Securities Industry Act, 2011

EXTRAORDINARY
OFFICIAL GAZETTE
THE BAHAMAS
PUBLISHED BY AUTHORITY
NASSAU 1 " June, 2011 (A)
11
Exhibit CR.1

SECURITIES INDUSTRY ACT, ;'.On
Arrangement of Section
Section
PART I -PRELIMINARY

Short title .......................................... " ..... " ..... ,,"" " ........ "" ....... """ .... ". " ............ 7
Commencement.. .. "". """"'" """" "." ......... " ................ ,," ........... " ...... " .. "" ........ 7
Purposes .......................................................................... " ................................... 7
Interpretation ........................................................................................................ 8
Ownership and control of securities ............ " .. " ............................... " .. " ... "" ... " 18
Control of an issuer"" """""'"'' ....... " .......... " ..................... " ..................... " ...... 18
Securities business ......................................... " ................... " ..... " ........ "" .... " "" 19
Carrying on business in The Bahamas .. "" .. " ........ " " ...... """ ....... " ........... " ........ 19
References .. "" .... " .......... " .... " ......... " .............. " ... " ,,''''''' .. ' '"'''''''''''''' ... ''''''' .. 20
PART n - THE SECURITIES COMMISSION 20
Continuation of the Commission""""" " .... "" .. """ " ......................................... 20
Declaration of interest.. ...................................................................................... 21
Functions of the Commission"" ..... "" ..... " " .... """. " ............... " .... ". ". "" "" .. " ". 22
Powers of the Commission""""." """"". ". " .... "'" " ......... "'''''' .. " ... ''''" "" ... " ,,23
Delegation .. ".,," ""." """. """ .... """ .... " " .. " .... " ". " ........... " ... " .. .. . . . ... .." ....... ". 2 3
Execntive Director"" ... "". """ ." .. " " .. ". ". "" " ... ". " .. " "" ....... " ............. " """ .. " ". 24
Funds and Resources""" .. "" .. ".". "" "" ... " .. "".". ". """""""''''''' ................. "" .. 24
Borrowing powers"" "."" .. """ .,," ". " .. "" ... "" "" .. " ....................... "" .. " ........ "." 24
Advances and Guarantees"". "" ". "" ". " .. ". "" ".' ". " ........................ " ... " ........ " .. 24
Repayment of interest.. .. ". """"'''''''''''''''''''''''' " ........... " ........... " ................. " .. 25
Surplus funds .... """""'" .... " ................... " ........ ""'''''' .. " ........................ " ....... 25
Reserve fund ...... " ...... " .... " ...... "". ". ""." .. " ."". """ ........ " .............................. 25
Authority to set fees ............ '"'''''''''''''''''''''''''''''''''''''''''' ............. " ......... " ....... 26
Balancing revenue and surplus .......... "."" ....... " .. " ...... "" .. "" ..... " ....... " .. " .. "",,26
Secretary and other officers""""""".""" .. " .. " .. """ ........ "" ... " .. "" ...... " ....... ".27
Commission staff.. """ ..... " .. " ... ". " .. " .. " ""'''''''''''' .......... " ..... " .... " ................... 27
Appointment of experts ...... " ........ " ............................... "" ............. "" ..... " .. " ..... 27
2 7 . Indemnity. ................. "'" ........ " ....... '" .. " ..... " ............ "... .. . .... "."........ . .. 2 8
Confidentiality ....... ". """'''''''''''''''''''''''''''''''''''''' .................... ". . .. " .... 28
Powers of Minister .. """"""""""'''''''''''''''''''''''''''... ...... '''''''''''' 29

Accounts, auditor and audit .............. " ....... " ............................. . Annual report ...... " ... """ """"' ......... ,,. " ... "" ...... ''',,,,, " ... .
.. .... 30
................... )0
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Commission procedures ................................................................. , ............... ,,30
Panels of the Commission ................................................................................. 31
PART HI -ASSISTANCE TO DOMESTIC AND FOREIGN
REGULATORY AUTHORITIES
DIVISION I - INTERPRETATION
32
32
Interpretation ...... , ............................................................................................ ,32
DIVISION 2 - ASSISTANCE TO DOMESTIC REGULATORY AUTHORITIES 33
Exercise of powers on behalf of domestic regulatory authorities ....................... 33
DIVISION 3 - ASSISTANCE TO FOREIGN REGULATORY AUTHORITIES 33
Conditions for provision of assistance ................ " ...................... ,,' .... . .... 33
Assistance that may be rendered ........................................................................ 34
DIVISION 4 - GENERAL 35

Authority to enter into Memoranda of Understanding ........................................ 35
Offences under this Part ........................................................ ' ..... " ... " ..... , ... ,.,.,36 Immunities ............... , ........ , ........ , ...................... "',., .... , ... , ... ,.,.',.,,., ... , ... ,. .36
PART IV - INVESTIGATIONS AND INSPECTIONS 37
DIVISION I-INTERPRETATION 37
41. Interpretation ............................. , ....................................................................... 37
DIVISION 2-INVESTIGATIONS 37
42. Power to investigate ............................................................. , ............. , ...... ,., ...... 37
43. Powers to obtain information for investigation .................................................. 37
44. Uncooperative witness liable for contempt... .................................................... 38
DIVISION 3-INSPECTIONS 38
45. Compliance inspections-regulated persons .................................. , ................. , ... 38
46. Power to require reports ........................................................................... " ... , .... 39
47. Compliance inspection of other market participants .......................................... .40
48. General. .... , .................... , ....... " ............. , .............................. ,' .... , ........ , .. , .. ".,., .. ,,40
49. Participation of other regulatory authorities in inspections under this Part ..... , . .41
DIVISION 4-PROVISION OF INFORMATION RELATING TO TRANSACTIONS 41
50. Provision of information ............ , ....... , ..................................... ,', ................. , .. ,.41
DIVISION 5-GENERAL 42
51. Liens ....................... , ............. , ....... , ................................................ ,"', .............. .4.2
52. Information about documents not in person's possession ................................. 42
53. Secrecy............................................................................................. . ..... 43
54. Exemption."" .............. , ................. " .... , ............ , ............... , " ........... ,' ..... 43
55. Privilege ........................ , .... , ....... , ............. " .. , ..... ,' ..... " ........... , .................... ,.,.43
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Use of documents etc ......................................................................................... 44
Offence of obstruction of investigations and inspections .................................. .44
PART V - REGULATION OF MARKETPLACES, ETC 44
Registration ....................................................................................................... 44
Conditions and restrictions on registration ........................................................ .45
Approval of regulatory instruments ................................................................... .45
Commission powers ........................................................................................... 45
Delegation .......................................................................................................... 46
Voluntary surrender ............................................................................................ 46
Auditors and audits ........................................................................................... .46
Reporting to the Commission ............................................................................. 47
Notices ............................................................................................................... 47
Keeping of records ........................................................................................... .47
Offences ............................................................................................................. 48
PART VI - REGISTRATION OF PERSONS CARRYING ON
SECURITIES BUSINESS 48
Registration requirement. ................................................................................... 48
Notices ............................................................................................................... 50
Surrender of registration ..................................................................................... 50
Criminal convictions .......................................................................................... 50
Voluntary liquidation .......................................................................................... 50
Offence ............................................................................................................... 51
PART VII - CONDUCT OF SECURITIES BUSINESS 51
Duties to c1ients .................................................................................................. 51
Auditor ............................................................................................................... 51
Reporting to the Commission ............................................................................. 52
Responsibility for actions of persons acting on behalf of registered firm or party
related to investment fund .................................................................................. 53
Keeping of records ............................................................................................. 53
Prohibition ......................................................................................................... 53
PART VIII - COMPENSATION FUND 54
Compensation funds .......................................................................................... 54
PART IX - DISTRIBUTIONS AND PROSPECTUSES 54
Interpretation ...................................................................................................... 54
Prospectus required ............................................................................................ 54
Receipt for preliminary prospectus .................................................................... 55
Selling activities before issue of receipt for prospectus ...................................... 55
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44
Defective preliminary prospectus............ .................... .... ........................ .. .... 55
Delivery of prospectus ........................................................................................ ))
Amendments ...................................................................................................... 56
Certificates ....................................................................................................... 56
Expert's consen!.. ............................................................................................... 56
Issue of receipt ................................................................................................... 56
Exempt distributions .......................................................................................... 57
Exemptions for approved foreign issuers ........................................................... 58
Distributions made outside The Bahamas .......................................................... 58
Resale restrictions ............................................................................................. 58
Lapse date ......................................................................................................... 58
Offence ............................................................................................................. 59
PART X - CONTINUING OBLIGATIONS OF PUBLIC ISSUERS 59
Disclosure to the public ..................................................................................... 59
Timely disclosure of material changes ............................................................... 60
Auditors and audits ............................................................................................ 61
Filing of annual audited financial statements .................................................... 61
Delivery of continuous disclosure documents to security holders ...................... 61
Proxies and proxy solicitation ............................................................................ 62
Exemptions for certain foreign issuers ............................................................... 63
Offence ............................................................................................................... 63
PART XI - GOVERNANCE OF PUBLIC ISSUERS 64
Governance of public issuers ............................................................................ 64
PART XII - TAKE-OVER BIDS 64
Take-over bids ....................................................... .. . .............................. 64
PART XIII - MISCONDUCT 64
Application and definitions ............................................................................. 64
Market manipulation ......................................................................................... 65
False trading and market rigging-creating a false or misleading appearance of
active trading etc ................................................................................................ 65
False trading and market rigging-artificially maintaining etc. trading price ...... 66
Misleading or deceptive conduct... ................................................................... 66
Misleading the Commission ............................................................................ 67
Dissemination of infonnation about illegal transactions ................................... 67
False or misleading statements ........................................................................... 67
Inducing persons to deaL .................................................................................. 68
Dishonest conduct... .......................................................................................... 68
Prohibited representations ................................................................................ 68
Prohibition on purchasing or selling of securities by certain persons ................ 69
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55
Front running ..................................................................................................... 70
Defence-belief that other party knows information ............................................ 71
Defence of automatic or predetermined trade ..................................................... 71
Defences- trading as agent ................................................................................. 71
Defences-trade or recommendation by individual with no inside or material
order information ............................................................................................... 72
Exemptions and modifications ........................................................................... 72
Offences ............................................................................................................. 72
PART XlV - REPORTING BY SECURITY HOLDERS Of PUBLIC
ISSUERS 73
Application ......................................................................................................... 73
Initial insider report ............................................................................................ 73
Disclosure of beneficial interest in share capitaL ............................................. 74
Public issuer to keep register of its security holders ........................................... 75
Offence .............................................................................................................. 75
PART XV - ENFORCEMENT 75
Compliance orders ............................................................................................. 75
Orders in the public interest... ............................................................................ 75
Application to court ............................................................................................ 78
Administrative penalty ....................................................................................... 79
Removal of benefits ........................................................................................... 79
Payment of costs ................................................................................................ 79
Order to freeze property ..................................................................................... 79
Hearings ............................................................................................................. 80
Limitation periods .............................................................................................. 81
Directors and officers ........................................................................................ 81
PART XVI - CIVIL LIABILITY FOR MISREPRESENTATIONS 82
Interpretation ..................................................................................................... 82
Liability for misrepresentation in prospectus-damages ...................................... 82
Action by security holders for rescission for misrepresentation in prospectus ... 84
Due diligence defence ........................................................................................ 84
Commission may seek leave to bring action or appear or intervene in an action .
........................................................................................................................... 84
General... ........................................................................................................... 85
PART XVII - GENERAL PROVISIONS 85
Regulations......... .... ... ....... ........ .... ... ... ......... ........ ..... ... ............ . .. 85
Rules ................................................................................................................ 86
Rule-making process .......................................................................................... 86
Regulation prevails over rule.. ... ......... ...... ... ... .... ... ..... ........ . ............. 87
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66
Power to vary Commission rules ........................................................................ 87
Power to remove exemption contained in Commission rule ............................... 87
Guidelines ................................................................................. ' ........................ 87
ISS. Administrative proceedings and reviews.: .......................................................... 88
Review of decisions of securities exchange etc .................................................. 88
Appeals to court ................................................................................................. 88
Filing of documents and public availability ........................................................ 89
Verification ......................................................................................................... 90
Register as evidence ........................................................................................... 90
Discretionary exemptions ................................................................................... 90
Designation orders ............................................................................................. 90
Conditions on decisions ..................................................................................... 91
Discretion to revoke or vary decision ................................................................. 91
Recognition offoreignjurisdictions and foreign securities exchanges ............... 91
Commission to keep register .............................................................................. 91
Stamp duty exemption ........................................................................................ 91
PART XVIII - TRANSITION PROVISIONS AND REPEALS 91
Definitions ......................................................................................................... 91
Existing unregistered market participants .......................................................... 92
Securities exchanges registered under the former Act... ..................................... 92
Clearing facilities registered under the former Act.. ........................................... 92
Broker-dealers and securities investment advisors ............................................. 92
Registered individuals ........................................................................................ 92
Interim financial statement requirements for public issuers ............................... 92
Insider reporting obligations .............................................................................. 93
Savings .................................. ' ............................................................................ 93
Repeals ............................................................................................................... 93
FIRST SCHEDULE
PART 1 - SECURITIES
PART 2 - SECURITIES BUSINESS - REGULATED ACTIVITIES
PART 3 - EXCLUDED ACTIVITIES
PART 4 - EXCLUDED PERSONS
SECOND SCHEDULE
THE COMMISSION
THIRD SCHEDULE (SECTION 177)
REPEALS
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94
97
98
102
104
104
105
105
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No. 10 of2011
SECURITIES INDUSTRY ACT, 2011
AN ACT TO UPDATE AND MODERNISE THE LAW RELATING TO THE REGULATION OF SECURITIES EXCHANGES AND THE SECURITIES INDUSTRY; TO EXPAND AND ENHANCE THE POWERS OF THE SECURITIES COMMISSION; TO REPEAL THE SECURITIES INDUSTRY ACT, CHAPTER 363 AND FOR CONNECTED MATTERS [Date of Assent - I st June, 20 II] Enacted by the Parliament of Tile Bahamas
PART I -PRELIMINARY

Short title.
This Act may be cited as the Securities Industry Act, 2011 ,
Commencement.
This Act shall come into operation on such day as the Minister, by notice published in the Gazette, may appoint and the Minister may cause different provisions of this Act to come into operation on different days by notice or notices published in the Gazette.
Purposes.
The purposes of this Act are to -
(a) provide protection to investors from unfair, improper or fraudulent practices; (b) foster fair and efficient capital markets and confidence in the capital markets in the Bahamas; (c) reduce systematic risk;
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(d) reduce the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime such as money laundering, fraud and insider dealing; and (e) promote public understanding of the financi al system including awareness of the benefits and risks of different kinds of investment or other financial dealing.
4. Interpretation.
In this ActPage - 8
"affiliate" means, in relation to an issuer, another issuer if - (a) one of them is the subsidiary of the other; or (b) the same person controls each of them; "alternative trading system" or "ATS" means a marketplace that- (a) is not a quotation and trade reporting system or a securities exchange; and (b) does not - (i) require an issuer to enter into an agreement to have its securities traded on the marketplace; (ii) provide, directly, or through one or more subscribers, a guarantee of a two-sided market for a security on a continuous or reasonably continuous basis; (iii) set requirements governing the conduct of subscribers, other than conduct in respect of the trading by those subscribers on the marketplace; and (iv) discipline subscribers other than by exclusion from participation in the marketplace; "ancillary facility" means any person providing prescribed services to a marketplace, clearing facility, registrant, or to a public issuer with securities listed or traded on a marketplace, where the services facilitate or are ancillary to the operations of a marketplace; "approved auditor" has the prescribed meaning; "approved foreign issuel'" means a foreign issuer that - (a) is a public issuer, or equivalent, under the securities laws of a recognised foreign jurisdiction; and (b) meets the prescribed criteria; "approved rating organization" means an organization that is prescribed as such; "associate" means, if used to indicate a relationship with a person, - (a) a partner, other than a limited partner, of the person; 99

(b) a trust or estate in which the person has a substantial beneficial interest or for which the person serves as trustee or in a similar capacity; (c) an issuer of which the person owns or controls voting securities carrying more than 10% of the voting rights attached to all outstanding voting securities of the issuer; or (d) a family member of the person, or a fami ly member of the person's spouse, if the family member has the same home as that person; "beneficial owner" means the person who is entitled to the benefits of ownership of a security although that person may not be the registered owner of the security; "beneficial ownership" includes ownership through a trustee, legal representative, agent or other intermediary; "bnsiness combination" means an amalgamation, merger, arrangement or similar transaction; "clearing facility" means a person that - (a) maintains records of trades of securities for the purpose of settling claims for money and securities; (b) maintains records of transfers and pledges of securities for the purpose of permitting securities to be transferred by record entry; (c) holds security certificates deposited with it for the purpose of permitting securities to be transferred by record entry; or (d) performs any combination of two or more functions referred to in paragraphs (a) to (c), but does not include a registrant or financial institution acting exclusive ly in the ordinary course of its customary business; "Commission" means the Securities Conunission of The Bahamas as continued under Part II; "company" means any corporation or other incorporated person; "Consolidated Fund" means the fund established by Article 128 of the Constitution; "control block holder" means a person that - (a) holds more than 30% of the voting rights attached to all an issuer's outstanding voting securities; or (b) is able to affect materially the control of the issuer, whether alone or by acting in concert with others; "decision" means -
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(a) if used in relation to the Commission or a person delegated a power of the Commission, a direction, decision, order, ruling or requirement made under securities laws, or (b) if used in relatiQn to a marketplace, self-regulatory organisation or clearing facility, a direction, decision, order, ruling or requirement made in relation to a regulatory instrument; "director" means a director of a corporation or an individual performing a similar ftmction or occupying a similar position for a company or for any other person; "distribution" means - (a) a trade in a security of an issuer that has not been previously issued; (b) a trade, by or on behalf of an issuer, in a previously issued security of that issuer that has been redeemed, purchased by or donated to that issuer; (c) a trade in a previously issued security of an issuer by a control block holder; (d) a trade within a prescribed class of trades; or (e) a trade described in an order made under subsection 161 (2); "distribution period" means the period between the issue of the receipt for a prospectus and the earlier of- (a) the date the distribution ceased; and (b) the lapse date of the prospectus under section 96; "document" includes, in addition to a document in writing, - (a) an electronic communication as defined in the Electronic Communications and Transactions Act, 2003; (b) any map, plan, graph or drawing; (c) any photograph; (d) any disc, tape , sound track or other device in which sounds or other data, not being visual images, are embodied so as to be capable, with or without the aid of some other equipment, of being reproduced; and (e) any film, negative, tape or other device in which one or more visual images are embodied so as to be capable, with or without the aid of some other equipment, of being reproduced; "domestic regulatory authority" means an authority in The Bahamas that exercises regulatory, supervisory, enforcement or similar functions and includes - 1111

(a) authorities that regulate or supervise financial institutions; (b) securities exchanges; (c) self-regulatory organisations; (d) law enforcement agencies; (e) governmental or regulatory agencies not mentioned 10 paragraph (a) to (d); and (f) any other Bahamian authority, as prescribed; "Executive Director" means the Executive Director of the Commission; "expert" means a lawyer, engineer, accountant, valuator or any other person whose profession or reputation gives authority to a statement made by the person; "expert's report" means a report, opinion, valuation or statement made or purporting to be made by an expert; "family member" means a person's spouse, parent, grandparent, brother, sister, child or grandchild; "file" means to submit a document to the Commission as required under a provision of securities laws that requires such document be filed, other than a document provided to the Commission under Part IV; "financial institution" means a bank or trust company licensed under the Banks and Trust Companies Regulation Act (Ch. 316) or an insurance company registered under the Insurance Act (Ch. 341); "foreign issuer" means an issuer that is not organized under the laws of The Bahamas; "foreign disclosure requirements" means the requirements to which a foreign issuer is subject concerning disclosure made to an overseas regulatory authority in a recognised foreign jurisdiction, which disclosure is made publicly available; "foreign jurisdiction" means a jurisdiction other than The Bahamas; "form of proxy" means a written or printed form that, upon completion and signature by or on behalf of a security holder, becomes a proxy; "former Act" means the Securities Industry Act (Ch. 363); "generaUy accepted accounting principles" means the standards promulgated by the International Accounting Standards Board or as prescribed; "generaUy accepted auditing standards" means the International Standards on Auditing issued by the International Auditing and Assurance Standards Board or as prescribed; "inside Information" means material information that has not been generally disclosed; "insider" meansPage - 11 1212

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(a) a director, senior officer or significant security holder of an Issuer; or (b) a director or senior officer of a subsidiary of an issuer, or of a significant security holder of an issuer, if the director or senior officer's responsibilities routinely provide the individual witb access to inside information about the issuer; "interim period" means a completed three, six or nine month period in a financial year; "investment fund" has the meaning given in the Investment Funds Act, 2003; "investment fund administrator" has the meaning given in the Investment Funds Act, 2003; "issuer" means a person tbat - (a) has a security outstanding; or (b) proposes to issue a security; "issuer bid" bas the prescribed meaning; "jurisdiction" means a country or territory or a political subdivision of a country or territory; "market participant" means - (a) a marketplace; (b) a self-regulatory organi zation; (c) a clearing facility; (d) a registrant; (e) a compensation, contingency or similar fund formed to compensate clients of registrants; (I) a custodian of assets of a registrant or a client of a registrant; (g) a public issuer; (h) a transfer agent or registrar for securities of a public issuer; (i) an investment fund; (j) a party related to an investment ftmd; (k) a general partner or a partner, director, officer or significant security holder of a person referred to in tbis definition; (I) a person that tbe Commission has ordered is exempt from a provision of securities laws; (m) a rating organisation; or (n) a person described in an order made under subsection 161 (2); but does not include a person - (aa) described in an order made under subsection 161(1); or 1313

