A Bill that aims to update the classification of securities — financial instruments such as any share of stocks on a company, bonds or debentures — under the Bermuda Monetary Authority Act 1969 was passed in the House of Assembly on Friday.

In reading the Bermuda Monetary Amendment (No 3) Bill 2022, Wayne Furbert, the Minister of Transport on behalf of David Burt, the Premier and Minister of Finance, said the Bill seeks to “update matters related to the external reserves of the BMA, to make provisions for annual fees payable by persons registered under the Investment Business Act 2003 as Class A and Class B registered persons, and to correct fees related to persons who are permitted to carry on the business of maintaining private keys under the Digital Asset Business Act 2018.”

Class A and Class B registered persons are those carrying on investment business — Class A may be incorporated in Bermuda, licensed, registered or authorised in another jurisdiction by another regulator but do not maintain a place here.

Class B are specified by the Minister of Finance as eligible to be registered based on the service they provide on an exclusive basis to persons with financial mean knowledge of investments including high net worth people.

The Bermuda Monetary Amendment (No 3) Bill 2022 seeks to provide for the reserves of the authority to consist of external and local reserves and to enable it to purchase shares of any company including the shares of any banking company.

Scott Pearman, the shadow legal affairs minister, raised questions around the potential for a conflict of interest in the BMA being permitted to purchase shares in entities it regulates.

He said: “Clause 4 is seeking to repeal the prohibition against the BMA investing its reserves in shares of companies including shares of any banking companies. If the BMA is regulating a bank and the BMA is also entitled to invest in that bank, doesn’t that create a conflict of interest?”

Mr Furbert responded: “The act is only one layer of criteria that determines what the authority invests in. The BMA Investment Committee sets its own restrictions which are often moved. The clauses are being amended in the act but it also allows the investment committee that somewhere in the future that wants to do it they can do it, it goes beyond the restrictions.”

Mr Pearman said the response didn’t address the issue of potential conflicts of interest.

Mr Furbert said: “The investment committee will not be investing in banks that they regulate. But they may invest in other things.”

Mr Furbert said that the external reserve requirement ensures that the authority maintains sufficient liquidity in the case of currency redemption due to various factors such as economic crises or the Bermuda dollar losing its value.

He said: “The authority acting on the advice of the BMA Investment Committee has requested that types of investments which may be invested by the authority should be updated to ensure that the authority has the flexibility to meet the requirements of the act in a challenging global economic environment.”

The Bill also amends the annual fee payable by the standard or test licence holder. Mr Furbert said the fees were “not appropriate for registered persons given the different levels of regulatory oversight required in respect of a licence holder and a registered person”.

After consultation and analysis, the annual fee was set at $850, which Mr Furbert said was “proportionate to the regulatory oversight for registered persons”.