The Bermuda Monetary Authority and the Bermuda International Business Association (BIBA) unveiled a new code of conduct yesterday in an effort to standardise the administration of the mounting number of mutual funds pouring into the island.

Three years into this process, the BMA will still have to rely on lawyers and other financial services providers to encourage operators of mutual funds to sign the code, and try to adhere to its provisions.

There is no penalty if they don't sign, even though collective investment schemes are subject to supervision, regulation and inspection by the Authority under the 1969 Bermuda Monetary Authority Act. The Code for Collective Investment Schemes is purely voluntary.

But proponents believe that because the guidelines in the code are commonly accepted principles that would be endorsed by anyone trying to operate a collective investment scheme, compliance should not be an issue.

The BMA and BIBA are now "discussing'' the introduction of regulations for collective investment schemes under section 29 of the Act.

The stated purpose is to create different classes for the schemes to encourage more to come to the Island.

But Bermuda has already become more attractive to such schemes. Mrs. Marcia Woolridge-Allwood, deputy general manager of the Bermuda Monetary Authority said: "It is an area of real potential growth. There are now some 550 collective investment schemes (including mutual funds and unit trusts) registered in Bermuda with an aggregated net asset value of $14 billion.

"We are now seeing 10 new funds a week and we are expecting that to grow.'' Chairman of BIBA's mutual funds committee, Mr. Michael Collins said: "It (the code) is a concise document that we can send overseas to potential clients.'' Manager of BMA's investment services division, Mr. Peter Sousa, said, "This code reflects international standards.'' BIBA chairman, Mr. Cummings Zuill, said: "It will make things easier for service providers and the industry.'' He said that it will provide a competitive message and a competitive advantage in marketing Bermuda overseas.

Mr. Zuill further stated that collective investment schemes have played a key role in the growth in international business.

Collective investment schemes include limited partnerships, in addition to unit trusts and mutual funds. But the code applies also to the service providers and lays out minimum standards and guidelines for signatories.

Schemes that are already in place are being asked to endeavour to bring their operation into compliance within a year.

The guidelines include the opportunity for inspection of a scheme's constitution by a prospective investor, and sets out exactly what such a constitution should include.

They provide for the publication of issue and redemption prices, the distribution to investors of regular reports, including audited financial statements and special reports to the manager and the Authority in the event that assets have failed to be invested, or the scheme is not managed, in accordance with the provisions of the constitution.

The managers of such schemes, normally Bermuda companies, need to demonstrate to the Authority their expertise and experience in managing such schemes and demonstrate an ability to manage the types of investments the scheme invests in.

The guidelines include the fact that the schemes' custodians must normally be a licensed Bermuda bank, or a subsidiary of such a bank, and the individual in that organisation who assumes that role must meet with the approval of the BMA.

The schemes registrar would have to be a Bermuda company empowered to carry on the business of a registrar, responsible for the issue, transfer, conversion and redemption of shares of the scheme and keeping the up-to-date records available for inspection.

The code also outlines the duties of the investment adviser for the schemes and a responsibility to demonstrate investment expertise.

Financial reports and the basis of their preparation is covered with specific requirements for what must be included. Also noted is the role of the Auditor and how the prospectus should be laid out.

Each prospectus should include a disclaimer statement for the BMA that reads: "Approvals or permissions received from the Bermuda Monetary Authority do not constitute a guarantee by the Authority as to the performance of the scheme or the creditworthiness of the company (or trust) involved.

"Furthermore, in giving such approvals or permissions, the Authority shall not be liable for the performance or default of the scheme or for the correctness of any opinions or statements expressed.'' Mr. Cummings Zuill.