(bb) within a prescribed class of persons;
"marketplace" means -
(a) a securiti es exchange, a quotation and trade reporting system, or an ATS; (b) a person not included in paragraph (a) that - (i) constitutes, maintains or provides a market or facility for bringing together buyers and sellers of securities; (ii) brings together the orders for securities of multiple buyers and sellers; and (iii) uses established, non-discretionary methods under which the orders interact with each other, and the buyers and sellers entering the orders agree to the terms of a trade; or (c) a person described in an order made under subsection 161 (2), but does not include a person - (aa) described in an order made under subsection 16 1 (I); or (bb) within a prescribed class of persons; "material information" means information relating to the business, operations or securities of an issuer tbat would reasonably be expected to significantly affect the value or market price of the issuer or a security of tbe issuer; "Member" means a person appointed by the Minister to the Commission under section 1 0; "Minister" means the Minister to whom responsibility for finance is assigned; "misrepresentation" means- (a) in re lation to an issuer - (i) an untrue statement of material information; (ii) the failure to disclose material information that is required to be disclosed; or (iii) the omission of material information from a statement, if that information is necessary to prevent the statement from being false or misleading in the circumstances; (b) in any other circumstance, a statement about something that a reasonable investor would consider important - (i) in making a decision to trade a security; or (ii) in relation to a trading or advising relationship with a person,
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if the statement is untrue or omits information necessary to prevent the statement from being false or misleading in the circumstances; "offering document" means a document, together with any amendments to that document, purporting to describe the business and affairs of an issuer that has been prepared primarily for delivery to and review by a prospective purchaser so as to assist the prospective purchaser to make an investment decision regarding securities being sold in a distribution to which section 83 would apply but for the availability of one or more of the exemptions contained in this Act or regulations; "officer" means an individual working in an executive capacity for the Commission, an issuer, a registrant or any other person; "order" means, unless a contrary intention appears, an order or decision ofthe Commission or its delegatee; "overseas regulatory authority" means an authority in a jurisdiction outside The Bahamas that exercises functions corresponding to any function of the Commission; "party related to an investment fund" has the meaning given in the Investment Funds Act, 2003; "person" includes an individual, company, pminership, party, trust, fund, association and any other organized or incorporated group of persons, and the personal or other legal representative of any person to whom the context can apply; "prescribe" or "prescribed" means prescribed by regulation or rule; "private company" means a company whose constitutive document- (a) restricts the right to transfer its shares; (b) limits the number of its security holders to no more than fifty beneficial owners, where two or more persons holding securities jointly shall be counted as one person; and (c) prohibits any invitation to the public to subscribe for any securities of the company; "prospectus" means a notice, circular, advertisement or document inviting applications or offers to subscribe for or purchase securities, or offering any securities for subscription or purchase; "proxy" means a completed and signed form of proxy by which a holde,- of voting securities of an issuer appoints a person to attend and act on the security holder's behalf at a meeting of security holders; "promoter" means a person that takes the initiative in founding or . . . orgamzmg an Issuer; "public issuer" means an issuer that - 1515

(a) has filed a prospectus for which the Commission has issued a receipt under Part IX; (b) has completed a takeover, business combination or other reorganisation, involving an exchange of securities in which one of the parties was a public issuer; (c) has issued a security that- (i) was listed for trading on a securities exchange registered with the Commission at the time this Act comes into force; or (ii) at any time after this Act comes into force, has been traded on a registered marketp lace registered under
Part V;
(d) was a public company or deemed public company under the former Act at the time that Act was repealed; or (e) is described in an order made under subsection 161(2); but does not include an issuer- (aa) described in an order made under subsection 161(1); (bb) that is an investment fund; or (cc) within a prescribed class of issuers; "publish" with respect to an action to be taken by the Commission includes- (a) publish in a daily newspaper of general circulation in The Bahamas; (b) print in a periodical regularly published by the Commission; (c) post on the Commission's website; or (d) any other method of publication of the rule or proposed rule as prescribed; "purchase" includes any purchase or acquisition of a security for valuable consideration, whether the terms of payment are on margin, instalment or otherwise, but does not include a transfer, pledge or encumbrance of securities for the purpose of giving collateral for a bona fide debt; "quotation and trade reporting system" means a facility that disseminates price quotations for the purchase and sale of securities and reports of completed transactions in securities for the exclusive use of registrants, but does not include a securities exchange, ATS or a registrant; "rating organization" means an organization that issues publicly available ratings that are current assessments of the creditworthiness of obligors with respect to specific securities;
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"recognised foreign jurisdiction" means a foreign jurisdiction recognised under section 165; "recognised foreign securities exchange" means a securities exchange located in a foreign jurisdiction recognised under section 165; "registrant" means any person registered under Part VI of the Act or required to be so registered; "registered clearing facility" means a clearing faci lity registered under
Part V of the Act;
"registered firm" means a person registered under subsection 69(1) to carryon securities business in The Bahamas; "registered marketplace" means a marketplace registered under Part V of the Act; "registered representative" means an individual who is registered under subsection 69(4) to act on behalf of a registered firm; "registered securities exchange" means a securities exchange registered under Part V of the Act; "registered self-regulatory organisation " means a self-regulatory organisation registered under Part V of the Act; "regulated person" means a registrant, a person registered under Palt V of the Act, an investment fund or an investment fund administrator; "regulations" means the regulations made under this Act and, unless the context otherwise indicates, includes the rules; "regulatory instrument" means a by-law, rule or other similar instrument of a marketplace, clearing facility or self-regulatory organization; "representative" means, when used in relation to a registrant, an individual who acts for or on behalf of the registrant in the carrying out of securities business and who is a director, officer, partner or employee of the registrant who performs any such securities business for the registrant; "reserve fund" means the fund established by the Commission under
section 2 1;
"sale" includes a sale or disposition of a sec1ll1ty for valuable consideration, whether the telms of payment are on margin, instalment, or otherwise; but does not include a transfer, pledge or encumbrance of securities for the purpose of giving collateral for a bona fide debt; "securities" means the assets, rights or interests specified in Palt 1 of the First Schedule; "securities activity" means an activity comprising securities business set out in Part 2 of the First Schedule; 1717

"securities business " has the meaning assigned in section 7; "securities exchange" means a marketplace, other than a quotation and trade reporting system or ATS, that maintains or provides - (a) physical facilities where persons may meet to execute trades in securities; or (b) a mechanical, electronic or other system that faci litates execution of trades in securities by matching offers of purchase and sale; "securities laws" means this Act and the Investment Funds Act, 2003; "self-regulatory organization" means a person, other than a marketplace, that sets standards for, or monitors the conduct of, its members or participants relating to trading in or advising on securities; " senior officer" means an officer of an issuer whose responsibilities routinely provide the officer with access to inside information about the issuer; "significant security holder" means, in relation to a person, a security holder that - (a) owns or controls 10% or more of any class of the person's voting securities, excluding any securities that the security holder, if a registrant, holds in the course of a publi c distribution; or (b) is able to affect materially the control of the person, whether alone or by acting in concert with another person; "spouse" means a person who- (a) is married to another person and is not living separate and apart from that person; or (b) is living and cohabiting with another person in a marriagelike relationship; "subsidiary" means an issuer that is controlled by another issuer; "subscriber", when used in relation to an ATS, means any person that has entered into a contractual agreement with an ATS to access such ATS for the purpose of effecting transactions in securities or submitting, disseminating or displaying orders on such ATS, including a client, member user or participant in the ATS; "surplus funds" has the meaning given the term in section 20; "take-over bid" has the prescribed meaning; "trade" includes - (a) any purchase or sale of a security for valuable consideration; or
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(b) any participation as a registrant or agent in any transaction in a security; "undenvriter" means a person who - (a) as principal, agrees to purchase a security for the purpose of a distribution; (b) as agent, offers for sale or sells a security in connection with a distribution; or (c) participates directly or indirectly in a distribution described in paragraph (al or (b) for valuable consideration, but does not include- (aa) a person whose interest in the transaction is limited to receiving the usual and customary distribution or sales commission payable by an underwriter or issuer; or (bb) an issuer that purchases shares of its own issue and resells them; "voting security" means a security carrying voting rights - (a) under all circumstances; or (b) by reason of the occurrence of an event that has occurred and is continuing, and includes a right to acquire such a security.
5. Ownership and control of securities.
In this Act-
(a) a person owns a security if the security is beneficially owned by the person; (b) a person controls a security if- (i) the person, directly or indirectly, directs the trading or voting of the security; (ii) the security is owned by an issuer that the person controls; or (iii) the security is owned by an affiliate of the person or by an issuer that the person controls.
6. Control of an issuer.
(1) A person controls an issuer if the person, acting either alone or jointly or in concert with other persons, has the power to direct that the business ;.;'; '.' affairs of the issuer be conducted in accordance with the person's wishes. (2) Where the person or persons own or control more than fifty percent of the outstanding securities carrying voting rights in an issuer, such person or persons are deemed to control the issuer.
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(3) Where the person or persons own or control more tban thirty percent of the outstanding securities carrying voting rights in an issuer, such person or persons are presumed to control the issuer. (4) The power under subsection (1) to direct the business and affairs of an issuer may arise through the ownership or control over securities of the issuer, or by virtue of any agreement, arrangement commitment or understanding with any person or persons.
7. Securities business.
(1) For the purposes of this Act, a person carries on securities business if that person is engaged in the course of business in anyone or more of the securities activities set ont in the Part 2 of the First Schedule. (2) For the purposes of this Act, a person engages in securities business if that person enters or offers to enter into an agreement the making or performance of which by either party constitutes a securities activity. (3) The activities set out in Part 3 of the First Schedule do not constitute securities business for the purposes of this Act. (4) Without prejudice to the generality of subsection 149(1), the Commission may, by rule, amend the First Schedule by deleting or amending any of the provisions or adding new provisions.
8. Carrying on business in The Bahamas.
(I) For the purposes of this Act, a person carries on securities business in or from The Bahamas if such person - (a) is incorporated, established or registered under any law in The Bahamas; (b) carries on securities business from a place of business maintained by such person in The Bahamas; or (c) engages in an activity the doing of which constitutes the carrying on by such person of securities business in or from The Bahamas under an order made under subsection (2). (2) The Commission may make an order specifying the circumstances 111 which a person is to be regarded as - (a) carrying on securities business in or from The Bahamas; or (b) not carrying on securities business in or from The Bahamas. (3) An order under subsection (2) may be made so as to apply - (a) generally to all securities activities; (b) in relation to a specified category of securities activity; or (c) in relation to a particular securities activity.
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(4) An order made under subsection (2) may be made subject to conditions. (5) For the purpose of this section, a person maintains a place of business if the person carries on securiiies business from premises the person occupies, at which the person employs staff and pays salaries and other expenses in cOlmection with that business.
9. References.
Any reference in this Act -
(a) to "the Act" shall, unless expressly stated, include a reference to any regulations, rules, orders, notices and other subsidiary legislation made under this Act; (b) to "securities laws" shall, unless expressly stated, include a reference to any regulations, rules, orders, notices and other subsidiary legislation made under a securities law; and (c) to any other statute shall, unless expressly stated, include a reference to any regulations, rules, orders, notices and other subsidiary legislation made under that statute.
PART II - THE SECURITIES COMMISSION
10. Continuation of the Commission.
(I) The Securities Commission of the Bahamas, a body corporate continued under the former Act, is continued. (2) The Second Schedule shall have effect with respect to the Commission. (3) The Members of the Commission shall consist of a Chairman, a Deputy Chairman and such number of other Members, not being more than seven, as the Minister may from time to time determine. (4) The Minister shall appoint all the Members and shall appoint one of their number to be its Chairman. (5) The Members shall be selected from among persons identified in the prescribed manner and who appear to the Minister to be qualified as having had experience of or shown capacity in matters relating to industry, commerce, law, [mance or administration. (6) In addition to Members appointed in subsection (3) the Executive Director of the Commission, the Governor of the Central Bank and the Registrar of Insurance shall be ex-officio Members of the Commission. (7) The Chairman shall hold office for a term of five years and sha ll be eligible for re-appointment for one additional term only.
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.,
I (8) The Deputy Chairman and the other Members of the Commission shall hold office for such term, not exceeding four years, as the Minister may direct in the instrument appointing such Member, and shall be eligible for re-appointment. (9) A Member shall not be eligible for re-appointment, if, by reason of consecutive appointments to the Commission, he has been a Member for a continuous period of ten years or more. (10) The Minister shall, in setting the term of appointment or re-appointment of a Member, consider the terms of the other Members then in office and use the Minister's best efforts to provide that the terms of no more than one third of the Members expire in any twelve month period. (11) The Minister may, by instrument in writing, appoint some suitable person as a Member of the Commission to act temporarily in the place of any Member who is absent or otherwise unable to act. (12) The Minister shall appoint new Members of the Commission on the advice of the Commission and the securities and investment funds industries in The Bahamas. (13) A Member may at any time resign his Membership by notice in writing addressed to the Minister. (14) The Minister may terminate the appointment of the Chairman, the Deputy Chairman or a Member of the Commission if the Minister is satisfied that the person - (a) has been absent from meetings of the Commission for more than three consecutive meetings without the permission of the Commission or without reasonable cause; (b) has become bankrupt or made arrangements with his creditors; (c) is incapacitated by physical or mental illness; (d) has been, in The Bahamas or in any other jurisdiction, convicted of a criminal offence involving fraud or dishonesty, or found liable in a civil or regulatory action for activities involving fraud or dishonesty; or (e) is otherwise unable or unfit to discharge the fimctions of the position to which that person was appointed. ( 15) A Member shall be paid such remuneration and allowances in respect of the Member's office as the Minister may determine from time to time. (16) The appointment, termination, death or resignation of any Member of the Commission shall be published promptly in tbe Gazette.
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Declaration of interest
(l) In carrying out the Member's duties and activities, the Member shall act honestly, fairly and with integrity and in the best interests of the Commission. (2) A Member who is in any way, whether directly or indirectly, interested in a matter before the Commission shall avoid any real or potential conflicts which a reasonable person may consider sufficiently material to affect a Member's judgement. (3) A Member with an interest in a matter shall not take part in any deliberations or vote on that matter and shall leave the room during such deliberations. (4) For the purposes of this section, a Member shall be deemed to have an interest in a matter if the Member, the Member's spouse or child, or any other relative that resides in the same dwelling as the Member, or the Member's nominee, is a security holder or partner in, or an officer or director of, an issuer having an interest or being involved in a matter before the Commission.
Functions of the Commission.
(l) The functions of the Commission are to -
(a) advise the Minister on all matters relating to the capital markets and its participants; (b) maintain surveillance over the capital markets and ensure orderly, fair and equitable dealings in securities; (c) foster timely, accurate, fair and efficient disclosure of information to the investing public and the capital markets; (d) protect the integrity of the capital markets against any abuses arising from financial crime, market misconduct and other unfair and improper practices; ( e) promote an understanding by the public of the capital markets and its participants and the benefits, risks, and liabilities associated with investing; (f) create and promote conditions that facilitate the orderly development of the capital markets; and (g) perform any other function conferred or imposed on it by securities laws or Parliament. (2) In the exercise of its functions the Commission shall satisfy itself that the provisions of the Financial Transactions Reporting Act, 2000 and any other Act or regulation administered by the Commission are being complied with.
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Powers of the Commission.
For the purpose of the discharge of its functions the Commission has power, subject to this Act, to - ' (a) regulate and govern the capital markets and its participants; (b) deal with such matters as may be referred to it by any person from time to time; (c) authorize and regulate registrants, marketplaces, investment fund administrators and other market participants with a view to maintaining proper standards of conduct and professionalism in the capital markets; (d) monitor the solvency of regulated persons and take measures to protect the interests of clients and others where the solvency of any such person is in doubt; (e) regulate issuers offering their securities to the public, including public issuers and investment funds; (f) adopt measures to supervise and minimise any conflict of interests that may arise in the case of market participants; (g) regulate take-over bids; (h) take enforcement action against any person for failing to comply with securities laws; (i) recommend regulations to the Minister and formulate rules; (j) publish notices, guidelines, bulletins, and policies describing the views of the Commission regarding the interpretation, application, or enforcement of securities laws; (k) make any order which the Commission may make under securities laws; and (1) do all things, and take all actions, which may be necessary or expedient or are incidental to the discharge of any function or power given to the Commission.
Delegation.
(l) The Commission may, by order, delegate any responsibility, power or function conferred on it by securities laws, except the power to make rules and to hear appeals within its jurisdiction, to the Executive Director or any officer of the Commission. (2) The Executive Director may, by written order, sub-delegate to any employee of the Commission any responsibility, power or function delegated to the Executive Director by the Commission under subsection (l), unless the Commission delegation order specifically states that no sub-delegation is permitted.
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Executive Director.
The Minister shall appoint an Executive Director who shall - (a) hold office on such terms as the Minister shall approve; and (b) perform the duties assigned by the Commission or by any written law.
Funds and Resources.
Subject to section 22, the funds and resources of the Commission shall consist of (a) all sums provided by Parliament; (b) all fees and other sums from time to time paid to or received by the Commission from its operations; (c) all sums from time to time borrowed by or advanced to the Commission under this Part; and (d) all other sums or other property as from time to time may in any manner be lawfully paid to or vested in the Commission whether or not for any matter incidental to its functions.
Borrowing powers.
(I) Subject to this section, the Commission may borrow sums required by it to meet any of its obligations or discharge any of its functions and may, in respect of any borrowing, issue debentures in such forms as the Commission may detennine. (2) Any borrowing of the Commission pursuant to subsection (l) shall be subject to the approval of the Minister as to the amount to be borrowed, the source of the borrowing and the terms on which the borrowing may be effected. (3) An approval given for the purposes of this section may be either general or limited to a particular borrowing or otherwise and may be either unconditional or subject to conditions.
Advances and Guarantees.
(l) Subject to subsection (3), the Minister may at the request of the Commission make advances to the Commission for the purposes of enabling the Commission to defray expenditures properly chargeable to its capital account, including provision of working capital; (2) Subject to subsection (3), the Minister may at the request of the Commission guarantee, in any such manner and on any such conditions as the Minister thinks fit, the repayment of the principal of, and the payment
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of interest and other charges on, any authorised borrowings of the Commission made under this Part. (3) The prior approval of the House of Assembly in accordance with section 17 of the Financial Administration and Audit Act must be given to any guarantee under this section. . (4) Where any sum is paid under a guarantee given under this section, the Minister shall as soon as practicable after the end of each financial year that there is any amount outstanding, lay before the House of Assembly a statement relating to that sum. (5) Any sums required by the Minister for making, advancing and discharging any guarantees under this section shall be charged on and issued out of the Consolidated Fund. (6) In this section and in this Part "financial year" means the period of twelve months beginning on I st January in any year.
19. Repayment of interest.
(l ) The Commission shall make to the Minister at such times and in such manner as the Minister may direct, payments on any amount as may be directed in or towards repayment of any sums issued in fulfilment of any guarantee given under this Part and payments of interest on any outstanding sums so issued at such rate as the Minister may direct, and different rates of interest may be directed for different periods. (2) The Minister shall lay before the House of Assembly a statement of any payment due from the Commission under subsection (I) that is not duly paid as required.
20. Surplus funds.
(I) Subject to subsection (2), all sums standing to the credit of the Commission and not required for any current purpose (in this Part referred to as "surplus funds") may from time to time either be carried to any reserve fund established under section 2 1 or be invested by the Commission in government securities approved by the Minister; and the Commission may from time to time, with the approval of the Minister, sell any or all of such securities. (2) No surplus funds are to be carried to the reserve fund or invested 10 securities under subsection (1 ) without the consent of the Minister.
21. Reserve fund.
(I) The Commission shall establish a reserve fund and may determine the management of the fund, the sum to be carried from time to time to the credit of the fund and the application of the fund.
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(2) No part of the reserve fund shall be applied otherwise than for the purposes of the Commission.
22. Authority to set fees.
(I) For the purpose of carrying out its powers or functions, the Commission may, by rule, prescribe the fees payable to the Commission for any function performed by the Commission or required under securities laws. (2) Despite the provisions of any other law- (a) the fees payable to the Commission under securities laws; (b) the revenue from the exercise of a power conferred or the discharge of a duty imposed on the Commission under securities laws; and (c) the investments held by the Commission, do not form part of the Consolidated Fund and, subject to this section, shall be applied to carrying out the powers conferred and duties imposed on the Commission under securities laws. (3) Funds received by the Commission- (a) under subsection 135(1) or section 136; or (b) under a settlement of a matter relating to a contravention or alleged contravention of this Act, excluding an amount designated in the settlement as - (i) a cost recovery; or (ii) an allocation to or for the benefit of a third party, may be expended only for the purpose of promoting public understanding of the financial system. (4) When ordered to do so by the Minister, the Commission shall pay into the Consolidated Fund such of its surplus or reserve funds as the Minister requires, other than an amount held pursuant to subsection (3). (5) In determining the amount of a payment to be made under subsection (4), the Minister shall allow reserves for the future needs of the Commission as the Minister considers appropriate, and shall ensure that the payment will not impair the Commission's ability to pay its liabilities. meet its obligations as they become due or fulfil its contractual commitments.
23. Balancing revenue and surplus.
(I) The Commission shall discharge its functions to ensure that its reven",," are not less than sufficient to meet all sums properly chargeable to its revenue accounts and its funds under sections 20 and 21 taking one year with another.
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(2) Any excess of the revenue of the Commission for any financial year over the sum properly chargeable to its revenue account and its funds under sections 20 and 21 for that year shall be applied by the Commission for the purposes of the Commission.
24. Secretary and other officers.
(1) The Commission -
(a) shall appoint an employee to be the Secretary of the Commission, who shall be an officer of the Commission; and (b) may appoint other employees to be officers of the Commission as it considers necessary. (2) The Commission may terminate the appointment of an officer at any time.
25. Commission staff.
(l) The Commission may employ any person the Commission considers necessary to perform its duties and exercise its powers under securities laws. (2) Except as provided in any contract of employment with the Commission, the Minister may grant to any employee of the Commission in respect of his service with the Commission pensions, gratuities or other like allowances at the rate prescribed by and in accordance with the provisions of the Pensions Act (Ch. 43) as if reference in that Act to the "GovemorGeneral", the "public service" and a "public officer" were references to the Commission acting with the approval of the Minister, service in the Commission and such employee, respectively. (3) For the purpose of subsection (l) reference to the service of an employee of the Commission includes any continuous period of service of that employee with an approved authority immediately prior to his service with the Commission. (4) In this section the expression "approved authority" has the same meaning as in section 2 of the Pensions Act (Ch. 43). (5) The pensions, gratuities or other like allowances which are payable under subsection (1) shall be charged on and paid out of the funds of the Commission or the Consolidated Fund.
26. Appointment of experts.
(I) The Commission may appoint, hire or retain, on such terms and conditions as it may approve, an expert to assist it in any manner that it considers necessary.
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(21 Where the Commission appoints an expert to advise it on the development of specific policies, rules or other regulatory proposals of the Commission, the expert shall fo rmulate and report the expert's views to the Commission tn writing and the Commission may. if it thinks fit. make tbe report available to the public.
27. Indemnity.
( I) No civil or criminal liability shall attach to the Commission, a Member, the Executive Director, an employee or an agent of the Commission for an act done in good faith in the performance of a duty or in the exercise of a function or power of the Commission under this Act or the Investment Funds Act, 2003 or the regulations made under either Act. (2) The Commission may indemnify a Member, the Executive Director, an employee or an agent of the Commission against the cost of defending his actions while so discharging his functions. (3) No civil or criminal liability shall attach to a registered securities exchange or registered self-regulatory organisation, or any director, officer, employee or an agent of the registered securities exchange or registered self-regulatory organisation, for any act done in good faith in the performance of a duty or in the exercise of- (al a function or power delegated by the Commission to the registered securities exchange or registered self-regulatory organisation under securities laws; or (b) a regulatory function or power of the registered securities exchange or registered self-regulatory organisation exercised under its regulatory instruments.
28. Confidentiality.
(I) The Commission or any Member, officer, employee, agent or adviser of the Commission who discloses any information relating to -
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(a) the affairs of the Commission;
(b) any application made to the Commission;
(c) the affairs ofa market participant;
(d) a request for assistance from a domestic regulatory authority or an overseas regulatory authority; or (d) the affairs ofa client ofa regulated person, that the person has acquired in the course of that person's duties or in the exercise of the Commission 's functions under this or any other law, is guilty of an offence and shall be liable on summary conviction to a fine not exceeding $50,000 or to imprisonment for a term not exceeding three years. 2929

