Government says it will reduce the red tape for investment funds incorporating on the Island in a bid to "streamline processes and pare down unnecessary bureaucracy".

The move, announced yesterday by Finance Minister Paula Cox, is designed to enhance the efficiency of the incorporation process "without in any way diluting Bermuda's rigorous vetting and approval standards".

Government's steps, which follow consultation with industry stakeholders, are likely being taken in a bid to attract greater business from the mutual fund and hedge fund sectors - areas where Bermuda has prospered in years past.

The net effect of the change is that funds incorporating in Bermuda will no longer need the Minister's permission to get up and running, and they no longer have to go through the full classification process before incorporation. The changes put Bermuda's approach in line with rival offshore domiciles.

Government's announcement comes after Opposition Senator E.T. (Bob) Richards told his Senate colleagues last week that he had grave concerns on the level of regulation being adopted by the Island, saying it was putting Bermuda at a disadvantage against other offshore domiciles. And he named the Cayman Islands as being one jurisdiction that the Island was losing out to on the mutual fund front.

A similar charge was laid against the Island on the hedge fund front last year when Joel Press, the New York-based head of the hedge fund practice for Ernst & Young, told an industry audience here that Bermuda was losing out to the Caymans in attracting business from the rapidly growing sector. In specific, Mr. Press said that the process of getting regulatory approval took too long here.

It is understood that incorporating a fund in the Cayman Islands or British Virgin Islands can take as little as 24 hours, for those that meet requirements.

BMA chairman Cheryl-Ann Lister, sitting on last year's industry panel with Mr. Press, challenged that assumption but said she could suggest to the Finance Ministry that the tasks of licensing, vetting and incorporating funds, be separated, as in other domiciles.

Yesterday, in a Press statement, Ms Cox said the collective investment schemes will become designated as unrestricted companies under the Companies Act, and the incorporation process is simplified because the Minister's approval will no longer be required.

Government also recently did away with another hurdle that tied up the incorporation process by allowing CIS's to proceed with incorporation without having to wait for separate approval from regulator, the Bermuda Monetary Authority, and classification of the fund under the Collective Investment Scheme Regulations.

Although funds will no longer have to wait for classification before they get up and running, the BMA will continue to vet applications both for incorporation, and later, classification, with the Minister's statement saying "no funds would commence operations until they had received all the necessary regulatory approvals".

Government said the changes to fast-track fund incorporations were decided after the Finance Ministry met with the BMA and a CIS sub-committee of the Bermuda International Business Association, determining Bermuda could benefit from the changes without compromising the licensing process, as the BMA had sufficient expertise to carry out the full review process on its own.

"There is a keen willingness by the Ministry to ensure that the right balance is struck so that there is the requisite regulatory oversight coupled with a need to ensure that Bermuda maintains its competitive position as a premier financial services jurisdiction," the statement from Ms Cox said.

Government reported that Bermuda currently has about 1,500 collective investment schemes based here with a net asset value of $141 billion.

The Cayman Islands Monetary Authority website reveals there were 5,249 mutual funds registered in that jurisdiction, at the end of 2004. The net asset value of the funds was not disclosed.