (IBCs) to be available through their Bahamas-based registered office/agent.

“Where the financial and corporate services provider is the registered office/agent of an IBC, the financial and corporate services provider must have access to reliable accounting records for an IBC, [and] must ensure that such records are available through its offices,” the draft guidelines state.

Tribune Business sources identified this section as the one causing most concern in the financial services industry. While the guidelines are designed to combat the biggest “deficiency” uncovered during the Phase One peer review of the Bahamas by the OECD’s Global Forum, financial and corporate services providers fear it imposes an unrealistic bureaucratic/administrative burden.

“It’s caused a huge amount of concern,” one provider, speaking on condition of anonymity, said of the draft guidelines. “It’s totally impractical.

“They [the Securities Commission] want evidence that confirms that records are available to produce accounts if necessary. The main concern is the work involved, and perhaps the impossibility of getting people to provide accounts. If they don’t, we’ll have to consider what to do.”

In short, Bahamian corporate and financial services providers fear the time and cost involved In complying with the existing guidelines could make them, and the sector as a whole, uncompetitive.

“I can understand the genesis of it,” the financial provider told Tribune Business, in a nod to the OECD Peer Review findings. “But if they go through with it, I for one will have to say to clients: ‘Give me your records’.

“I’m lucky, because I’ve got a few hundred clients, most of whom are in businesses where they have to keep records, but if you’re one of those registered agents with a couple thousand clients, it’s a huge task.”

While the guidelines make clear that maintaining accounting records is the responsibility of the IBC, or any other Bahamian-domiciled entity, the proposals also require registered agents to obtain declarations from their clients that they are in compliance with the regulator’s requirements.

And, revealing the meeting between industry participants and the BFSB’s chief executive, the provider added: “A bunch of service providers went to meet with her last week, and said it was outrageous.”

Ms Allen, when contacted by Tribune Business, confirmed that the financial services industry was set to make its concerns known to the Securities Commission – via the BFSB – “in short order”.

She added that the sector wanted to “clarify” where the record keeping obligation lay, and ensure the Bahamas “doesn’t go beyond” the accepted international standard as pushed by the G-20/OECD.

“We are in the middle of consulting with industry who are affected,” Ms Allen told Tribune Business, “and when we are in a position to put our concerns to the Securities Commission, we will do so in short order. There are a number of concerns, and we are going to address those concerns with the Securities Commission directly.”

Asked what the specific concerns were, Ms Allen replied: “They just relate to what are considered to be undue obligations placed on financial and corporate service providers, when in reality they are obligations placed on the company.

“It’s a matter of clarifying where those obligations lie, and making sure what we’re doing doesn’t go so far beyond the standard that we put ourselves at a competitive disadvantage.”

Emphasising that the industry was not criticising the regulator, and that the proposals were still a draft, Ms Allen added: “The Commission has said these are just draft guidelines. We just want to make sure we’re not criticising them unduly.

“This is a consultation paper, and we are hopeful given the disquiet in the industry that significant revisions will be made.”

The Securities Commission’s proposed guidelines are designed to bring Bahamian financial and corporate services providers, and the entities they act for, into compliance with demands by the G-20 and the Organisation for Economic Co-Operation and Development (OECD).

The main issue identified by the OECD’s phase one peer review of the Bahamas was the absence of legislation requiring all corporate entities domiciled in this nation to maintain accounting records for a minimum of five years.

As a result, the Government amended a whole raft of companies-related legislation – the IBCs Act, Foundations Act, Segregated Accounts Companies Act, Exempted Limited Partnership Act etc – to bring the Bahamas into compliance with the Peer Review findings. The Securities Commission’s guidelines are thus an effort to develop the regulations that will accompany, and implement, these legal changes.

“The amendments were made in response to deficiencies identified in Phase 1 of the OECD Global Forum Peer Review, and as such it is critical that all affected entities move expeditiously to implement the requirement and come into compliance with the applicable legislation,” the regulator’s draft guidelines confirm.

Describing the proposals as the “mandatory minimum obligations” that it was seeking to impose on Bahamian financial and corporate services providers, the Securities Commission suggested that they annually test whether they could access, and have available, accounting records for their IBCs.

And, if a Bahamian financial and corporate services provider is providing director services to a Bahamian entity, the draft guidelines state it must ensure – and certify – that the required accounting records are being kept.

“Where the financial and corporate services provider becomes aware that the current records being maintained do not satisfy the standards prescribed in the amendments, the financial and corporate services provider shall require that the client brings its operations in line with the requirements,” the draft guidelines state.

“Where the client is unwilling or unable to do, the financial and corporate services provider should re-assess its relationship with the client in terms of the potential risk exposure such a relationship contains and be able to justify any position taken to the regulator on request.”