(2) Subsection (I) shall not apply to a disclosure- (a) lawfu lly required or pennitted by any court of competent jurisdiction within The Bahamas; (b) for the purpose of assisting the Commission to exercise any function conferred on it by securities laws; (c) in respect of the affairs of a market participant or of a client of a regulated person, with the consent of the market participant or client, as the case may be, which consent has been voluntarily given; (d) where the information disclosed is or has been available to the public from any other source; (e) where the information disclosed is in a manner that does not enable the identity of any market participant or of any client of a regulated person to which the information relates to be asceltained; (I) to a person with a view to the institution of, or for the purpose of - (i) criminal proceedings; (ii) disciplinary proceedings, whether within or outside The Bahamas, relating to the exercise by a counsel and attorney, auditor, accountant, valuer or actuary of the person's professional duties; (iii) disciplinary proceedings relating to the discharge by a public officer, or a Member or employee of the Commission, of that person's duties; or (g) in any legal proceedings in connection with - (i) the winding-up or dissolution of a regulated person; or (ii) the appointment or duties ofa receiver of a regulated person.
29. Powers of Minister.
( I) The Minister may give the Commission directions in writing for the discharge of its functions where the Minister is of the opinion that such directions are necessary or advisable to ensure that The Bahamas complies with its obligations under international treaties and agreements, and the Commission shall give effect to such directions. (2) The Commission shall promptly give the Minister any information about its activities, operations and financial affairs as the Minister requests. (3 ) The Minister may designate a person to examine any fi nancial or accounting procedures, activities or practices of the Commission and the person designated shall report the results of the exarnjnatiolJ to the Minister.
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(4) The Members and employees of the Commission shall gi ve the person designated by the Minister under subsection (3) all the assistance and cooperation necessary to enable that persoll to complete the examination.
30. Accounts, auditor and audit.
(I) The Commission shall keep proper accounts of all transactions and shall prepare annual financial statements in accordance with generally accepted accounting principles. (2) The financial statements prepared pursuant to subsection (I) shall present the financial position, results of operations and changes in the reserve fund and cash flow of the Commission for its most recent fiscal year. (3) The Commission shall appoint one or more approved auditors to audit the financial statements of the Commission for each fiscal year.
31. Annual report.
(I) The Commission shall, as soon as practicable after the end of each financial year and in any event not later than 30th June in any year, submit to the Minister a report containing - (a) an account of its transactions throughout the preceding financial year in such detail as the Minister may direct; and (b) the audited financial statement of the Commission accompanied by the auditor's report. (2) The Minister shall cause a copy of the report together with a copy of the audited fmancial statements and the auditor's report to be laid on the table of both Houses of Parliament. (3) Copies of an annual report shall be made available to the public no later than fourteen days after it is laid in Parliament under subsection (2).
32. Commission procedures.
(l) The Commission shall meet at such times as may be necessary or expedient for the transaction of business and such meetings shall be held at such places and time and on such days as the Chairman may determine. (2) The Chairman, or in his absence the Deputy Chairman, or in the absence of both of them, such other person as authorized by the Chairman, shall preside at all meetings of the Commission. (3) A quorum for a meeting of the Commission shall consist of the person authorized under subsection (2) to preside at tbe meeting of the Commission and three other members. (4) The decisions of the Commission shall be by a majority of votes and in any case in which the voting is equal, the Chairman or the Deputy
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Chairman presiding at the meeting has a casting vote, in addition to an original vote. (5) The Commission may establish. codes - (a) respecting the calling of and conduct of business at meetings of the Corrunission; (b) respecting procedures for the initiation and holding of hearings by the Commission; (c) prescribing the procedure for appeals and review of decisions 01'- (i) persons to whom the Commission's powers have been delegated; and (ii) persons registered under Part V; (d) with the approval of the Minister, establishing a code of conduct governing the activities of Members and the officers and employees of the Commission in order to avoid conflicts of interest and other practices that the Commission considers undesirable; and (e) respecting any other matter, whether or not required by this Act, relating to the organization, procedure. administration or practice of the Commission.
33. Panels of the Commission.
(l) The Commission may establish one or more panels and, in matters referred to a panel by the Commission, the panel has the powers of the Commission delegated to it by Commission order. (2) A panel shall be composed of three or more persons appointed by the Commission, at least one of whom must be a Member. (3) The Commission may appoint one or more qualified person to a panel who is not a Member. (4) The Commission may- (a) terminate appointments to a panel; and (b) except for a panel that has commenced a hearing, fill a vacancy on a panel. (5) The Commission may refer a matter that is - (a) before the Commission, to a panel; and (b) before a panel, to the Commission or to another panel.
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PART III - ASSISTANCE TO DOMESTIC AND FOREiGN
REGULATORY AUTHORIT!ES
DIVISION 1 - INTERPRETATION
34. Interpretation.
In this Part, unless the context otherwise requires -
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"designated third party", in relation to a foreign jurisdiction, means - (a) any person or body responsible for supervising the overseas regulatory authority in question; (b) any authority of the foreign jurisdiction responsible for carrying out the supervision, investigation or enforcement in question; or (c) any authority of the foreign jurisdiction, other than the requesting overseas regulatory authority, exercising a function that corresponds to a regulatory function of the Commission under this Act; "enforce" means enforce through criminal, civil or administrative proceedings; "enforcement" means the taking of any action to enforce a law or regulatory requirement against a specified person, where the law or regulatory requirement relates to the capital markets of the foreign jurisdiction of the regulatory authority concerned; "investigation" means an investigation to detennine if a specified person has contravened or is contravening a law or regulatory requirement, where the law or regulatory requirement relates to the capital markets of the foreign jurisdiction of the regulatory authority concerned; "material" includes any information or document in any form and, in relation to information recorded otherwise than in legible form, the power to require its production includes the power to require the production of a copy of it in legible and intelligible form; "supervision" , in relation to an overseas regulatory authority, means the taking of any action for the supervision of- (a) a marketplace or any other person regulated or supervised by the overseas regulatory authority; or (b) the issue of or trading in sectuities in the foreign jurisdiction of the overseas regulatory authority. 3333

DIVISION 2 - ASSISTANCE TO DOMESTIC REGULATORY AUTHORITIES
35. Exercise of powers on behalf of domestic regulatory authorities.
(l) At the request of a domestic regulatory authority, the Commission may, where it considers appropriate, exercise its powers under securities laws for the purposes of assisting the performance by the domestic regulatory authority of its regulatory functions. (2) Notwithstanding subsection 28( 1), the Commission may provide information that it has acquired in the course of its duties or in the exercise of its functions under securities laws to any other domestic regulatory authority where the COllunission considers such information may be relevant to the functions of such other domestic regulatory authority or as a necessary part of a framework for consolidated supervision, oversight or regulation of the financial services sector. DIVISION 3 -ASSISTANCE TO FOREIGN REGULATORY AUTHORITIES
36. Conditions for provision of assistance.
(1) The Commission may provide the assistance referred to in section 37 to an overseas regulatory authority if the Commission is satisfied that all of the fo llowing conditions are fulfi lled - (al the assistance is intended to enable the overseas regulatory authority, or any designated third party, to carry out the supervision, investigation or enforcement to which the request relates; (b) the overseas regulatory authority has given a written undertaking that any material obtained pursuant to its request shall not be used for any purpose other than a purpose that is specified at the time of the request or thereafter and is approved by the Commission; (c) the overseas regulatory authority has given a written undertaking not to disclose to a third party, other than a designated third party of the foreign jurisdiction in accordance with paragraph (d), any material received pursuant to the request; (d) the overseas regulatory authority has given a written undertaking to obtain the prior consent of the Commission before disclosing to a designated third party any material received pursuant to the request, and to make such disclosure only in accordance with such conditions as may be imposed by the Commission; (e) the material requested is of sufficient importance to the carrying out of the supervision, investigation or enforcement to which the request relates and cannot reasonably be obtained by any other Ineans; o " . age - .J.) 3434

(f) the matter to which the request relates is of sufficient gravity; and (g) the rendering of assistance will not be contrary to the public interest ofTbe Babamas or tbe interest of the investing public. (2) In deciding whether to grant a request for assistance referred to in section 37 from an overseas regulatory authority, the Commission may also bave regard to the following - (a) wbether the act or omission that is alleged to constitute the contravention of the law or regulatory requirement to which the request relates would, if it had occurred in Tbe Babamas, have constituted a breach of securities laws; (b) whetber the overseas regulatory authority bas given or is willing to give an undertaking to the Commission to comply witb a future request by the Commission to tbe overseas regulatory authority for similar assistance; and (c) whetber tbe overseas regulatory authority bas given or is willing to give an undertaking to the Commission to contribute towards the costs of providing the assistance that tbe overseas regulatory authority bas requested. (3) Wbere an overseas regulatory authority fails to comply with a requirement of tbe Commission under subsection (I) or (2), the Commission may refuse to provide the assistance sougbt.
37. Assistance that may be rendered.
(I) Notwitbstanding subsection 28( I), the provisIOns of any prescribed written law or any requirement imposed thereunder, or any mle of law, the Commission may, in relation to a request by an overseas regulatory authority for assistance - (a) transmit to the overseas regulatory authority any material in the possession of the Commission that is requested by the authority; (b) order any person to furnish to the Commission any material that is requested by the overseas regulatory authority, that the Commission may tben transmit to that authority; (c) order any person to give the Commission assistance in connection with a request made by an overseas regulatory authority; or (d) order any person to make an oral statement to the Commission on any information requested by the overseas regulatory authority, record such statement, and transmit the recorded statement to the authority. (2) An order under subsection (I )(b), (c) or (d) shall have effect notwithstanding any obligations as to secrecy or other restrictions upon
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the disclosure of information imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct. (3) A person shall not be required under this section to disc lose information or to produce a document wbich the person would be entitled to refuse to disclose or to produce on the grounds of legal professional privilege in court proceedings. (4) For the purposes of this section, any information or other matter comes to a professional legal adviser in privileged circumstances if it is communicated or given to the legal adviser- (a) by, or by a representative of, a client of the adviser in connection with the giving by the adviser of legal advice to the client; (b) by, or by a representative of, a person seeking legal advice from the adviser; or (c) by any person - (i) in contemplation of, or in connection with, legal proceedings; and (ii) for the purpose of those proceedings. (5) No information or other matter shall be treated as coming to a professional legal adviser in privileged circumstances if it is communicated or given witb a view to furthering any criminal purpose. (6) Where the person in possession of any document required to be produced under this Part claims a lien on the document - (a) tbe requirement to produce the document shall not be affected by the lien; (b) no fees shall be payable for or in respect of tbe production; and (c) the production sball be witbout prejudice to tbe li en. DIVISION 4 - GENERAL
38. Authority to enter into Memoranda of Understanding.
( I) The Commission may, in the exercise of its cooperative functions, enter into memoranda of understanding with overseas regulatory authorities for (a) the purpose of assisting an overseas regulatory authority, or any designated third party, to carry out its supervision, investigation or enforcement functions, (b) the purpose of assisting in consolidated supervision with such overseas regulatory authority, or any designated third patty; or (c) such other purposes as the Commission may deem fit.
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(2) No memorandum of understanding may call for assistance beyond that which is provided for under securities laws, or relieve the Commission of any of its obligations under thi& Part. (3) The Commission shall notify the Ministry of Finance of each memorandum of understanding and promptly publish the memorandum of understanding in the Gazette.
39. Offences under this Part.
(I) Any person who -
(a) without reasonable excuse, refuses or fails to comply with an order under this Part; (b) in purported compliance with an order under this Part, furnishes to the Commission any material known to the person to be false or misleading in a material particular; or (c) in purported compliance with an order made under this Part, makes a statement to the Commission that is false or misleading in a material particular, IS guilty of an offence an offence and shall be liable on summary conviction to a fine not exceeding $ 100,000. (2) If the offence of which the person is convicted under subsection (I) is continued after conviction, the person commits a further offence and shall be liable on summary conviction to a fine of $ 10,000 for every day on which the offence is continued.
40. Immunities.
( I) No civil or criminal proceedings, other than proceedings for an offence under section 39, shall lie against any person for - (a) furnishing to the Commission or transmitting any material to the Commission or an overseas regulatory authority, if the person had furnished or transmitted that material in good faith in compliance with an order made under this Part; (b) making a statement to the Commission in good faith and in compliance with an order made under this Part; or (c) doing or omitting to do any act, if the person had done or omitted to do the act in good faith and as a result of complying with such an order. (2) Any person who complies with an order referred to in subsection (I)(a) or (b) shall not be treated as being in breach of any restriction upon the disclosure of information or material imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.
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PART IV -INVESTIGATIONS AND INSPECTIONS
DIVISION 1-INTERPRETATION
41. Interpretation.
For the purposes of this Part, "regulated person" includes a party related to an investment fund. DIVISION 2-INVESTIGATIONS
42. Power to investigate.
(I) The Commission may conduct such investigation as it considers necessary or expedient for any of the following purposes - (a) to determine whether any person has contravened, is contravening or is about to contravene securities laws; (b) for the administration of securities laws; or ( c) to assist in the administration of the securities legislation of another jurisdiction. (2) For the purposes of subsection (I), the Commission may conduct the investigation or may, in writing, appoint another person for that purpose. (3) The Commission may, notwithstanding the provisions of any prescribed written law or any requirement imposed thereunder or any rule of law, exercise any of its powers under this Division for the purposes of conducting an investigation under subsection (I).
43. Powers to obtain information for investigation.
(1) Where the Commission considers that a person is or may be able to give information or produce a document which is or may be relevant to an investigation, it may - (a) require such person to attend before it at a specified time and place to answer questions, including under oath or affirmation that the statements that the person will make will be tme; (b) enter, during reasonable hours, the business premises of such person for the purpose of- (i) inspecting and copying information or documents stored in any form on such premises; and (ii) removing from the premises any information or documents; (c) require such person to give, or procure the giving of, specified information or information of a specified description in such form as the Commission may reasonably require;
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(d) require such person to produce, or procure the production of. specified documents or documents of a specified description; (e) require such person to give an explanation of or further particulars regarding any information or document produced under paragraphs (c) and (d); (I) require such person to give the Commission all assistance in relation to the investigation that the person is reasonably able to gIve. (2) If a person, acting on behalf of the Commission, enters premises under subsection (I )(b), the person must present proof of his or her authority to do so. (3) Any information or document removed under subsection (l)(b) must be returned to the person from whom, or premises from which, it was taken as soon as practicable.
44. Uncooperative witness liable for contempt.
On application by the Commission to the court, a person summoned under
section 43 is liable to be committed for contempt, as if in breach of an order or
judgement of the court, if the person neglects or refuses to - (a) attend; (b) give evidence; or (c) produce a document in the custody, possession or control of that person. DIVISION 3-INSPECTIONS
45. Compliance inspections-regulated persons.
(I) At any time, the Commission may conduct an on-site or off-site inspection of the business of a regulated person for the purpose of - (a) determining if the person is complying with- (i) securities laws; (ii) the Financial Transactions Reporting Act; 2003; or (iii) any other prescribed statute that is administered by the Commission; or (b) assisting in the administration of the securities legislation of another jurisdiction .. (2) The Commission may, in writing, appoint another person to conduct the inspection under subsection (I).
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(3) The Commission may, by notice in writing, require a person under inspection to produce information or documents, or a class of information or documents, that reasonably relates to the inspection. (4) After receiving a notice under subsection (3), a person must, within a reasonable period as specified in the notice, provide to the Commission the information or document that is described in the notice and that is in the custody, possession or control of the person. (5) The Commission may enter, during reasonable hours, the business premises of a person under inspection for the purpose of- (a) inspecting and copying information or documents stored In any form on such premises; and (b) removing from the premises any information or documents. (6) The Commission may require a person under inspection to give an explanation of, or further particulars regarding, any information or document produced under subsection (4). (7) If a person, acting on behalf of the Commission, enters premises under subsection (5), the person must present proof of his or her authority to do so. (8) Any information or document removed under subsection (5) must be returned to the person from whom, or premises from which, it was taken as soon as practicable.
46. Power to require reports.
(I) The Commission may require a regulated person to provide the Commission with a report, in such form as may be specified in the notice, by the person's approved auditor, or by an accountant or other person with relevant professional skill, on, or on any aspect of, any matter about which the Commission has required or could require the regulated person to provide information under section 45. (2) The report referred to in subsection (I) shall be prepared at the expense of the regulated person. (3) The person appointed by a regulated person to make the report required under section (I) shall immediately give written notice to the Commission of any fact or matter of which that person becomes aware which indicates (a) that any of the minimum criteria is not or has not been fulfilled, or may not be or may not have been fulfilled, in respect of the regulated person; and
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(b) that the matters are likely to be of material significance for the exercise, in relation to such person, of the Commission's functions under this Act. (4) The person appointed to make a report required under this section must be a person approved by the Commission.
47. Compliance inspection of other market participants.
(l) The Commission may inspect the business of a market participant, other than a regulated person, for the purpose of- (a) determining if the person is complying with - (i) securities laws; (ii) the Financial Transactions Rep0l1ing Act; 2003; or (iii) any other prescribed statute that is administered by the Commission; or (b) assisting in the administration of the securities legislation of another jurisdiction. (2) For the purposes of subsection (I), the Commission may, in writing, appoint another person to conduct the inspection. (3) The Commission may, by notice in writing, require a person Lmder inspection to produce information or documents, or a class of information or documents, that reasonably relates to the inspection. (4) After receiving a notice under subsection (3), a persou must, within a reasonable period as specified in the notice, provide to the Commission the information or document that is described in the notice and that is in the custody, possession or control of the person.
48. General.
(I) After the conclusion of an inspection of a regulated person under section 45 or a market participant under section 47, a report shall be prepared setting out the findings of that inspection. (2) The Commission shall consider and make recommendations on any information or report prepared under this Division. (3) The Commission shall assess charges to recover the cost of any inspection performed under this Division. (4) Upon application, the Commission may grant an exemption regarding the payment of costs where the Commission considers it appropriate.
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Participation of other regulatory authorities in inspections under
this Part.
(l) Subject to subsection (2), the Commission may, upon the request of a domestic regulatory authority or an overseas regulatory authority, permit the authority to take part in a compliance inspection undertaken by the Commission. (2) The Commission shall not permit an overseas regulatory authority to take
part in a compliance inspection under subsection (l) unless it is of the
opinion that the participation of the overseas regulatory authority is reasonably required - (a) for the effective supervision of a regulated person; or (b) for the purposes of the regulatory functions of the overseas regulatory authority. (3) The Commission may, in deciding whether to permit an overseas regulatory authority to take part in a compliance inspection under subsection (I), take into account, in particular, whether the overseas regulatory authority is subject to adequate legal restrictions on further disclosure and whether it is likely, without the written permission of the Commission, - (a) to disclose information obtained or documents examined or obtained during the compliance inspection to any person other than an officer or employee of the authority engaged in supervision; or (b) to take any action on information obtained or documents examined or obtained during the compliance inspection. (4) For the purposes of this section, "overseas regulatory authority" includes an authority in a foreign jurisdiction that exercises regulatory or supervisory functions over entities carrying on banking, insurance, securities or other financial services business. DIVISION 4-PROVISION OF INFORMATION RELATING TO TRANSACTIONS
Provision of information.
(l) The Commission may, for the purposes of assisting in the performance of any of its functions or the exercise of any of its powers under securities laws, require - (a) a person registered as the holder of securities in a register kept by or on behalf of an issuer:
(b) a person that the Commission has reasonable cause to believe holds any securities;
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(c) a person that the Commission has reasonable cause to beli eve bas acquired or disposed of any secmities, whether directly or through a nominee, trustee or agent, and whether as beneficial owner, nominee, trustee, agent or otherwise; or (d) a regulated person through whicb the Commission has reasonable cause to believe any securities have been acquired, disposed of, dealt with or traded, to furnish to the Commission any of the information specified in subsection (2) within the time and in the form specified. (2) The information specified for the purposes of subsection (I) consists of- (a) particulars that are reasonably capable of establishing the identity of the person on whose behalf, or by, from, to or through whom the securities in question are held, or have been acquired, disposed of, dealt with or traded, as the case may be; (b) the instructions given to or by the person referred to in paragraph (a) or any officer, employee or agent of such person, in relation to the holding, acquisition, disposa l, dealing, or trading of or 111 respect of the securities; (c) the particulars of the securities and the consideration gIven or received; and (d) any other information in the possession of the person as the Commission may specify. DIVISION 5-GENERAL
51. Liens.
Where the person in possession of any document required to be produced under this Part claims a lien on the document - (a) the requirement to produce the document shall not be affected by the lien; (b) no fees shall be payable for or in respect of the production; and (c) the production shall be without prejudice to the lien.
52. Information about documents not in person's possession.
If a person who is required under this Part to produce a document fails to do so, the Commission may require the person to state to the best of that person's knowledge and belief- (a) where that document may be found; and (b) the identity of the person who last had custody of that document.
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Secrecy.
An order under this Part shall have effect notwithstanding any obligations as to secrecy or other restrictions upon the discloslue of infonnation imposed by any prescribed written law or any requirement imposed thereunder, any ntle of law, any contract or any ntle of professional conduct.
Exemption.
(I) Any person who complies with a requirement imposed by the Commission in the exercise of its powers under this Part shall not be treated as being in breach of any restriction upon the disclosure of information or material imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any ntle of professional conduct. (2) A person is neither liable to a proceeding, nor subject to a liability, merely because the person has complied, or proposes to comply, with a requirement made or purporting to have been made under any provision of this Part for the inspection, copying or production of infonnation or documents.
Privilege.
(I) A person shall not be required under this Part to disclose infonnation or to produce a document that the person would be entitled to refuse to disclose or to produce on the grounds of legal professional privilege in court proceedings. (2) For the purposes of this Part, any infonnation or other matter comes to a professional legal adviser in privileged circumstances if it is communicated or given to the legal advisor - (a) by, or by a representative of, a client of the adviser in connection with the giving by the adviser of legal advice to the client; (b) by, or by a representative of, a person seeking legal advice from the adviser; or (c) by any person - (i) in contemplation of, or in connection with, legal proceedings; and (ii) for the purpose of those proceedings. (3) No information or other matter shall be treated as coming to a professional legal adviser in privileged circumstances if it is communicated or given with a view to furthering any criminal purpose.
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Use of documents etc.
Where information or documents are produced pursuant to this Pall, the Commission may- (a) take copies or extracts from them; and (b) use or permit the use of any of the information or documents in any proceeding.
Offence of obstruction of investigations and inspections.
(1) A person who without reasonable cause -
(a) fails to comply with a requirement of the Commission under this
Part;
(b) with intent to avoid the provisions of this Part, falsifies, destroys, mutilates, defaces, hides or removes a document; or (c) wilfuny obstructs an inquiry by the Commission made in accordance with the provisions of this Part, is guilty of an offence and shaU be liable on conviction to a fine not exceeding $100,000. (2) If the offence of which the person is convicted under subsection (1) is continued after conviction, the person commits a further offence and shan be liable- (a) on summary conviction, to a fine of $10,000 for every day on which the offence is continued; or (b) on conviction on infonnation, to - (i) a fine of $10,000 for every day on which the offence IS continued; (ii) imprisonment for five years; or (iii) both fine and imprisonment. (3) A person contravenes this section if the person knows or reasonably should know that a hearing, inspection or investigation is to be conducted and the person takes any action referred to in subsection (t) before the hearing, inspection or investigation.
PART V - REGULATION OF MARKETPLACES, ETC
Registration.
(1) No person shat! carry on business as a marketplace or dearing facility in or from The Bahamas unless registered under this Part.
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(2) If the Commission considers it in the public interest to do so, the Commission may require a self-regulatory organisation or ancillary facility to register under this Part and may prescribe the requirements applicable to such persons, (3) An application for registration' (mder this Part must be in the prescribed form, (4) The Commission may, on application, register the applicant if the Commission is satisfied that all prescribed requirements have been fulfilled and to do so would be in the public interest. (5) A registration is effective until - (a) it is revoked; (b) it expires; (c) the conditions for continuing the registration have not been met; or (d) the Director accepts a surrender of registration under section 63, (6) Where the Commission refuses to grant a registration under this Part, the applicant shall be provided with notice in writing of the reasons for the refusal and the applicant may file an appeal pursuant to section 157, (7) Any person registered as a securities exchange with the Commission on the date that this Part comes into force shall be deemed to be registered as a marketplace under this Part as of that date,
59. Conditions and restrictions on registration.
(I) The Commission may grant or renew a registration under this Part subject to such terms, conditions or restrictions as the Commission deems fit. (2) The Commission may, at any time, by notice in writing to the registered person, vary any term, condition or restriction or impose such further term, condition or restriction as the Commission deems fit.
60. Approval of regulatory instruments.
If a person registered under this Part adopts, amends or repeals a regulatory instrument, the adoption, amendment or repeal is not effective until the Commission approves it.
61. Commission powers.
(I) If the Commission considers it in the public interest to do so, the Commission may make a decision about a person registered under this
Part, including a decision about -
(a) the person's regulatory instruments;
(b) the person's procedures or practices;
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(c) the business or regulatory services provided by the person; (d) trading or quotation activity on a marketplace; (e) a security or class of securities traded or quoted on a marketplace; or (f) an issuer whose securities are traded or quoted on a marketplace. (2) No registered securities exchange may admit any person to membership on the securities exchange unless that person is registered under the Act. (3) No registered securities exchange may admit a person to become a security holder of the securities exchange unless that person is approved by the Commission. (4) The Commission shall have the authority to hear appeals of a person registered under this Part from any ruling, decision or order and may establish its own procedures for such proceedings.
62. Delegation.
(l) The Commission may delegate to a registered securities exchange or registered self-regulatory organisation, any of the powers conferred on it by this Act, including the authority to adopt and enforce rules for the conduct of their members and the responsibility to regulate their members' compliance with the provisions of those rules and of this Act. (2) Any order of delegation issued under subsection (1) shall be published. (3) The Commission may withdraw, add or vary any powers delegated under subsection ( 1) as it deems necessary. (4) Notwithstanding any delegation under subsection (I), the Commission shall continue to have full authority to regulate the activities of the registered securities exchange or registered self-regulatory organisation and any of its members.
63. Voluntary surrender.
(I) If a person registered under this Part applies to the Commission to surrender its registration, the Commission may accept the surrender unless the Commission considers it prejudicial to the public interest to do so. (2) The Commission may, on receiving an application tfider subsection (l l, without providing an opportunity to be heard, suspend or impose any condition or restriction on the registration that the Corrunission deems appropriate.
64. Auditors and audits.
(I) Every person registered under this Palt shall appoint an approved auditor who shall make an examination, in accordance with generall y accepted
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auditing standards, of the annual financial statements of the person and shall provide the Commission with the prescribed reports on the financi al affairs of the person. (2) The Commission may impose all or any of the following duties on the auditor of a person registered under this Part - (a) a duly to submit to the Commission such additional information in relation to the audit as the Commission considers necessary; (b) a duty to enlarge or extend the scope of the audit of the business and affairs of the person registered under this Part; (c) a duty to carry out any other examination or establish any procedure in any particular case; (d) a duty to submit a report to the Commission on any of the matters referred to in paragraphs (b) and (c), and the auditor shall carry out such additional duty or duties. (3) The person registered under this Part shall remunerate the auditor in respect of the discharge of such additional duty or duties as the Commission may impose under subsection (2).
65. Reporting to the Commission.
Within the prescribed periods, a person registered under this Part shall deliver to the Commission - (a) annual financial statements in respect of the year along with the report of the auditor; (b) interim financial statements and other information as may be prescribed; and (c) all reports or other information and documents as the Commission may prescribe.
66. Notices.
(I) An applicant for registration under this Part and a person registered under this Part shall provide the Commission notice in writing of the occurrence of any prescribed event within the time periods prescribed. (2) Upon receipt of a notice under subsection (1 ), the Commission may review the person's application or registration and may take any action that the Commission deems appropriate.
67. Keeping ofrecords.
(I) A market participant shall -
(a) make and keep such information and documents in such form and for such periods -
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(i) as are reasonably necessary in the conduct of its business and operations, including to document compliance with all requirements imposed by statute or regulation on the market participant; and (ii) as may be prescribed; and (b) file with or deliver to the Commission any prescribed document or report. (2) The Commission may require a market participant to disseminate to the public any report filed with the Commission under paragraph (I )(b). (3) In addition to subsection (I), a registered marketplace shall keep a record of each trade executed through its facilities showing the time when it took place and any other prescribed information. (4) A market participant shall deliver to the Commission a copy of, or an extract from, any information or document kept under this section upon receipt of a request from the Commission.
68. Offences.
(I) No person may establish or maintain, or assist in establishing or maintaining, a marketplace or clearing facility in The Bahamas or conduct business on or with a marketplace or clearing facility in The Bahamas other than one registered in accordance with this Act. (2) Any person who contravenes subsection (l) is guilty of an offence and shall be liable on summary conviction to a fine of $150,000 or to imprisonment for two years or to both.
PART VI - REGISTRATION OF PERSONS CARRYING ON
SECURITIES BUSINESS
69. Registration requirement.
(1) No person may carry on any securities business in or from The Bahamas, or purport to do so, unless that person is - (a) registered with the Commission to carry on that business and has received written notice of the registration; or (b) exempt from registration. (2) The persons specified in Part 4 of the First Schedule are not required to register to conduct securities business. (3) For the purposes of subsection (l), a person may be considered to purport to carry on securities business where that person -
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(a) uses one or more words which connote securities business, either in English or in any other language, in the description or title under which the person carries on business; (b) makes a representation in a document or in any other manner that the person is carrying on securities business; or (c) otherwise holds itself out as carrying on securities business. (4) No individual shall act as a representative in respect of any securities business or hold himself or herself out as doing so unless - (a) that person has been registered with the Commission as a representative for that securities business; and (b) when so acting, the individual is doing so for the registered finn that sponsored that individual's application for, or for renewal of, registration as a representative. (5) Subsection (4) does not apply to - (a) an employee performing functions which are solely administrative in nature, including technology support, facilities support, human resources management and clerical support; or (b) any prescribed person. (6) The termination of the employment of registered representative with a registered firm shall operate as a suspension of the registration of that individual until notice in writing has been received by the Commission from another registered firm of the employment of the individual and the reinstatement of the registration has been approved by the Commission. (7) An application for registration under this Part must be in the prescribed form. (8) The Commission may, on application, register the person if the Commission is satisfied that all prescribed requirements have been fulfilled and to do so would be in the public interest. (9) The Commission may grant or renew a registration subject to such terms, conditions or restrictions as the Commission thinks fit. (10) The Commission may, at any time, by notice in writing to tbe registered firm or registered representative, vary any term, condition or restriction or impose such further term, condition or restriction as the Commission may think fit. (II) A registration is effective until - (a) it is revoked; (b) it expires; (c) the conditions for continuing the registration have not been met; or
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(d) the Commission accepts a surrender of registration under section 7l. (1 2) Where the Commission refuses to grant a registration under this Part, the applicant shall be provided with· notice in writing of the reasons for the refusal and the applicant may appeal that decision.
70. Notices.
(I) An applicant for registration and a registrant shall provide the Commission notice in writing of the occurrence of any prescribed event within the time periods prescribed. (2) Upon receipt of a notice under subsection (I), the Commission may review the person's application or registration and may take any action that the Commission deems appropriate.
71. Surrender of registration.
(I) The Commission may, on application by a registrant, accept, subject to such terms and conditions as it may impose, the voluntary surrender of the registration of the registrant if the Commission is satisfi ed that the surrender of the registration would not be prejudicial to the public interest. (2) On receiving an application under subsection (I), the Commission may, without providing an opportunity to be heard, suspend or impose any condition or restriction on the registration that the Commission deems appropriate.
72. Criminal convictions.
(I) Where a registrant is convicted in The Bahamas or elsewhere of a criminal offence involving fraud or dishonesty, such person shall cease to be registered under this Act with effect from the date of the conviction. (2) Where a registrant is convicted in The Bahamas of any criminal offence other than fraud or dishonesty under Bahamian law, or is convicted of any like criminal offence under any foreign law in any foreign jurisdiction, such person's registration shall be reviewed by the Commission and may be subject to revocation, suspension or other remedial action. (3) Where a registrant has been the subj ect of any disciplinary action by any domestic regulatory authority or overseas regulatory authority, such person's registration shall be reviewed by tbe Commission and may be subject to revocation, suspension or other remedial action.
73. Voluntary liquidation.
A registered firm shall not go into voluntary liquidation without the prior approval of the Commission and if proceedings for an involuntary liquidation
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are commenced against a registered firm the Commission shall be immediately notified in writing by the affected registered finn or by one of its partners, directors or officers.
74. Offence.
(I) It is an offence -
(a) for a registrant to carry on securities business or purport to do so otherwise than in accordance with the permission given to the registrant under this Part; (b) for a person to carry on securities business or purport to do so without having been registered to do so with the Commission under this Part; and (c) for person to make a misrepresentation in any filing, application, notification, or other document required to be filed, delivered or notified to the Commission under this Part. (2) Any person or registrant who contravenes the provisions of subsection (I) is guilty of an offence and shall be liable on summary conviction to a fine of $150,000 or to imprisonment for two years or to both.
PART VII - CONDUCT OF SECURITIES BUSINESS
75. Duties to clients.
A registered firm, its officers, directors, partners and employees and parties related to an investment fund shall - (a) act honestly and fairly in conducting its business activities in the best interests of its clients and the integrity of the market; and (b) act with due skill, care and diligence, in the best interests of its clients and the integrity of the market.
76. Auditor.
(I) A registered firm shall appoint an approved auditor.
(2) The auditor shall -
(a) make an examination of the annual financial statements and other regulatory filings of the registered firm in accordance with generally acceptable auditing standards and shall prepare a report on the audit in accordance with generally accepted accounting principles; and (b) when requested to do so by the Commission, provide a report on whether or not the business of the registered firm has been
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conducted in accordance with the provisions of this Act relating to the prescribed requirements and the financial affairs of registered firms. (3) The Commission may, where the' report of the audito,. required by subsection (2)(a) is qualified in any respect or the report required by subsection (2)(b) discloses that there are any material weaknesses or defici encies in or non-compliance with any of the prescribed requirements, take any action that is deemed necessary until the matters giving rise to the qualified audit report are resolved or the matters giving rise to the weaknesses or deficiencies or non-compliance are rectified. (4) The auditor shall, where in the course of performing the duties required by subsection (2) he comes to the view that a matter that could give rise to a qualification in the audit report on the financial statements is present or that there is a material weakness or deficiency in or non-compliance with any of the prescribed requirements, provide notice to the Commission immediately in the prescribed form and a copy of the notice must be delivered promptly to the registered firm. (5) The Commission may require the auditor of a registered firm to - (a) submit to the Commission such additional information in relation to the audit as the Commission considers necessary; (b) enlarge or extend the scope of the audit of the business and affairs of the registered firm; (c) carry out any other examination or establish any procedure in any particular case; (d) submit a report to the Commission on any of the matters referred to in paragraphs (b) and (c), and the auditor shall carry out such additional duty or duties. (6) The registered firm shall remunerate the auditor in respect of the discharge of such additional duty or duties as the Commission may impose under subsection (5).
77. Reporting to the Commission.
Within the prescribed periods, a registered firm shall deliver to the Commission
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(a) the annual financial statements in respect of the year along with the report of the auditor; (b) a copy of the annual report of the auditor on results of the procedures performed by the auditor as required by subsection 76(2)(b ); (c) interim financial statements and other information as may be prescribed; and 5353

(d) all reports or other infonnation as the Commission may prescribe.
78. Responsibility for actions of persons acting on behalf of registered
firm or party related to investment fund.
(l) A registered finn shall be responsible for all acts and omissions of each partner, director, officer, representative, employee and agent acting on its behalf. (2) A party related to an investment fund shall be responsible for all acts and omissions of each partner, director, officer, representative, employee and agent acting on its behalf.
79. Keeping of records.
( I) A registered firm shall -
(a) make and keep such information and documents in such fonn and for such periods - (i) as are reasonably necessary in the conduct of its business and operations, including to document compliance with all requirements imposed by statue or regulation on the registrant; and (ii) as may be prescribed; and (b) file with or deliver to the Commission any prescribed document or report. (2) The Commission may require a registered firm to disseminate to the public any report filed with the Commission under paragraph (I )(b). (3) A registered finn shall deliver to the Commission a copy of, or an extract from, any information or document kept under this section upon receipt of a written request from the Commission.
80. Prohibition.
(I) A registered finn, without the prior approval of the Commission, may not (a) become a significant security holder of any issuer that is not a registered finn other than in the usual course of the business of trading in securities; (b) acquire any shares, debentures or other interest in any other registered finn, except where the transaction involves acquiring all the voting securities of the other registered finn, or (c) permit anyone to become a significant security holder of the registered finn.
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(2) Failure to comply with this section shall render the registration of the registered firm revocable by the Commission.
PART VIII - COMPENSATION FUND
81. Compensation funds.
The Commission may prescribe requirements regarding the establishment, maintenance and use of compensation funds for the protection of registrants and clients of registrants who may suffer loss as a result of the bankruptcy, insolvency or winding up of a registrant.
PART IX - DISTRIBUTIONS AND PROSPECTUSES
82. Interpretation.
(I) InthisPart-
"communication" means a notice, circular, letter or advertisement in any media; "foreign prospectus" means a prospectus or other offering document to be used in connection with a distribution of securities that has become final for the purposes of a distribution in the recognised foreign jurisdiction and includes any supplement or amendment to the document. (2) For the purposes of this Part, a communication solicits the purchase or sale of securities if- (a) it invites a person to enter into an agreement for, or with a view to subscribing for, or otherwise acquiring or underwriting, any securities; or (b) it contains information reasonably calculated to lead, directly or indirectly, to a person entering into such an agreement. (3) This Part does not apply to securities that are equity interests in investment funds.
83. Prospectus required.
(I) No person shall trade in a security on the person's own account or on behalf of any other person where the trade would be a distribution of the security unless a preliminary prospectus and a prospectus have been filed with the Commission and the Commission has issued a receipt for each document.
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(2) A preliminary prospectus and a prospectus filed under this Part must disclose all material information about the issuer and the securities being offered and contain the prescribed information.
84. Receipt for preliminary prospectus.
The Commission shall issue a receipt for a preliminary prospectus immediately upon the filing of the preliminary prospectus.
85. Selling activities before issue of receipt for prospectus.
(I) During the period between the filing of the preliminary prospectus and the issue of the receipt for the prospectus, provided the requirements of
section 87 are met, it is permissible to -
(a) distribute a communication identifying the security proposed to be issued provided that the communication contains all prescribed information; (b) distribute a preliminary prospectus; and (c) solicit expressions of interest from prospective pnrchasers. (2) No binding agreement to purchase the securities may be entered into nnti I the Commission issues the receipt for the prospectus.
86. Defective preliminary prospectus.
The Commission may, without giving notice, ifit appears to it that a preliminary prospectus does not substantially comply with the prescribed requirements, order that the activities permitted by section 85 shall cease until a revised preliminary prospectus satisfactory to the Commission is filed and forwarded to each recipient of the defective preliminary prospectus.
87. Delivery of prospectus.
(I) An issuer, selling security holder or registrant who solicits a sale of securities or receives an expression of interest, order or subscription from a person for a security offered in a distribution during the period before the issue of a receipt for the prospectus shall send to such person the preliminary prospectus or amended preliminary prospectus, as the case may be. (2) An issuer, selling security holder or registrant who receives an expression of interest, order or subscription for a secnrity olTered in a distribution shall, dnring the distribution period, send to such person a prospectus, or amended prospectus, as the case may be. (3) The documents required to be sent under subsections (I) and (2) shall be sent within two business days after the expression of interest, order or subscription is received.
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(4) An issuer or selling security holder that files a preliminary prospectus and prospectus with the Commission under this Part shall make copies of those documents available without charge upon request and shall furnish to a registrant a reasonable number of copies of the documents.
88. Amendments.
(I) The issuer shall, if there is a change in any material information after a receipt is obtained for a preliminary prospectus and before the receipt for the prospectus is obtained or during the distribution period, file witb the Commission an amended preliminary prospectus or amended prospectus containing the particulars of the material information. (2) Every preliminary prospectus or prospectus thereafter sent or delivered to any person shall include the amended preliminary prospectus or amended prospectus. (3) Where an amended prospectus is required to be filed with the Commission under subsection (I), the distribution of securities under the prospectus shall cease until such time as the Commission has issued a receipt for the amended prospectus. (4) An issuer, selling security holder or registrant who sent a preliminary prospectus to a person under subsection 87( I) shall send to each such person an amended preliminary prospectus immediately after it has been filed. (5) An issuer, selling security holder or registrant who sent a prospectus to a purchaser under subsection 87(2) shall send to each purchaser an amended prospectus immediately after a receipt is issued by the Commission for the amended prospectus.
89. Certificates.
A prospectus or amended prospectus tiled with the Commission shall contain certificates in the prescribed form signed by the prescribed persons.
90. Expert's consent.
The Commission shall not issue a receipt for a prospectus that includes an expert's report unless the prescribed requirements have been met regarding the expert's consent.
91. Issue of receipt.
(I) Subject to subsections (2), (3) and (4), the Commission shall issue a receipt for a prospectus within a reasonable time after the date of the filing of the prospectus. (2) The Commission shall refuse to issue a receipt for a prospectus -
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(a) if the Commission considers that the distribution would be prejudicial to the public interest; or (b) for any other prescribed reason. (3) Where the Commission refuses to issue a receipt for a prospectus, the Commission shall provide the issuer with notice in writing of the reasons for the refusal and the issuer may appeal that decision. (4) The Commission may, in connection with the issue of a receipt for a prospectus, impose any condition that in the opinion of the Commission is necessary for the protection of investors.
92. Exempt distributions.
The requirement to file a prospectus under section 83 does not apply to a distribution - (a) of securities issued by the Government of The Bahamas; (b) of securities issued by a private company; (c) of securities of an investment ftmd licensed or registered under the Investment Funds Act, 2003 or exempt from licensing or registration under that Act; (d) by an issuer of its own securities that are distributed to holders of its securities as a dividend; (e) by an issuer of a security to holders of its securities incidental to a reorganization or winding up or to a distribution of its assets for the purpose of winding up its affairs; (f) by an issuer of a security that is exchanged by or for the account of the issuer with another issuer or the security holders of another Issuer on- (i) a statutory amalgamation or arrangement; or (ii) a statutory procedure by wltich one issuer takes title to the assets of another issuer that loses its existence by operation of law or by which the existing issuers merge into a new Issuer; (g) by an issuer pursuant to a prescribed take-over bid; (h) where the Commission, being satisfied that to do so would not be prejudicial to the public interest, makes an order exempting the distribution and such order may be subject to any condition the Commission considers appropriate; or (i) in such other prescribed circumstances.
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Exemptions for approved foreign issuers.
(I) An issuer that is an approved foreign issuer may satisfy the requirements of sections 83, 87, 88 89 and 90 by - (a) filing with the Commission the prescribed documents; and (b) delivering to each purchaser in The Bahamas- (i) he foreign prospectus; and (ii) any other prescribed document. (2) Where an approved foreign issuer files with the Commission the documents required under subsection (I), the Commission shall issue a receipt for such foreign prospectus unless the Commission determines it is not in the public interest to do so.
Distributions made outside The Bahamas.
(I) A distribution of securities issued, or to be issued, by an issuer that is incorporated in or established under the laws of The Bahamas that is made outside The Bahamas shall be made in accordance with the laws or rules of the country in which the distribution is made. (2) For the purposes of subsection (I), "laws" included any subordinate legislation and "rules" includes any applicable listing rules or any rules issued by a marketplace to which the issuer is subject.
Resale restrictions.
The first trade in securities previously acquired pursuant to a prescribed exemption, other than a further trade exempted by this Act or the regulations, is deemed to be a distribution, unless the prescribed conditions are met.
Lapse date.
(I) Subject to subsection (2), in this section "lapse date" means in respect of a distribution to which section 83 or 93 applies, the date that is 12 months after the date the Commission issued the receipt for the prospecnls or foreign prospectus. (2) The Commission may order that the period specified in subsection (l) shall be reduced to not less than three months. (3) No distribution of a security to which section 83 or 93 applies shall continue after the lapse date unless a new prospectus or foreign prospectus that complies with this Part is filed and the Commission issues a receipt for the document.
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Offence.
If a distribution is carried out other than in compliance with this Part, the issuer and every person who is knowingly .a party to the distribution is guilty of an offence and shall be liable to a fine of $1,000 for every day, or part thereof, from the date of the first solicitation in connection with the distribution until a receipt has been issued for a prospectus by the Commission and shall be further liable (a) on summary conviction to a fine of $30,000 or to imprisonment for six months, or to both; (b) on conviction on information to a fine of $75,000 or to imprisonment for one year or to both.
PART X - CONTINUING OBLIGATIONS OF PUBLIC
ISSUERS
Disclosure to the public.
(I) A public issuer must disclose to the public the prescribed information about the business operations and securities of the issuer. (2) A public issuer shall disclose to the public, as soon as practicable, any information relating to the public issuer, including information on any significant new developments in the issuer's business or affairs which is not public knowledge, which - (a) is necessary to enable them and the public to appraise the position of the public issuer; (b) is necessalY to avoid the establishment of a false market in its securities; (c) might reasonably be expected materially to affect market acti vity in and the price of its securities; or (d) may significantly affect its ability to meet its commitments. (3) Information disclosed to the public by a public issuer must - (a) include all material information; (b) not contain a misrepresentation; and (c) present a balanced view of the issuer's activities. (4) The Commission may prescribe the method to be used by the public issuer to disclose information to the public. (5) A public issuer must treat its security holders in a fair and equitable manner.
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(6) Every director and officer of a public issuer, in exercising their powers and discharging their duties, shall - (a) act honestly and in good faith with a view to the best interests of the issuer; and (b) exercise the care, diligence and skill that a reasonably pmdent person would exercise in comparable circumstances.
99. Timely disclosure of material changes.
(I) Subject to subsection (2), where a material change occurs in the affairs of a public issuer, the issuer shall - (a) immediately, and in any event within one day of the material change, issue a press release that discloses the nature and substance of the material change; and (b) within five days of the material change, file with the Commission a report in the prescribed form. (2) If the public issuer is of the opinion that the disclosure required by subsection (I) would be unduly detrimental to its interests, it must immediately advise the Commission in writing of the material change and the reasons why the issuer is of the opinion that public disclosure should be withheld. (3) Where the Commission is of the opinion thatthe disclosure of the material change would not be unduly detrimental to the interests of a public issuer, the Commission may, after giving the public issuer an opportunity to be heard - (a) require disclosure to the public of the material change in accordance with subsection (I); or (b) permit non-disclosure of the material change by the public issuer provided non-disclosure does not continue beyond the time set out in subsection (5). (4) A decision of the Commission under subsection (3) is final and no appeal from such a decision shall be available. (5) Notwithstanding any permitted non-disclosure under subsection (2) or (3) (b), the public issuer shall disclose such material change no later than the thirtieth day following the date on which the public issuer would have been required to issue a press release in respect of the material change under subsection (I). (6) The public issuer shall, notwithstanding a report has been given to the Commission under subsection (2), promptly disclose the material change in the manner referred to in subsection (I) upon the public issuer becoming aware, or having reasonable grounds to believe, that persons are
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purchasing or selling securities of the issuer with knowledge of the undisclosed material change. (7) For the purposes of this section, a "material change" means any change in any material information regarding the public issuer.
100. Auditors and audits.
Every public issuer shall appoint an approved auditor who shall make an examination, in accordance with generally accepted auditing standards, of the annual financial statements of the person and shall provide the Commission with the prescribed reports on the financial affairs of the person.
101. Filing of annual audited financial statements.
(I) Every public issuer shall, within 120 days after the end of the issuer's financial year or such other prescribed period, file with the Commission annual financial statements prepared and certified as prescribed. (2) Every financial statement referred to in subsection (I) shall be accompanied by a report of the auditor of the public issuer. (3) The Commission may, where the report of the auditor required by subsection (2) is qualified in any respect, take any action that it deems necessary until the matters giving rise to the qualified audit report are resolved. (4) The auditor shall, where in the course of performing the duties required by subsection (2) he comes to the view that a matter that could give rise to a qualification in the audit report on the financial statements is present, provide notice to the Commission immediately in the prescribed form and deliver a copy of the notice promptly to the public issuer. (5) Every public issuer shall file with the Commission interim financial statements, prepared and certified as prescribed, within the prescribed period after the end of the financial period to which it relates. (6) Every pnblic issuer shall, within the prescribed period, file with the Commission - (a) a copy of its annual report containing the prescribed information; and (b) all reports or other information and documents as the Commission may prescribe.
102. Delivery of continuous disclosure documents to security holders.
(I) A public issuer shall, as soon as practicable after filing with the Commission, send to each security holder at the address provided to the public issuer as the preferred delivery address of the security holder, or at
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the last address of the security holder shown on the securities register of the public issuer, and at no cost to the security holder, the - (a) annual financial statements and the report of the auditor; (b) interim financial statements; (c) annual report; and (d) any other prescribed report or document. (2) The obligation to send documents to security holders under subsection (I) does not apply- (a) to documents published as prescribed; or (b) if a security holder has informed the issuer that the security holder does not wish to receive the documents.
103. Proxies and proxy solicitation.
(1) In this section "solicit" and "solicitation" includes- (a) a request for a proxy, whether or not accompanied by or included in a form of proxy; (b) a request to execute or not to execute a form of proxy or to revoke a proxy; (c) the sending of a form of proxy or other communications to a security holder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy; and (d) the sending of a form of proxy to a security holder under subsection (2), but does not include - (i) the sending of a form of proxy in response to an unsolicited request made by or on behalf of a security holder; (ii) the performance of administrative acts or professional services on behalf of a person soliciting a proxy; (iii) the sending by a registrant of documents to a beneficial owner; (iv) the solicitation by a person in respect of securities of which the person is the beneficial owner; or (v) other prescribed activities. (2) A public issuer shall, concurrently with the giving of notice of a meeting of its security holders, send a prescribed form of proxy and any other prescribed document to each holder of voting securities who is entitled to receive notice of the meeting at the latest address of the security holder shown on the securities register of the issuer.
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(3) A person shall not solicit proxies under subsection (2) unless each security holder whose proxy is solicited is sent all prescribed documents concurrently with the solicitation. (4) A person soliciting proxies shall, concurrently with sending the proxy material required in subsection (2), file with the Commission a copy of each document sent to security holders. (5) The Commission may - (a) require a public issuer to file with tbe Commission, within such time limit as may be prescribed, draft copies of any documents that the issuer intends to send to security holders under this section prior to any sending; and (b) may review any proxy materials or any other communications to security holders and require modifications to tbe documents or delay any mailing or security holder meeting as a result of its revIew.
104. Exemptions for certain foreign issuers.
A public issuer that is an approved fo reign issuer is exempt from the requirements of this Part, other than section 103, provided that it - (a) complies in all respects with the foreign disclosure requirements of its recognised foreign jurisdiction regarding- (i) the disclosure of changes in material information on a timely basis; (ii) the preparation, fi ling and delivery of annual audited financial statements; and (iii) the preparation, fi ling and delivery of interim financ ial statements; (b) fil es with the Commission all such documents which it files with the overseas regulatory authority in the recognised fore ign jurisdiction in respect of the items described in paragraph (a); and (c) deli vers to each security holder resident in The Bahamas, at the latest address shown on the securities register of the public issuer and at no cost to the security holder, the documents that such security holder would be entitled to receive under securities laws of the recognised foreign jurisdiction if such security holder were resident in that fo reign jurisdiction.
105. Offence.
A publi c issuer that contravenes this Part, or makes a rnisrepresentation in any document required to be fil ed with the Commission or sent to security holders under this Part, is guilty of an offence and is liablePage - 63 6464

(a) on summary conviction to a fine of 530,000 or to imprisonment for six months, or to both; (b) on conviction on information to a fine of S75,000 or to imprisonment for one year or to both.
PART XI- GOVERNANCE OF PUBLIC iSSUERS
106. Governance of public issuers.
For the purposes of this Act and the regulations, a public issuer shall comply with all prescribed requirements regarding the governance of public issuers, including requirements relating to - (a) the composition of its board of directors and qualifications for membership on the board, including matters respecting the independence of members; (b) the establishment of specified types of committees of the board of directors, the mandate, functioning and responsibilities of each committee, the composition of each committee and the qualifications for membership on the committee, including matters respecting the independence of members; (c) the establishment and enforcement of a code of business conduct and ethics applicable to its directors, officers and employees and applicable to persons or companies that are in a special relationship with the public issuer, including the minimum requirements for such a code; and (d) procedures to regulate conflicts of interest between the interests of the public issuer and those of a director or officer of the public issuer.
PART XiI- TAKE-OVER BIDS
107. Take-over bids.
A person shall not make a take-over bid or issuer bid for a public issuer except in accordance with the prescribed requirements.
PART XIII - MISCONDUCT
108. Application and definitions.
(l) Sections 109, 110, Ill, 114, 119 and 120 do not apply to conduct relating to securities issued by investment funds.
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(2) in this Part "dishonest" means -
(a) dishonest according to the standards of ordinary people; and (b) known by the person to be dishonest according to the standards of ordinary people.
109. Market manipulation.
A person must not take part in or carry out, whether directly or indirectly and whether in The Bahamas or elsewhere, a transaction or series of transactions that has or is likely to have the effect of- (a) creating an artificial price for trading in securities on a registered marketplace; or (b) maintaining a price for trading in securities on a registered marketplace at a level that is artificial, whether or not it was previously artificial.
110. False trading and market rigging-creating a false or misleading
appearance of active trading etc.
(I) A person must not do, or omit to do, an act, whether in The Bahamas or elsewhere, if that act or omission has or is likely to have the effect of creating, or causing the creation of, a false or misleading appearance - (a) of active trading in securities on a registered marketplace; or (b) with respect to the market for, or the price for trading in, securities on a registered marketplace. (2) For the purposes of subsection (1), a person is taken to have created a false or misleading appearance of active trading in particular securities on a registered marketplace if the person - (a) enters into, or carries out, either directly or indirectly, any transaction of purchase or sale of any of those securities that does not involve any change in the beneficial ownership of the products; (b) makes an offer to sell any of those securities at a specified price and has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to purchase the same number, or substantially the same number, of those securities at a price that is substantially the same as the price specified in the offer to sell; or (c) makes an offer to purchase any of those securities at a specified price and has inade or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to sell the same number, or substantially the same number, of those securities at a price that is substantially the same as the price specified in the offer to purchase.
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(3) The circumstances in which a person creates a false or misleading appearance of active trading in particular securities on a securities exchange are not limited to the circumstances set out in subsection (2). (4) For the purposes of subsection (2)(a), a purchase or sale of securities does Dot involve a change in the beneficial ownership if a person - (a) who had an interest in the securities before the purchase or sale; or (b) an associate of such a person, has an interest in the securities after the purchase or sale. (5) The reference in paragraph (2)(a) to a transaction of purchase or sale of securities includes - (a) a reference to the making of an offer to purchase or sell securities; and (b) a reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to buy or sell securities.
111. False trading and market rigging- artificially maintaining etc. trading
price.
(I) A person must not, whether in The Bahamas or elsewhere, enter into, or engage in, a fictitious or artificial transaction or device if that transac tion or device results in - (a) the price for trading in securities on a registered marketplace being maintained, inflated or depressed; or (b) fluctuations in the price for trading in securities on a registered marketplace. (2) In determining whether a transaction is fictitious or artificial for the purposes of subsection (1), the fact that the transaction is, or was at any time, intended by the parties who entered into it to have effect according to its terms is not conclusive.
112. Misleading or deceptive conduct.
(l) A person must not engage in conduct, in or from The Bahamas, in relation to securities business or a security that is misleading or deceptive or is likely to mislead or deceive. (2) The reference in subsection (l) to engaging in conduct in relation to a security includes any of- (a) trading in a security; (b) issuing a security; (c) publishing a notice in relation to a security;
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(d) making, or making an evaluation of, an offer under a take-over bid or a recommendation relating to such an offer; or (e) canying on negotiations, or making an'angements, or doing any other act, preparatory to,' or in any way related to, an acti vity covered by any of paragraphs (b) to (d).
113. Misleading the Commission.
A person must not, in purported compliance with any requirement imposed by or under securities laws, knowingly or recklessly provide the Commission or the public with information that - (a) is false ; (b) (c) is misleading in a material particular; or fails to state a fact that is required to be stated or that is necessary to make the statement not misleading.
114. Dissemination of information about illegal transactions.
A person must not, whether in The Bahamas or elsewhere, circulate or disseminate, or be involved in the circulation or dissemination of, any statement or information to the effect that the price for trading in securities on a registered marketplace will, or is likely to, rise or fall, or be maintained, because of a transaction, or other act or thing done, in relation to those securities, if- (a) the transaction, or thing done, constitutes or would constitute a contravention of section 109, 110, III or 112; and (b) the person, or an associate of the person - (i) has entered into such a transaction or done such an act or thing; or (ii) has received, or may receive, directly or indirectly, a consideration or benefit for circulating or disseminating, or authorising the circulation or dissemination of, the statement or information.
115. False or misleading statements.
A person must not, whether in The Bahamas or elsewhere, make a statement, or disseminate information, if- (a) the statement or information is false in a material particular or is materially misleading; (b) the statement or information is likely - (i) to induce persons in The Bahamas to trade securities: or
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(ii) to have the effect of increasing, reducing, maintaining or stabilising the price for trading in securities on a registered marketplace; and (c) when the person makes the statement, or disseminates the information ~ (i) the person does not care whether the statement or information is true or false; or (ii) the person knows, or ought reasonably to have known, that the statement or information is false in a material particular or is materially misleading.
116. Inducing persons to deal.
A person must not, in or from The Bahamas, induce another person to trade in securities ~ (a) by making or publishing a statement, promise or forecast if the person knows or is reckless as to whether the statement lS misleading, false or deceptive; (b) by a dishonest concealment of material information; or (c) by recording or storing information that the person knows to be false or misleading in a material particular or materially misleading if~ (i) the information is recorded or stored in, or by means ot~ a mechanical, electronic or other device; and (ii) when the information was so recorded or stored, the person had reasonable grounds for expecting that it would be available to others.
117. Dishonest conduct.
A person must not, in the course of carrying on a securities business in or from The Bahamas, engage in dishonest conduct in relation to securities business or a security.
118. Prohibited representations.
(I) Except as prescribed, no person, for the purpose of inducing another person to trade in a security, other than a security that carries an obligation of the issuer to redeem or purchase, or a right of the owner to require redemption or purchase, shall make any representation, written or oral, that any person ~ (a) will resell or repurchase such security; or (b) will refund all or any of the purchase price of such security.
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(2) No person, for the purpose of inducing another person to trade in a security, shall make any representation, written or oral, relating to the future value or price of such security. (3) Except as prescribed, no person, for the purpose of inducing another person to trade in a security, shall make any representation, written or oral, that such security will be listed on any securities exchange.
119. Prohibition on purchasing or selling of securities by certain
persons.
(l) In this section-
"person in a special relationship" means, in relation to a public issuer. (a) an insider, officer, employee, affiliate or associate of the public issuer; (b) an associate or affiliate of an insider; (c) a person that is making or proposing to make a take-over bid for the securities of the public issuer; (d) a person that is proposing to - (i) become a party to a reorganization or business combination with the public issuer; or (ii) acquire a substantial portion of the property of the public issuer; (e) a person engaging in or proposing to engage in any business or professional activity with or on behalf of the public issuer or with or on behalf of a person referred to in paragraph (c) or (d); (I) an insider, officer, employee, affiliate or associate of a person referred to in paragraph (c), (d) or (e); (g) a person with inside information, if the information was obtained at a time when the person was a person in a special relationship under paragraph (a), (b), (c), (d), (e) or (I); or (h) a person that obtained inside information from another person- (i) who, at the time, was a person in a special relationship under this definition, including this paragraph; and (ii) whom the person knew or reasonably should have known was a person in a special relationship; (2) A person that - (a) is in a special relationship with the public issuer: and (b) has inside information about the public issuer.
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must not-
(c) trade any security of the public issuer; or (d) enter into a transaction involving a security the value of which is derived from or varies materially with the value or market price of a security of the public issuer. (3) A public issuer, or a person in a special relationship with a public issuer, must not inform another person of inside information about the public issuer unless it is necessary in the course of the public issuer's or the person's business. (4) A public issuer, or a person in a special relationship with a public issuer, with inside information about the public issuer, must not recommend or encourage another person to - (a) trade a security of the public issuer; or (b) enter into a transaction involving a security the value of which is derived from or varies materially with the value or market price of a security of the public issuer.
120. Front running.
(I) In this section, "material order information" means information that- (a) relates to- (i) the intention of a person responsible for making decisions about an investment portfolio to trade a security on behalf of the investment portfolio; (ii) the intention of a registrant trading on behalf of an investment portfolio to trade a security on behalf of the investment portfolio; or (iii) an unexecuted order, or the intention of any person to place an order, to trade a security; and (b) if disclosed, would reasonably be expected to affect the market price of the security. (2) If a person knows of material order information, the person must not -
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(a) trade a security that is the subject of the information; (b) enter into a transaction involving a security the value of which is derived from or varies materially with the value or market price of the security referred to in paragraph (a); (c) inform another person of the material order information, unless it is necessary in the course of the person's business; or (d) recommend or encourage another person to - (i) trade the security referred to in paragraph (al; or 7171

(ii) enter into a transaction involving a security the value of which is derived from or varies materially with the value or market price of the security referred to in paragraph (a).
121. Defence-belief that other party knows information.
(I) A person does not contravene subsection 119(2), 120(2)(a) or 120(2)(b) if, at the time the person trades the security, the person reasonably believes that the purchaser or seller of the security knows the inside information or material order information. (2) A person does not contravene subsection 119(3), 119(4), 120(2)(c) or 120(2)( d) if, the person reasonably believes that the other person knows the information at the time the person - (a) informs the other person of the inside information or material order information; or (b) recommends or encourages the other person to trade the security.
122. Defence of automatic or preQ&:~"nnined trade.
A person does not contravene subsection 119(2), 120(2)(a) or 120(2)(b) if the person- (a) trades the security under a written automatic dividend reinvestment plan, written automatic purchase plan or other similar written automatic plan, in which the person agreed to participate before ('htaining the inside information or material order information; or (b) trades the security as a result of a written legal obligation - (i) imposed on the person; or (ii) that the person entered into before obtaining the inside information or material order information.
123. Defences- trading as agent.
A person does not contravene subsection 119(2), 120(2)(a) or 120(2)(b) if the person trades - (a) as agent under the specific unsolicited instmctions of the principal; (b) as agent under specific instmctions that the agent solicited iI-om the principal before obtaining the inside information or material order information; (c) as agent or tmstee for another person because of that other person's participation in a written automatic dividend reinvestment plan, written automatic purchase plan or other similar written automatic plan; or Pag<;; - Ii 7272

(d) as agent or trustee for another person to tlrlfil a wiitten legal obligation of the other person.
124. Defences-trade or recommendation by individual with no inside or
ma~erial order information.
A person does not contravene subsection 119(2), 119(4 l, 120(2)( a), 120(2)(d) if120(2)(b) or (a) the person is not an individual; and (b) the individual making the trade or recommendation on behalf of the person does not have inside information or material order infonnation and is not acting on the advice or recorrLmendation of an individual who does have that information.
125. Exemptions and modifications.
(l) The Commission may prescribe that-
(a) a person or class of persons is exempt from all or specified provisions of this Part; or (b) a security or a class of securities are exempt from all or specified provisions of this Part; or (c) this Part applies as if specified provisions were omitted, modified or varied as prescribed. (2) For the purpose of this section, the provisions of this Part include the definitions in the Act or regulations as they apply to references in this
Part.
126. Offences.
(I) Any person who contravenes a provision under this Part other than under
section 119, is gnilty of an offence and shall be liable-
(a) on summary conviction to a fine of S75,000, or to imprisonment for a tenn of one year, or to both; (b) on conviction upon information to a fine of SI50,000, or to imprisonment for a tenn of two years or to both. (2) Any person who is guilty of an offence under this Part, other than under
section 119, shall return any gains made or Joss avoided from
contravention of the sections, and if the court so directs, pay a penalty not to exceed twice the amount of such gains or loss avoided. (3) Any person who contravenes section 119 is guilty of an offence and shall be liable on conviction on information ,0 a fine of S 150,000 or to imprisonrllent for a term of two years or to both~ ana. iY the ::;curt so
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directs, pay a penalty not to exceed twice the amount of the unlawful gains made or losses avoided by the person.
PART XiV - REPORTING BY SECURITY HOLDERS OF
PUBLIC iSSUERS
127. Application.
The provisions of this Part shall apply mutatis mutandis to partnerships, limited partnerships, trusts, joint vennlres, syndicates, and other public issuers, as the case may be.
128. Initial insider report.
( I) An insider of a public issuer who -
(a) owns or controls a security of the public issuer; or (b) owns or controls, or has entered into a transaction involving, a security the value of which is derived from or varies materially with the value or market price of a security of the public issuer, must, within the prescribed time, file a report with the Commission in the prescribed form disclosing the insider's direct or indirect beneficial ownership or control of securities of the public issuer. (2) No person is required to file a report under this section where the person does not beneficially own or control any securities of the public issuer. (3) If an insider of a public issuer fil ed or was required to file a report under subsection (1) and - (a) there is a change in the insider's beneficial ownership or control of a security of the public issuer, or of a security the value of which is derived from, or varies materially with, the value or market price of a security of the public issuer; (b) the insider enters into a transaction involving a security of the public issuer or a security the value of which is derived from, or varies materially with, the value or market price of a security of the public issuer; or (c) there is a change in a transaction referred to in paragraph (b) or subsection (I )(b), or a change in the security involved in the transaction; the insider must, within the prescribed time, file a report with the Commission in the prescribed form disclosing the change or transaction. (4) Any person who files a report with the Commission under this section must immediately send a copy of that report to the public issuer.
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(5) For the purposes of this section, an insider shall be deemed to beneficially own securities that are beneficially owned by an affiliate or associate of that insider.
129. Disclosure of beneficial interest in share capita/.
(I) A public issuer may require any person that is a holder of its securities- (a) to indicate in writing the capacity in which the person holds the securities of the public issuer; and (b) if the person holds the securities otherwise than as beneficial owner, to indicate so far as it lies within the person's knowledge, any other person who has an interest in them, either by name and address or by other particulars sufficient to enable that other person to be identified, and the nature of that other person's interest. (2) Where a public issuer is informed, in response to a notice given under this
section, that any other person has an interest in the securities of the public
issuer, the public issuer may require that other person - (a) to indicate the capacity in which that person holds that interest; and (b) if that person holds it otherwise than as beneficial owner, to indicate so far as it lies within the person's knowledge, the person who has an interest in the issuer, either by name and address or by other particulars sufficient to enable that person to be identified, and the nature of that person's interest. (3) Any public issuer may require any holder of its securities to indicate whether any of the voting rights carried by any securities of the public issuer held by that person are the subject of an agreement or arrangement under which another person is entitled to control the exercise of the voting rights and, if so, to give, so far as it lies within the security holder's knowledge, particulars of the agreement or arrangement and the parties to it. (4) Where a public issuer is informed, in response to a notice given to any person under this section, that any other person is a party to an agreement or arrangement mentioned in subsection (3), the public issuer may require that other person to give, so far as it lies within that person's knowledge, particulars of the agreement or arrangement and the parties to it. (5) A public issuer shall keep a record of- (a) each demand made under this section; and (b) the information received in response to each demand. (6) The Commission may require that a public issuer deliver to the Commission a copy of the record kept by the public issuer under subsection (5).
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(7) All notices sent by a public issuer under tbis section may require that a response be returned within the period specified in the notice and. in all cases, tbis period shall be at least ten days atter the date the notice was sent (8) All notices and responses under this section shall be in writing.
130. Public issuer to keep register of its security holders.
A public issuer shall keep a register containing tbe prescribed information about its security holders.
131. Offence.
Any person who commits a breach of any section in this Part or, in complying witb any section in this Part, makes a statement wbich the person knows to be false, or recklessly makes a statement which is false, or fails to supply any particulars which the person is required to supply, is guilty of an offence and shall be liable - (a) on summary conviction ,~ 3. fine of$30,000 or to imprisonment for a term of six months, or to both; (b) on conviction on information to a fine of S75.000 or to imprisonment for a term of one year, or to both.
PART XV - ENFORCEMENT
132. Compliance orders.
Without prejudice to any other action tbat may be instituted or taken against a person, if at any time it appears to the Commission that a person has failed to comply with any of the requirements under securities laws, the Commission may, by written notice, direct the person to comply with the requirement witbin such period and on such terms and conditions as the Commission may specify and tbe person shall comply with tbe notice.
133. Orders in the public interest.
(I) If the Commission considers it in the public interest to do so, the Commission may, upon a settlement with the person or after a hearing - (a) order a person to comply with - (i) securities laws or a Commission decision, or (ii) tbe regulatory instruments or a decision of a person registered under Part V;
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(b) order a person, a class of persons or all persons to cease trading a security, a class of securities or all securities; (c) order that any or all of the exemptions in securities laws do not apply to a person; (d) prohibit a person from - (i) acting as a partner, director or officer of another persof!; (ii) acting as a registrant, or representative of a registrant; (iii) acting as a party related to an investment fund; (iv) acting as an auditor of a market partic ipant; (v) acting in a management or consultative capacity In connection with activities in the securities market: or (vi) promoting tbe trading of a security or of securities generally; (e) issue a censure or reprimand; (f) impose conditions or restrictions on a registration, or suspend or revoke a registration; (g) restrict tbe trading or advising activities of a registrant or a persof! exempt from registration; (h) order a person to change a document; (i) order a person to publish informatio[l or a document; (j) order a person not to publish information or a document; (k) order a person that is a market participant to make changes to its practices and procedures; (1) appoint a person to advise a regulated person on the proper conduct of its affairs and to report to the Commission thereon; (m) appoint a person to assume control of a regulated person's affairs who sball, subject to necessary modifications, have ali the powers of a person appointed as a receiver or manager of a business appointed under the law goveming bankruptcy or winding up; (n) apply to tbe court for an order to take such action as it considers necessary to protect the interests of - (i) clients or creditors of a registrant; (ii) investors or creditors of an investment fund; or (iii) investment funds administered by an investment fund administrator or creditors of an investment fund administrator; (0) apply to the court for an order that the person be wound up by the court; (p) order that a distribution of securities cease and that any subscription funds collected be repaid to subscribers; 7777

(q) order the disgorgement of profits or other unjust enrichment pius a penalty not to exceed twice the amount of such profits or llnjust enri chment; (r) order restitution; or (s) impose any other sanctions or remedies as the justice of the case may require. (2) The Commission may make an order under subsection (I) (a) to (g) against a person, without a hearing, if the person - (a) bas been convicted in any j urisdic tion of a criminal offence arising from a transaction, business or course of conduct related to securities; (b) has been found by a court to have contravened the securities laws of any jurisdiction; or (c) has been found by an overseas regulatory allthority to have contravened the securities laws ofthat jurisdiction. (3) If the Commission considers it necessary and in the public interest to do so, the Commission may, without providing an opportunity to be heard, make an order under subsection (l), other than an order under sllbsection ( I )(h), (i) or U), that is effective for not more than 15 days. (4) If the Commission considers it necessary and in the public interest to do so, the Commission may, without providing an opportunity to be heard, extend an order made under subsecti on (3) until the Commission makes a final decision after - (a) a hearing under subsection ( 1) is held; or (b) an opportunity to be heard under subsection (2) is provided. (5) If the Commission makes an order under this section, the Commission must send the order to each person named in the order. (6) If the Commission sends an order made under subsection (3) or (4), the Commission must send a noti ce of hearing, or a notice of opportunity to be heard, with the order. (7) A person appointed lmder subsec tion (l)(l) or (m) is appointed at the expense of the relevant regulated person and any expenses reasonably incurred by the Commission by virnle of the appointment is an amount dlle to the Commission payable by the regulated person. (8) A person appointed under subsection (l )(m) has all the powers necessary, to the exclusion of any other person, other than a liquidator or receiver, to administer the affairs of the relevant regulated person in the best interest of the clients, investors and creditors of the regulated person. (9) The powers re ferred to in subsection (8) include the power to terminate the business of the regulated person if it is judged to be insolvent.
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(10) A person appointed in respect of a regulated person under subsection (I) (I) or (m) shall - (a) supply the Commission with such information in respect of the regulated person, when requested to do so by the Commission; (b) within three months of the person's appointment, or within such other period as the Commission may specify, prepare and supply to the Commission a repori 011 the affairs of the regulated person and where appropriate make recommendations in respect of the regulated person; and (c) if the person's appointment is not terminated after supplying the report referred to in paragraph (b), subsequently supply to the Commission such other information, reports and recommendations as the Commission shall require. (II) If a person appointed under subsection (I )(1) or (m) - (a) fails to comply with an obligation under subsection (10); or (b) in the Commission's opinion, is Ilot carrying out the person's obligations in respect of the relevant regulated person satisfactorily, the Commission may revoke the appointment and appoint some other person in the person's place, and may assess the charges payable to such appointed person up to the date of the revocation of the appointment. (12) On receipt of any information or report pursuant to subsection (10) in respect of a regulated person, the Commission may - (a) require the regulated person to reorganise its affairs in a manner specified by the Commission; or (b) apply to the Court for an order to wind up, dissolve, liquidate or otherwise terminate, as appropriate, the regulated person upon such terms and conditions as the Court thinks fit; (c) take such action in respect of the appointment or continued appointment of the person appointed under subsection (I )(1) or (m) as the Commission considers appropriate. ( 13) If the Commission takes action under subsection (12) it may - (a) apply to the court for an order to take such other action as it considers necessary to protect the interests of the clients or creditors of, or investors in, the regulated person or (b) take any other action provided for ill subsection (1) or (2).
134. Application to court.
Notwithstanding any other provision, if the Commission considers it in the public interest to do so, the Commission may, at any time and without a hearing, apply to the court for an order to take any action as it considers necessary.
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Administrative penalty.
(I) If the Commission considers it in the public interest to do so, the Commission may, upon a settlement or after a hearing, order a person that has breached any provision of securities laws to pay the Commission an administrative penalty of not more than $300,000 for each contravention. (2) Any person in breach of any provision ofa securities law solely by reason of failing to file with or deliver to the Commission a document within the required time period shall be subject to an automatic penalty of up to $ 1,000, or as prescribed, for every day from the day the document was required to be filed or delivered to the day the document was filed or delivered.
Removal of benefits.
If the Commission considers it in the public interest to do so, the Commission may, after a hearing, order a person to pay to the Commission any amount obtained, or payment or loss avoided, as a result of a contravention of securities laws, plus a penalty not to exceed tv.;C" the amount obtained or payment or loss avoided.
Payment of costs.
(I) The Commission shall order a person subject to a healing to pay the costs of the Commission's investigation, the hearing and related costs. (2) The Ccrc.mission may grant an exemption regarding the payment of costs where the Commission considers it appropriate. (3) For the purposes of this section, the costs that the Commission may order the person to pay include - (a) costs incurred in respect of services provided by persons appointed or engaged under section 26 or subsection 42(2); (b) costs of matters preliminary to the hearing; (c) costs for time spent by the Commission or the staff of the Commission; (d) any fee paid to and costs ofa witness; and (e) costs oflegal services provided to the Commission.
Order to freeze property.
(I) If the Commission considers it in the public interest to do so, the Commission may, for the administration of securiti es laws or to assist in the administration of the securities legislation of another jurisdiction, by order for a period not to exceed fi ve days, direct -
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(a) a person having on deposit, under control or for safekeeping any funds, securities or other property of the person named in the order to hold them; or (b) a person - (i) not to withdraw any funds, securities or other property from any person having them on deposit, under control or for safekeeping; or (ii) to hold all funds, securities or other property of a client of that person, or of others, in the person's possession or control in tmst for a receiver, receiver-manager, tmstee or liquidator appointed under an enactment of The Bahamas. (2) An aggrieved person may apply to a judge in chambers to discharge the order of the Commission under this section and shall serve notice on the Commission to join in the proceedings, but the Commission order shall remain in effect until the judge determines otherwise. (3) Unless expressly stated, an order made under subsection (I) does not apply to funds, securities or other property at a clearing facility, or to securities in the process of transfer by a transfer agent.
139. Hearings.
(1) At a hearing the Commission shall provide a reasonable opportunity fo r each person directly affected to be heard and shall give reasonable notice to each such person and may give notice to any interested market participant, which notice shall include the prescribed information. (2) The Commission may - (a) issue a subpoena or other request or summons requiring a person to attend at a hearing, to testify to all matters relating to the subject of the hearing, and to produce all records relating to the subject of the hearing that are in the person's possession or under tbe person's control, whether they are located in or outside The Bahamas; and (b) compel a person to give evidence on oath orally or in writing. (3) Notwithstanding subsection (2), no persons giving evidence before the Commission shall be compelled to incriminate themselves, and every person shall be entitled to all privileges that a witness giving evidence before a court is entitled to in respect of the evidence given by the person to the Commission. (4) On application by the Commission to the court, a person summoned under subsection (I) is liable to be committed for contempt, as if in breach of an order or judgement of the court, if the person neglects or refuses to - (a) attend;
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(b) give evidence; or
(c) produce a document in the custody, possession or control of the person. (5) A hearing under this section shall be open to the public unless the Commission directs otherwise. (6) A person who is entitled to notice of a hearing under subsection (1) may be represented by counsel and, subject to the procedural rules made by the Commission under this Act, may present evidence and argument and may cross-examine witnesses at the hearing. (7) Counsel may advise a witness at a hearing under subsection (1). (8) The Commission may admit as evidence any oral testimony or documentary exhibit that it considers relevant to the subject matter of the proceedings and may take notice of any fact that may be judicially noticed and of any generally recognised scientific or technical fact, information or opinion within its area of expertise. (9) The Commission shall make provision for all oral evidence presented at a hearing under subsection (1) to be transcribed. (10) The Commission shall- (a) make a final decision in writing and state the findings of fact on which it is based and the reasons for it; (b) send a copy of the final decision and reasons to each person given notice under subsection (l) and to each person who appeared at the hearing; and (c) publish a copy of the final decision and reasons or a summary of the decision and reasons in a periodical published by the Commission, on its website or in a daily newspaper circulating in The Bahamas hut the Commission may omit the name of an affected person from an decision so published.
140. Limitation periods.
No proceedings against any person for a breach of any of the provisions of securities laws, or for a failure to comply with any of their provisions, may be commenced after the expiration of six years from the day upon which the breach or non-compliance was or ought to have been discovered. 141 .. Directors and officers. (1) Notwithstanding any other provision of securities laws, where a person has been convicted of an offence under securities laws, any director or officer of the person who knowingly or recklessly authorised. permitted or
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acquiesced in the offence is also guilty of the offence and liable to the penalty specified for it. (2) Reasonable reliance, including reliance on advice of counsel, an auditor or other expert, in good faith, is a defence in a proceeding under rIIis section.
PART XVI - CIVil LIABILITY FOR MiSREPRESENTATiONS
142. Interpretation
In this Part -
"prospectus" means a prospectus filed under section 84 or a foreign prospectus filed under section 93, together with any amendment those documents filed under Part IX.
143. Liability for misrepresentation in prospectus-damages,
(l) Where a prospectus contains a misrepresentation, a purchaser who purchases a security offered by the prospectus during the distribution period has a right of action in damages against - (a) the issuer or the control block holder on whose behalf the distribution is made; (b) a person who is the chief executive officer, chief financial officer or a director of the issuer at the time the prospectus was filed; (c) a person who consented to be named in the prospectus as the chief executive officer, chief financial officer or director or as a proposed chief executive officer, chief financial officer or director of the Issuer; (d) where the issuer is not a public issuer prior to the distribution, any person who was a promoter of the issuer within the prescribed period immediately preceding the date of filing of the prospectus; (e) a person whose consent has been filed as required by section 90 but only with respect to misrepresentations in a prospectus derived from or based on that expert's report; and (f) any other person who signed a certificate in the prospectus other than a person referred to in paragraphs (a) to (d). (2) No person, other than the issuer or the control block holder on whose behalf the distribution is made, is liable under subsection (l) -
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(a) who, having consented to become the chief executive officer, chief financial officer or a director of the issuer, withdrew the consent before the filing of the prospectus and the prospectus was filed without the person's authority or consent; 8383

(b) who, when the prospectus was filed without the person's knowledge or consent, gave reasonable public notice of tbat fact immediately after becoming aware of it: or (c) who, after the filing of .the prospectus and before the sale of securities under it, became aware of a misrepresentation and withdrew the person's consent and gave reasonabl e public notice of the withdrawal of the consent and the reasons for it. (3) No person is liable under subsection (1)- (a) where the misrepresentation is contained in a part of the prospectus made on the authority of an expert or based on an expert's report, if the person had reasonable grounds to believe and did believe, up to the time the prospectus was fi led, that - (i) there was no misrepresentation; (ii) the language in the prospectus fairly represented and was a correct and fair copy of, or eKtract from, the expert's report; and (iii) the expert making :~e statement or preparing the report, opinion, valuation - (Al was competent to make it; (B) had consented as required under section 90; and (C) bad not withdrawn tbat consent; or (b) where the misrepresentation is contained in what purports to be a statement made by a public official or a copy of, or extract from, a public offi cial document, if the misrepresentation was a correct and fair representation of the statement or a copy of, or eKtract from, tbe document and the person bad reasonable grounds for believing it to be tme. (4) Tbe liability of all persons referred to in subsection (I) is joint and several as between tbemselves with respect to tbe same cause of action. (5) A person who is found liable to pay a sum in damages may recover a contribution, in whole or in part, from a person who is jointly and severally liable under this section to make the same payment in the same cause of action unless, in all tbe circumstances of the case, a court is satisfied that it would not be just and equitable. (6) Notwithstanding subsections (4) and (5), no underwriter is liable for more than the total public offering price represented by the pO!1ion of the distribution of securities underwritten, or sold by or to, the underwriter.
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Action by security holders for rescission for misrepresentation in
prospectus.
(I) If a prospectus contains a misrepresentation, a purchaser of a security distributed under the prospectus has a right of action against the issuer, selling security holder or the underwriter that sold the securities to the purchaser uncjj;:r the prospectus for the rescission of the sale and the repayment to that purchaser of the price the person paid for that security. (2) If the purchaser elects to exercise a right of action for rescission against the issuer, selling security holder or underwriter under this section, such person shall have no right of action for damages against such issuer or underwriter under section 143. (3) The right of rescission also applies to securities sold under a prospectus that offers them for subscription in consideration of the transfer or surrender of other securities, whether with or without the payment of cash by or to the issuer, as though the issue price of the securities offered for subscription were the fair value, as ascertained by a court, of the securities to be transferred or sWTendered, plus the amount of cash. if any, to be paid by the issuer.
Due diligence defence.
A person is not liable under section 143 for a misrepresentation in a prospectus if the person proves that the person - (a) made all inquiries that were reasonable in the circumstances; and (b) after doing so, believed on reasonab le grounds that the was not a misrepresentation. statement
Commission may seek leave to bring action or appear or intervene
in an action.
The Commission may apply to a court for leave to bring an action under this Pan in the name and on behalf of an issuer or a security holder and the coun may grant leave on any terms as to security for costs or otherwise that the coun considers proper if it is satisfi ed that -
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(a) the Commission has reasonable grounds for believing that a cause of action exists under this Part; (b) the issuer or security holder has failed or is unable to commence an action; and (c) the Commission has given sixty days written notice to the issuer or security holder who has refused or failed to commence an action. 8585
General.
(I) The rights of action for damages or rescission conferred by sections 143 and 144 shall be in addition to and without derogation from any other right the purchaser may have at law. (2) In an action brought under section 143 or 144, the person bringing such action shall be deemed to have relied on the prospectus in making the investment decision and need not prove thai the person was in fact influenced by the misrepresentation or that the person relied on the misrepresentation in purchasing the security. (3) No person shall be liable under section 143 or 144 if the purchaser bringing the action knew of the misrepresentation at the time of the purchase. (4) The amount recoverable under section 143 or 144 by a purchaser shall not exceed the aggregate price paid by that purchaser for the securities under the offering. (5) In determining what constitutes reasonable investigation or reasonable grounds for belief for the purposes of this Part, the standard of reasonableness shall be that required of a prudent person in the circumstances of the particular case.
PART XVii - GENERAL PROVISIONS
Regulations.
(l) The Minister may, after consultation with the Commission, make regulations necessary or expedient for carrying out the purposes of securities laws and giving effect to the functions and responsibilities of the Commission. (2) Without limiting subsection (1), the Minister may make regulations- (a) regarding any matter in relation to which the Conunission may make a rule; (b) specifying a provision of the regulations the contravention of which constitutes an offence; (c) governing the procedures that are to be followed by the Commission in making and repealing rules made by the Commission; and (d) repealing or amending a rule made by the Commission.
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Rules.
(l) [n carrying out the purposes Qf securities laws and its functions and responsibilities under securities laws, the Commission may make rules providing for such matters as may be necessary or expedient for giving effect to such purposes, nmctions and responsibilities. (2) Rules may vary the provisions in securities laws generally or with respect to its application to - (a) a person or class of persons; (b) a security or class of seclU"ities; or (c) a trade or class of trades.
Rule-making process.
(I) The Commission shall publish, in a daily newspaper of general circulation in the Bahamas, in any regular periodical published by the Commission or on its website, at least sixty days before the proposed effective date thereof- (a) a copy of any rule that it proposes to make; and (b) a concise statement of the substance and purpose of the proposed rule. (2) After a proposed rule is published in accordance with subsection (I), the Commission shall give interested parties a reasonable opportunity to make written representations with respect to the proposed rule. (3) The Conunission shall publish each final rule, with any amendments that the Commission deems appropriate to make as a result of the public comment process under this section, as prescribed on or before its effective date. (4) The Commission is not required to comply with subsections (I) and (2) if
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(a) all persons who will be subject to the rule are named and the information required by subsections (l)(a) and (b) is sent to each of them; (b) the rule only grants an exemption or relieves a restriction and is not likely to have a substantial impact on the interests of persons other than those who benefit under it; (c) the rule makes no material substantive change in an existing rule; (d) the Commission for good cause finds that compliance with subsections (I) and (2) is impracticable or unnecessary and publishes the fmding and a concise statement of the reasons for it; or 8787

(e) the Commission believes that there is an urgent need for the proposed nile and that the delay involved in complying with subsections (I) and (2) would be prejudicial to the public interest. (5) The Commission must give a ·copy of any fi nal nile to the Minister without delay. (6) A nile, or any amendment to a nile, shall be effective if the Commission has provided the Minister with a copy of the nile or amendment and the Commission as not received an objection to the rule or amendment from the Minister within thirty days after the ru le or amendment was de livered to the Minister. (7) Where the Minister objects to a nile or any amendment to a nile, the Commission shall be provided with notice in writing of the reasons for the objection. (8) A nile, or any amendment to a nile, shall be effective on the date it is published in the Gazette or such later date as may be specified in the nile or amendment. (9) If the Commission alters or revo "~3 a nile, it must - (a) publish notice of the alteration or revocation; and (b) give written notice to the Minister without delay; and (c) include in such notices details of the alteration or revocation.
151. Regulation prevails over rule.
If a nile made by the Commission conflicts lVith a regulation made by the Minister, the regulation made by the Minister prevails.
152. Power to vary Commission rules.
If the Commission considers it not prejudicial to the public interest to do so, the Commission may by order vary a nile made under section 149 as it applies to a person, trade or security, or a class of persons, trades or securities.
153. Power to remove exemption contained in Commission rule.
If the Commission considers it in the public interest to do so, the Commission may order that an exemption in a nile made under section 149 does not apply to a person, trade or security, or a class of persons, h'ades or securities.
154. Guidelines.
The Commission may publish guidelines regarding any regulations or niles made pursuant to securities laws, or of any provisions of securities laws, provided however that such guidelines shall not be taken as having the force of law.
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Administrative proceedings and reviews.
(l) Any person directly affected by a decision of the Executive Director or any employee exercising delegated authority from the Commission may, by notice in writing sent by registered mail to the Commission within thirty days after the mailing of the notice of the decision, request and be entitled to a hearing and review of that decision by the Commission. (2) Upon a hearing and review, the Commission may by order confirm the decision under review or make such other decision as the Commission considers proper. (3) Notwithstanding the fact that a person requests a hearing and review under subsection (2), the decision under review takes effect inunediately but the Commission may grant a stay until disposition of the hearing and revIew.
Review of decisions of securities exchange etc.
(I) Any person who is aggrieved by any act or omission of a person registered under Part V may lodge a complaint in respect of that act or omission with the Commission. (2) The Commission may investigate and adjudicate upon the complaint lodged under subsection (I). (3) Sections 42 and 43 shall apply to any investi gation conducted by the Commission under subsection (2). (4) The Commission may, following receipt of a complaint made under subsection (l), make such order as it thinks just, including an order for the payment by the person registered lUlder Part V of any sum by way of restitution or as compensation for any loss suffered by the complainant. (5) Subject to subsection (6), the person who has lodged a complaint against a person registered under Part V shall, if the Commission proceeds to a judgement on the complaint, be precluded from pursuing the complaint or making it the basis of any suit, action or proceeding in any court of law. (6) A person shall not be precluded under subsection (5) unless the person has, before the Commission proceeds to any hearing of and judgement upon the complaint, been informed in writing to that effect.
Appeals to court.
(l) A person directly affected by a final decision of the Commission, other than those stated not to be subject to appeal, may appeal to the Supreme Cowi in accordance with the rules of couli within thirty days after the later of the making of the final decision or the issuing of the reasons for the final decision.
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(2) Notwithstanding the fact tbat an appeal is taken under this section. the decision appealed from takes effect immediately but the Commission or the Supreme Court may grant a stay until disposition of the appeal. (3) The Secretary shall certify to the Supreme Court - (a) the decision of the Corrunission, together with a statement of reasons for that decision; (b) the record of the proceedings before the Commission; and (c) all written submissions to the Commission or other matetial that is relevant to the appeal. (4) The Minister is entitled to be heard by counselor otherwise on the argument of an appeal under this section, whether or not the Minister is named as a party to the appeal. (4) Where an appeal is taken under this section, the court may by its order direct the Commission to make such decision or to do such other act as the Commission is authorised and empowered to do under securities laws and as the court considers proper, having regard to the material and submissions before it and to securities laws, and the Commission shall make such decision or do such act accordingly. (5) Despite an order of the court on an appeal, the Commission may make any further decision upon new material or where there is a significant change in the circumstances and every such decision is subject to this section.
158. Filing of documents and public availability.
(l) All documents or information required to be filed with, delivered to or provided to the Commission shall be submitted to the Commission in the prescribed manner. (2) Subject to subsection (3), the Commission - (a) shall make all documents or information required to be filed with it available for public inspection; and (b) may make all documents or information filed with it available to the public by posting such documents to the Internet website of the Commission. (3) The Commission may hold in confidence all or pati of a document or information referred to in subsection (l) if it considers that - (a) a person whose information appears in the document or information would be unduly prejudiced by disclosure of the information; and (b) the person's privacy interest outweighs the public's interest in having the information disclosed. (4) Where a document or information is not expressly required to be filed but is required to be delivered or provided to the Commission by securities
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laws, the document or information shall not be disclosed under subsections (2) unless the Commission determines that such disclosure is in the public interest.
159. Verification.
The Commission may by notice in writing require the person furnishing any information to the Commission to verify, within a reasonable period as specified in the notice, the information by oath or affirmation.
160. Register as evidence.
Where it is provided in secunlIes laws that a register be established and maintained or kept, or a book of accounts be kept, or a list be prepared or published, any entry in such register, book of account or list, or the production of any licence or certificate issued under securities laws, shall be prima facie evidence of the contents thereof
161. Discretionary exemptions.
(1) If the Commission considers it not prejudicial to the public interest to do so, the Commission may exempt a person, trade or security, or a class of persons, trades or securities, from a provision in Parts V, VI, VII, VIII, IX, X, XI, XII, XIII and XIV of this Act. (2) Exemptions granted under subsection (I) shall be published by the Commission on its website.
162. Designation orders.
(1) If the Commission considers it not prejudicial to the public interest to do so, the Commission may, without providing an opportunity to be heard, order that- (a) an issuer, or an issuer within a class of issuers, is not a public Issuer; (b) a person, or a person within a class of persons, is not a market participant or a marketplace; or (cl a right or obligation, or a right or obligation within a class of rights or obligations, is not a security. (2) If the Commission considers it in the public interest to do so, the Commission may, without providing an opportunity to be heard, order that
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(a) an issuer, or an issuer within a class of issuers, is a public issuer; or (b) a person, or a person within a class of persons, is a market partici pant or a marketplace; or 9191

(c) a trade, or a trade within a class of trades, is a distribution.
163. Conditions on decisions.
The Commission may impose terms, conditions, requirements and restrictions in any decision it makes, as the Commission deems fit.
164. Discretion to revoke or vary decision.
The Commission may, at any time by notice in writing, vary any term, condition, requirement or restriction imposed in any Commission decision or may revoke a Commission decision as it deems fit.
165. Recognition of foreign jurisdictions and foreign securities
exchanges.
For the purposes of securities laws, the Commission may, if it is in the public interest to do so, recognise a - (a) foreign jurisdiction. if the Commission is of the view that the jurisdiction meets the mte, ,a prescribed; and (b) foreign securities exchanges established and operated in a recognised foreign jurisdiction, if the Commission is of the view that the securities exchange meets the criteria prescribed.
166. Commission to keep register.
(I) The COimnission shall maintain a register that shall contain the prescribed information about current and former regulated persons, public issuers and any other person required to be registered with or otherwise approved by the Commission under securities laws. (2) The Commission may make the register available to the public on the prescribed terms.
167. Stamp duty exemption.
Notwithstanding any provision of the Stamp Act (Ch. 370) or any other law to the contrary, stamp duty shall not be payable in respect of the transfer in The Bahamas of any securities listed on a registered securities exchange.
PART XVIII - TRANSITION PROVISIONS AND REPEALS
168. Definitions.
In this Part -
"effective date" means the date when this Act comes into force;
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"relevant period" means the period between the effective date and the transition date; "transition date" means the day that is the first anniversary of the effective date.
169. Existing unregistered market participants.
A person who, immediately before the effective date, was carrying on securities business in or from The Bahamas and was not required to be registered, licensed or otherwise authorised under the former Act, shall be deemed not to be carrying on securities business without registration contrary to this Act by virtue of continuing to carry on that business - (a) during the relevant period, or (b) if the person applies for registration during the relevant period, on or from the effective date until the date that the application for registration is granted or refused by the Commission or is withdrawn by the applicant.
170. Securities exchanges registered under the former Act.
Every securities exchange registered with the Commission under the former Act is deemed to be registered as a securities exchange under section 58 of the Act with effect from the effective date.
171. Clearing facilities registered under the former Act.
Every clearing, settlement, depository and custody facility registered with the Commission under section 20 of the former Act is deemed to be registered as a clearing facility under section 58 of the Act with effect from the effective date.
172. Broker-dealers and securities investment advisors.
Every person or company registered with the Commission under the former Act as a broker-dealer or securities investment advisor is deemed to be registered under section 69 of the Act with effect from the effective date.
173. Registered individuals.
Every individual registered with the Commission under the former Act as a securities investment advisor, stockbroker, principal or associated person is deemed to be registered under subsection 69(4) of the Act as a representative with effect from the effective date.
174. Interim financial statement requirements for public issuers.
The obligations on a public issuer to prepare and file interim financial statements with the Commission under subsection 10 1(5) and to send interim financial
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statements to the issuer's security holders under section 102 shall not take effect until the issuer's first financial year that begins after the transition date.
175. Insider reporting obligations.
The reporting obligations on insiders of public issuers under section 128 of the Act shall not take effect until the day that is ninety days after the effective date.
176. Savings.
Any authority, approval or exemption granted by the Commission under the former Act which is in force immediately before the effective date- (a) shall be deemed to continue as if granted by the Commission under the Act; and (b) in the case of a grant for a specific period, shall be deemed to remain in force for so much of that period as falls after the effective date.
177. Repeals.
(1) The Securities Industry Act (Ch. 363) is repealed.
(2) The enactments specified in the flTst column of the Third Schedule are repealed in the manner and to the extent indicated in the second column of that Schedule.
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Shares
FIRST SCHEDULE
PART 1 - SECURITIES
Any of the following securities -
(a) shares and stock of any kind in the share capital of a company; (b) interests in a limited partnership established under the Partnership Act (Ch. 310); (c) interests in an exempted limited partnership as defined in the Exempted Limited Partnership Act (Ch. 312), as amended; (d) interests in a limited partnership or an exempted limited partnership constituted under the laws of a jurisdiction other than The Bahamas; and (e) equity interests in a regulated or unregulated investment fund as defined in the Investment Funds Act, 2003. Instruments creating or acknowledging indebtedness
2. Debentures, debenture stock, loan stock, bonds, certificates of deposit and
any other instruments creating or acknowledging indebtedness other than (a) any instrument acknowledging or creating indebtedness for, or for money borrowed to defray, the consideration payable under a contract for the supply of goods or services; (b) a cheque, promissory note or other bill of exchange under the Bills of Exchange Act (Ch. 335); (c) a hankers draft or a letter of credit; (d) a bank note, a statement showing a balance in a current, deposit or savings account, a lease or other disposition of property; (e) a contract of insurance; (f) an instrument creating or acknowledging indebtedness and creating security for that indebtedness over land; and (g) a debenture that specifically provides it is not transferable or negotiable. Instruments giving entitlements to securities 3 Warrants and other instruments entitling the holder to subscribe for securities falling within section I or 2. Certificates representing certain securities
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4 Certificates or other instruments that confer contractual or proprietary rights - Options (a) in respect of any security falling in sections I, 2 or 3 being a security held by a person other than the person on whom the rights are conferred by the certificate or instrument; and (b) the transfer of which may be effected without the consent of that person. 5 Options to acquire or dispose ofFutures (a) a security falling in any other section of tbis Part; (b) any currency; (c) any precious metal; or (d) an option to acquire or dispose of a security falling within this
section by virtue of subsection (a), (b) or (cl above.
6 These are -
(a) Rigbts under a contract for tbe sale of a commodity or property of any other description under which delivery is to be made at a future date and at a price agreed upon when the contract is made, other than a contract made for corrunercial and not investment purposes. (b) A contract is to be regarded as made for investment purposes if it is made or traded on a recognised securities exchange, or is made otherwise than on a recognised securities excbange but is expressed to be as traded on such an exchange or on the same terms as those on whicb an equivalent contract would be made on such an exchange. (c) A contract not falling within paragraph (b) is to be regarded as made for commercial purposes if under the terms of the contract delivery is to be made within seven days. (d) The following are indications that a contract not falling within paragraph (b) or (c) is made for commercial purposes and the absence of them is an indication that it is made for investment purposes - (i) one or more of the parties is a producer of the commodity or other property or uses it in his business; or (ii) the seller delivers or intends to deliver the property or the purchaser takes or intends to take delivery of it. (e) It is an indication that a contract is made for commercial purposes that the prices, the lot, the delivery date or other terms are determined by the parties for the purposes of the particular contract
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and not by reference, or not solely by referenc e, to regularly published prices, to standard lots or deli very dates or to standard tenns. (f) The following are indications that a contract is made for investment purposes - (i) it is expressed to be as traded on a securities exchange; (ii) perfonnance of the contract is ensured by a securities exchange or a clearing house; or (iii) there are arrangements for the payment or provision of margIn. (g) For the purposes of paragraph (a), a price is to be taken to be agreed on when a contract is made - (i) notwithstanding that it is left to be determined by reference to the price at which a contract is to be entered into on a market or exchange or could be entered into at a time and place specified in the contact; or (ii) in a case where the contract is eKpressed to be by reference to a standard lot and quality, notwithstanding that provision is made for a variation in the price to take account of any variation in quantity or quality on delivery. Contracts for differences
7. These are -
(1) Rights under -
(a) a contract for differences; or
(b) any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in - (i) the value or price of property of any description; or (ii) an index or other factor designated for that purpose in that contract. (2) Subsection (1) does not include rights under a contract- (a) if the parties intend that the profit is to be secured or the loss is to be avoided by one or more of the parties taking delivery of any property to which the contract relates; or (b) under which money is received by way of deposit on terms that any interest or other return to be paid on tbe sum deposited will be calculated by reference to fluctuations in an index or other factor. Rights and Interests in Securities
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8 Rights to and interests in any security falling within any of the preceding sections of this Part. Foreign Exchange Contracts 9 A foreign exchange contract when carried out in connection with a transaction in securities that is not - (a) an option (currency options are covered by section 5) or (b) a contract to exchange one currency (whether Bahamian or not) for another that is to be settled immediately; where "foreign exchange contract" means a contract - (i) to buy or sell currency (whether Bahamian or not); or (ii) to exchange one currency (wnether Bahamian or not) for another (whether Bahamian or not). Prescribed Securities 10 Anything declared by the regulations or rules to be a security for the purposes of this Part.
PART 2 - SECURITIES BUSINESS - REGULATED ACTIVITIES
The following activities are activities carried on in the course of securities business for the purposes of this Act - 1 Dealing in securities. (a) buying, selling, subscribing for or tmderwriting securities as an agent; or (b) buying, selling, subscribing for or underwriting securiti es as principal where the person entering into that transaction - (i) holds himself out as willing, as principal, to buy, sell or subscribe for securities of the kind to wbicb the transaction relates at prices determined by him generally and continuously rather than in respect of each particular transaction; (ii) holds himself out as engaging in the business of underwriting securities of the kind to whicb the transaction relates; or (iii) regul arly solicits members of the public witb the purpose of inducing them, as principals or agents, to buy, sell, subscribe for or underwrite securities and such transaction is entered into as a result of such person baving solicited members of tbe public in tbat manner; (c) For the purposes oftbis section, "members of the public" means any person other than a person -
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(i) referred to in paragraphs I to 3 of Part 4; (ii) regulated by the Commission; (iii) regulated by a recognised overseas regulatory authority; or (iv) as prescribed. 2 Arranging deals in securities. Making arrangements with a view to - (a) another person (whether as a principal or an agent) buying, selling, subscribing for or underwriting securities; or (b) a person, who participates in the arrangements, buying, selling, subscribing for or underwriting securities. 3 Managing securities. Managing securities belonging to another person in circumstances involving the exercise of discretion. 4 Advising on securities. Advising a person on securities if the advice is - (a) given to the person in his capacity as an investor or potential investor or in his capacity as agent for an investor or a potential investor; and (b) advice on the merits of his doing any of the following (whether as principal or agent) - (i) buying, selling, subscribing for or underwriting a particular security; or (ii) exercising any right conferred by a security to buy, sell, subscribe for or underwrite a security.
PART 3 - EXCLUDED ACTIVITIES
The activities specified in this Part are not considered securities business in the following circumstances - 1 Dealing in securities. (I) Securities evidencing indebtedness -
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Where a person as principal or agent buys, sells. subscribes for or underwrites securities and such securities create or acknowledge indebtedness in respect of any loan, credit, guarantee or other similar financial accommodation or assurance which such person or his principal has made, granted or provided. 9999

(2) Issuing, redeeming or repurchasing securities - Where a company, partnership or trust issues, redeems or repurchases any of its securities falling within sections I to 3 of Part I. (3) Risk management - Where a person buys, sells, subscribes for or underwrites securities and - (a) the transaction relates to securities falling within section 5, 6(1), 7 or 9 of Part I; (b) none of the parties to the transaction are individuals; (c) the sole or main purpose for which the person concerned enters into the transaction, either by itself or in combination with other such transactions, is to limit the extent to which a relevant business will be affected by any identifiable risk arising otherwise than as a result of the carrying on of any activities specified in Part 2 and which is not excluded by virtue of this Part; and (d) the relevant business is a business other than securities business carried on by - (i) the person entering into the transaction; (ii) a company within the same group of companies as such person; or (iii) another person who is or is proposing to become a participator in a joint enterprise with such person. (4) Dispo~a ! of goods or supply of services - Where a person buys, sells, subscribes for or underwrites securities for the purposes of or in connection with the disposal of goods or supply of services or a related disposal or supply by a supplier to a customer and the supplier is acting - (a) as a principal; or (b) as an agent, and the supplier does not hold himself out generally as engaging in the buying, selling, subscribing for or underwriting of securities and does not regularly solicit members of the public to buy, sell, subscribe for or underwrite securities. (5) Incidental activity - Where a person buys, sells, subscribes for or underwrites securities in the course of carrying on any profession or business not otherwise constituting securities business and where such transaction is a necessary or incidental part of other services provided in the course of carrying on that profession or business and is not separately remtmerated otherwise
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than as part of any remuneration received in respect of such other services. (6) Employee schemes - Where an employer buys, sells, subscribes for or underwlites securities in connection with the operation of a share or pension scheme for the benefit of employees or former employees, or of their spouses, widows, widowers or children or step-children under the age of eighteen. (7) Application of proprietary assets - Where a company, partnership or trust, acting as principal and dealing only on its own behalf buys, sells or subscribes for securities by applying its proprietary assets, otherwise than as described in section I (b) of Part 2. (8) Dealing in investment funds - Where a person carries out those securities activities specified in section I of Part 2 solely with respect to securities described in section l ee) of Part 1. 2 Arranging deals in securities. (I) Arranging own deals - Where a person makes arrangements relating to a transaction to which that person will himself be a party as principal or which will be entered into by that person as agent for one of the parties to the transaction. (2) Incidental activities - Where a person makes arrangements and such arrangements are made in the course of carrying on any profession or business not otherwise constituting securities business and where the making of the arrangements is a necessary or incidental part of other services provided in the course of carrying on that profession or business and is not separately remunerated otherwise than as part of any remuneration received in respect of such other services. (3) Enabling parties to communicate - Where a person makes arrangements to provide means by which one party to a transaction, or potential transaction, is able to communicate with other parties to the transaction or potential transaction. (4) Arrangements in connection with securities evidencing indebtedness - Where a person makes arrangements in respect of a transaction referred to in section I ( I). (5) Provision of financePage - 100 101 101

Where a person makes arrangements for the sole purpose of providing finance to enable a person, as principal or agent, to buy, sell, subscribe for or underwrite securities. (6) Introducing - Where a person makes arrangements to introduce a person to another person and- (a) the person to whom introductions are to be made is a person referred to in Part 4; and (b) the introduction is made with a view to the provision of independent advice or the independent exercise of discretion in relation to securities generally or in relation to any class of securities to which the arrangements relate; (7) Arrangements for the issue of securities - Where a person makes arrangements in respect of a transaction referred to in sections I (l) and I (7) of this Part. (8) Disposal of goods or supply of services - Where a supplier makes arrangements made for, or with a view to, a transaction that is to be entered into by a customer for the purposes of or in connection with the disposal of goods or supply of services or a related disposal or supply. (9) Employee schemes - Where a person makes arrangements in connection with the operation by an employer of a share or pension scheme for the benefit of employees or former employees, or of their spouse, widows, widowers or children or step-children under the age of eighteen. (l0) Arranging deals in investment funds - Where a person makes arrangements for, or with a view to, transactions in securities that are described in section I(e) ofPart 1. 3 Managing securities. (I) Disposal of goods or supply of services Where a person manages securities that are or are to be managed for the purposes of or in connection with the disposal of goods or supply of services or a related disposal or supply by a supplier to a customer. (2) Managing investment funds Where a person manages securities and - (a) is incorporated in The Bahamas; and
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(b) its sole securities business is the provision of management or advisory services to one or more investment funds licensed or registered by the Commission as a professional fund, SMART fund or standard fund as defined under and regulated by the Investment Funds Act, 2003, 4 Advising on securities. (l) Advising on investment funds Where a person advises on securities and- (a) is incorporated in The Bahamas; and (b) its sole securities business is the provision of management or advisory services to one or more investment funds licensed or registered by the Commission as a professional fund, SMART fund or standard fund as defined under and regulated by the Investment Funds Act, 2003; (2) Disposal of goods or supply of services Where a supplier gives advice to his customer for the purposes of or in connection with the disposal of goods or supply of services or a related disposal or supply, (3) Publications Where a person gives advice in any communications media and- (a) the principal purpose of the publication, taken as a whole including the advertisements, is not to induce persons to buy, sell, subscribe for or underwrite particular securities; or (b) the person responsible does not derive any direct benefit from any such purchase, disposal, subscription or underwriting, (4) Incidental activities
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Where a person gives legal, accounting or other advice and - (a) the securities related advice is given in the course of carrying on any profession or business not otherwise constituting securities business; (b) the giving of the advice is a necessary or incidental part of other services provided in the course of carrying on that profession or business; and (3) is not separately remunerated otherwise than as part of any remuneration received in respect of such other services,
PART 4 - EXCLUDED PERSONS
103 103

The persons specified in this Part are not required to be registered under the Act in the following circumstances - (l) A company carrying on securities bllsiness exclusively for one or more affiliated companies. (2) A person participating in a joint enterprise (and, where that person is a company, any other affiliated company) with a person carrying on the securities business where the activities constituting such securities business are to be carried on for the purposes of or in connection with that joint enterprise. For the purposes of this paragraph "joint enterprise" means an enterprise into which two or more persons enter for commercial reasons related to a business or businesses, other than securities business, carried on by them. (3) The following persons - (a) a registered marketplace; (b) the Commission; (c) the Government of The Bahamas; (d) the Central Bank o[ :he Bahamas. (4) A person carrying on securities business only in the course of acting in any of the following capacities - (a) director; (b) partner; (c) liquidator, including a provisional liquidator; (d) trustee in bankruptcy; (e) receiver of an estate or company; (f) executor or administrator of an estate; or (g) a trustee acting together with co-trustees in their capacity as such, or acting for a beneficiary under the trust; Provided that in each case such person - (i) is not separately remunerated for any of the activities which constitute the carrying on of securities business otherwise than as part of any remuneration the person receives for acting in that capacity; and (ii) does not hold himself out as carrying on securities business other than as a necessary or incidental part of perfonning functions in that capacity, or (iii) is acting on behalf of a company, partnership or trust that is otherwise registered or exempted from registration under this Act.
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SECOND SCHEDULE
THE COMMISSION

Body corporate.
(I) The Commission is a body corporate having perpetual succession and a common seal, with power to purchase, lease or otherwise acquire and hold and dispose ofland and other property of whatsoever kind. (2) The Commission may sue and be sued in its corporate name and may for all purposes be described by such name, and service upon the Commission of any document of whatsoever kind must be made by delivering the document to, or sending it by registered post addressed to. the secretary of the Commission at the office of the Commission.
Custody and affixing of seal etc.
(I) The seal of the Commission must be kept in the custody of any officer of the Commission as the Commission may approve, and may be affixed to instruments pursuant to a resolution of the Commission and in the presence of the chairman or the deputy chairman and one other member. (2) The seal of the Commission must be authenticated by the signature of the chairman or deputy chairman and another member, and the seal shall be officially and judicially noticed. (3) All documents, other than those required by law to be under seal, made by, and all decisions of the Commission may be signified under the hand of the chairman or deputy chairman.
Tax liability of Commission.
Nothing in this Act shall exempt the Commission from liability for any tax, duty, rate, levy or other charge whatsoever.
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105 105

THIRD SCHEDULE (Section 177)
SHORT TITLE
Investment Funds Act (Ch. 369A)
REPEALS
EXTENT OF AMENDMENT
(al in section 2, repeal the definitions given for "Commission", "Executive Director" and in part (b) of "professional fimd", respectively, and replace with the following- ""Commission" means the Securities Commission of The Bahamas; "Executive Director" means the person appointed as such under the Securities Industry Act, 20 I 0; "professional fund" means ... (b) any firm registered under
Part VI of the Securities
Industry Act, 20 10 which maintains a minimum capital of$120,000 dollars of regulatory capital or is registered or licensed to carry on equivalent securities acti vities in a prescribed jurisdiction; "; (b) repeal the whole of Parts VI; Part VII and IX respectively.
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106 106

1
MULTILATERAL MEMORANDUM OF UNDERSTANDING
CONCERNING CONSULTATION AND COOPERATION
AND THE EXCHANGE OF INFORMATION
INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS MAY 2002 [version revised May 2012] 107

2 version revised May 2012
PURPOSE
The signatories to this IOSCO Multilateral Memorandum of Understanding:
Considering the increasing international activity in the securities and derivatives markets, and the corresponding need for mutual cooperation and consultation among IOSCO Members to ensure compliance with, and enforcement of, their securities and derivatives laws and regulations; Considering the events of September 11, 2001, which underscore the importance of expanding cooperation among IOSCO Members; Desiring to provide one another with the fullest mutual assistance possible to facilitate the performance of the functions with which they are entrusted within their respective jurisdictions to enforce or secure compliance with their laws and regulations as those terms are defined herein, Have reached the following understanding:
DEFINITIONS
For the purposes of this IOSCO Multilateral Memorandum of Understanding:

"Authority" means those regulators listed in Appendix A, who, in
accordance with the procedures set forth in Appendix B, have signed this Memorandum of Understanding.
"Requested Authority" means an Authority to whom a request for
assistance is made under this Memorandum of Understanding.
"Requesting Authority" means an Authority making a request for
assistance under this Memorandum of Understanding.
“Laws and Regulations” mean the provisions of the laws of the
jurisdictions of the Authorities, the regulations promulgated thereunder, and other regulatory requirements that fall within the competence of the Authorities, concerning the following:
a. insider dealing, market manipulation, misrepresentation of material information and other fraudulent or manipulative practices relating to securities and derivatives, including solicitation practices, handling of investor funds and customer orders; b. the registration, issuance, offer, or sale of securities and derivatives, and reporting requirements related thereto;
c. market intermediaries, including investment and trading advisers
who are required to be licensed or registered, collective investment schemes, brokers, dealers, and transfer agents; and d. markets, exchanges, and clearing and settlement entities. 108

3 version revised May 2012
5. "Person" means a natural or legal person, or unincorporated entity or
association, including corporations and partnerships.
MUTUAL ASSISTANCE AND THE EXCHANGE OF INFORMATION
6. General Principles regarding Mutual Assistance and the
Exchange of Information
(a) This Memorandum of Understanding sets forth the Authorities' intent with regard to mutual assistance and the exchange of information for the purpose of enforcing and securing compliance with the respective Laws and Regulations of the jurisdictions of the Authorities. The provisions of this Memorandum of Understanding are not intended to create legally binding obligations or supersede domestic laws. (b) The Authorities represent that no domestic secrecy or blocking laws or regulations should prevent the collection or provision of the information set forth in 7(b) to the Requesting Authority. (c) This Memorandum of Understanding does not authorize or prohibit an Authority from taking measures other than those identified herein to obtain information necessary to ensure enforcement of, or compliance with, the Laws and Regulations applicable in its jurisdiction. (d) This Memorandum of Understanding does not confer upon any Person not an Authority, the right or ability, directly or indirectly to obtain, suppress or exclude any information or to challenge the execution of a request for assistance under this Memorandum of Understanding. (e) The Authorities recognize the importance and desirability of providing mutual assistance and exchanging information for the purpose of enforcing, and securing compliance with, the Laws and Regulations applicable in their respective jurisdictions. A request for assistance may be denied by the Requested Authority:
(i) where the request would require the Requested Authority to act in a manner that would violate domestic law; (ii) where a criminal proceeding has already been initiated in the jurisdiction of the Requested Authority based upon the same facts and against the same Persons, or the same Persons have already been the subject of final punitive sanctions on the same charges by the competent authorities of the jurisdiction of the Requested Authority, unless the Requesting Authority can demonstrate that the relief or sanctions sought in any proceedings initiated by 109

4 version revised May 2012 the Requesting Authority would not be of the same nature or duplicative of any relief or sanctions obtained in the jurisdiction of the Requested Authority. (iii) where the request is not made in accordance with the provisions of this Memorandum of Understanding; or (iv)on grounds of public interest or essential national interest. Where a request for assistance is denied, or where assistance is not available under domestic law, the Requested Authority will provide the reasons for not granting the assistance and consult pursuant to paragraph 12.
7. Scope of Assistance
(a) The Authorities will, within the framework of this Memorandum of Understanding, provide each other with the fullest assistance permissible to secure compliance with the respective Laws and Regulations of the Authorities. (b) The assistance available under this Memorandum of Understanding includes, without limitation:
(i) providing information and documents held in the files of the Requested Authority regarding the matters set forth in the request for assistance; (ii) obtaining information and documents regarding the matters set forth in the request for assistance, including:

contemporaneous records sufficient to
reconstruct all securities and derivatives transactions, including records of all funds and assets transferred into and out of bank and brokerage accounts relating to these transactions;
records that identify: the beneficial owner and
controller, and for each transaction, the account holder; the amount purchased or sold; the time of the transaction; the price of the transaction; and the individual and the bank or broker and brokerage house that handled the transaction; and
information identifying persons who beneficially
own or control non-natural Persons organized in the jurisdiction of the Requested Authority. (iii) In accordance with Paragraph 9(d), taking or compelling a Person’s statement, or, where permissible, testimony under 110

5 version revised May 2012 oath, regarding the matters set forth in the request for assistance. (c) Assistance will not be denied based on the fact that the type of conduct under investigation would not be a violation of the Laws and Regulations of the Requested Authority.
8. Requests For Assistance
(a) Requests for assistance will be made in writing, in such form as may be agreed by IOSCO from time to time, and will be addressed to the Requested Authority's contact office listed in
Appendix A.
(b) Requests for assistance will include the following:
(i) a description of the facts underlying the investigation that are the subject of the request, and the purpose for which the assistance is sought; (ii) a description of the assistance sought by the Requesting Authority and why the information sought will be of assistance; (iii) any information known to, or in the possession of, the Requesting Authority that might assist the Requested Authority in identifying either the Persons believed to possess the information or documents sought or the places where such information may be obtained; (iv)an indication of any special precautions that should be taken in collecting the information due to investigatory considerations, including the sensitivity of the information; and (v) the Laws and Regulations that may have been violated and that relate to the subject matter of the request. (c) In urgent circumstances, requests for assistance may be effected by telephone or facsimile, provided such communication is confirmed through an original, signed document.
9. Execution of Requests for Assistance
(a) Information and documents held in the files of the Requested Authority will be provided to the Requesting Authority upon request. 111

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(b) Upon request, the Requested Authority will require the production of documents identified in 7(b)(ii) from (i) any Person designated by the Requesting Authority, or (ii) any other Person who may possess the requested information or documents. Upon request, the Requested Authority will obtain other information relevant to the request. (c) Upon request, the Requested Authority will seek responses to questions and/or a statement (or where permissible, testimony under oath) from any Person involved, directly or indirectly, in the activities that are the subject matter of the request for assistance or who is in possession of information that may assist in the execution of the request. (d) Unless otherwise arranged by the Authorities, information and documents requested under this Memorandum of Understanding will be gathered in accordance with the procedures applicable in the jurisdiction of the Requested Authority and by persons designated by the Requested Authority. Where permissible under the Laws and Regulations of the jurisdiction of the Requested Authority, a representative of the Requesting Authority may be present at the taking of statements and testimony and may provide, to a designated representative of the Requested Authority, specific questions to be asked of any witness. (e) In urgent circumstances, the response to requests for assistance may be effected by telephone or facsimile, provided such communication is confirmed through an original, signed document.
10. Permissible Uses of Information
(a) The Requesting Authority may use non-public information and non-public documents furnished in response to a request for assistance under this Memorandum of Understanding solely for:
(i) the purposes set forth in the request for assistance, including ensuring compliance with the Laws and Regulations related to the request; and (ii) a purpose within the general framework of the use stated in the request for assistance, including conducting a civil or administrative enforcement proceeding, assisting in a selfregulatory organization's surveillance or enforcement activities (insofar as it is involved in the supervision of trading or conduct that is the subject of the request), assisting in a criminal prosecution, or conducting any investigation for any general charge applicable to the 112

7 version revised May 2012 violation of the provision specified in the request where such general charge pertains to a violation of the Laws and Regulations administered by the Requesting Authority. This use may include enforcement proceedings which are public. (b) If a Requesting Authority intends to use information furnished under this Memorandum of Understanding for any purpose other than those stated in Paragraph 10(a), it must obtain the consent of the Requested Authority.
11. Confidentiality
(a) Each Authority will keep confidential requests made under this Memorandum of Understanding, the contents of such requests, and any matters arising under this Memorandum of Understanding, including consultations between or among the Authorities, and unsolicited assistance. After consultation with the Requesting Authority, the Requested Authority may disclose the fact that the Requesting Authority has made the request if such disclosure is required to carry out the request. (b) The Requesting Authority will not disclose non-public documents and information received under this Memorandum of Understanding, except as contemplated by paragraph 10(a) or in response to a legally enforceable demand. In the event of a legally enforceable demand, the Requesting Authority will notify the Requested Authority prior to complying with the demand, and will assert such appropriate legal exemptions or privileges with respect to such information as may be available. The Requesting Authority will use its best efforts to protect the confidentiality of non-public documents and information received under this Memorandum of Understanding. (c) Prior to providing information to a self-regulatory organization in accordance with paragraph 10(a)(ii), the Requesting Authority will ensure that the self-regulatory organization is able and will comply on an ongoing basis with the confidentiality provisions set forth in paragraphs 11(a) and (b) of this Memorandum of Understanding, and that the information will be used only in accordance with paragraph 10(a) of this Memorandum of Understanding, and will not be used for competitive advantage.
12. Consultation Regarding Mutual Assistance and the Exchange of
Information
(a) The Authorities will consult periodically with each other regarding this Memorandum of Understanding about matters 113

8 version revised May 2012 of common concern with a view to improving its operation and resolving any issues that may arise. In particular, the Authorities will consult in the event of:
(i) a significant change in market or business conditions or in legislation where such change is relevant to the operation of this Memorandum of Understanding; (ii) a demonstrated change in the willingness or ability of an Authority to meet the provisions of this Memorandum of Understanding; and (iii) any other circumstance that makes it necessary or appropriate to consult, amend or extend this Memorandum of Understanding in order to achieve its purposes. (b) The Requesting Authority and Requested Authority will consult with one another in matters relating to specific requests made pursuant to this Memorandum of Understanding (e.g., where a request may be denied, or if it appears that responding to a request will involve a substantial cost). These Authorities will define the terms herein in accordance with the relevant laws of the jurisdiction of the Requesting Authority unless such definition would require the Requested Authority to exceed its legal authority or otherwise be prohibited by the laws applicable in the jurisdiction of the Requested Authority. In such case, the Requesting and Requested Authorities will consult.
13. Unsolicited Assistance
Each Authority will make all reasonable efforts to provide, without prior request, the other Authorities with any information that it considers is likely to be of assistance to those other Authorities in securing compliance with Laws and Regulations applicable in their jurisdiction. FINAL PROVISIONS
14. Additional Authorities
Additional IOSCO members may become Authorities under this Memorandum of Understanding in accordance with the procedures set forth in Appendix B. New Authorities may be added under this Memorandum of Understanding by signing Appendix A. 114

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15. Effective Date
Cooperation in accordance with this Memorandum of Understanding will begin on the date of its signing by the Authorities. The Memorandum of Understanding will be effective as to additional Authorities as of the date of that Authority’s signing of Appendix A.
16. Termination
(a) An Authority may terminate its participation in this Memorandum of Understanding at any time by giving at least 30 days prior written notice to each other Authority. (b) If, in accordance with the procedures set forth in Appendix B, the Chairmen of the IOSCO Board, the Emerging Markets and the Monitoring Group (the “Committee of Chairmen”) determine, following notice and opportunity to be heard, that there has been a demonstrated change in the willingness or ability of an Authority to meet the provisions of this Memorandum of Understanding, as set forth in paragraph 12(a)(ii), the Committee of Chairmen may, after consultation with the Chairman of the relevant Regional Committee, terminate that Authority’s participation in this Memorandum of Understanding, subject to a possible review by the IOSCO Board. (c) In the event that an Authority decides to terminate its participation in this Memorandum of Understanding, cooperation and assistance in accordance with this Memorandum of Understanding will continue until the expiration of 30 days after that Authority gives written notice to the other Authorities of its intention to discontinue cooperation and assistance hereunder. If any Authority gives a termination notice, cooperation and assistance in accordance with this Memorandum of Understanding will continue with respect to all requests for assistance that were made, or information provided, before the effective date of notification (as indicated in the notice but no earlier than the date the notice is sent) until the Requesting Authority terminates the matter for which assistance was requested. (d) In the event of the termination of an Authority’s participation in the Memorandum of Understanding, whether under the provisions of 16(a) or 16(b), information obtained under this Memorandum of Understanding will continue to be treated confidentially in the manner prescribed under Article 11 and cooperation under this Memorandum of Understanding will continue among the other Authorities. 115

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APPENDIX A
IOSCO MMoU: List of Current Signatories http://www.iosco.org/about/?subSection=mmou&subSection1=signatories 116

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APPENDIX B
Procedures Under the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information
I. Application to Become a Signatory to the MOU
(a) All governmental regulatory bodies that are Ordinary or Associate Members of IOSCO are eligible to apply to participate in the MOU at any time. Applications should be submitted to the IOSCO Secretary General. (b) All applicants must provide a complete response to the questionnaire, which is included in Part IV of this Appendix B, and provide copies of their supporting laws, rules and regulations as indicated in the questionnaire. Responses should identify and explain the applicant’s legal authority to meet the specific MOU provisions cited in the questionnaire, which are essential to mutual assistance and the exchange of information in order to successfully enforce securities and derivatives laws. (c) Responses to the questionnaire will be verified by the Screening Group with administrative support provided by the Secretary General. The screening group will establish verification teams that include members with substantial expertise in enforcement of securities and derivatives laws, as well as expertise in cross border information sharing. The screening group has discretion to invite other IOSCO members to participate in the verification teams. (d) The verification of the questionnaire responses will be limited to verification that the responses accurately reflect the legal authority of members to comply with the specific MOU provisions cited in the questionnaire based on the laws, rules and regulations cited in the responses. Based on their review of the questionnaire responses, the verification teams will make specific recommendations to the screening group concerning the ability of the applicant to comply with each MOU provision cited in the questionnaire. (e) The screening group will make recommendations concerning its verification of applicant responses to a decision making group. Prior to making any negative recommendation on an application, the screening group will notify the applicant in writing, identifying the specific MOU provisions for which the applicant lacks legal authority. The applicant will have an opportunity, upon request, to be heard by the screening group. (f) The decision-making group will be comprised of the Chairmen of the IOSCO Board, the Emerging Markets Committee, and the Monitoring Group (“Committee of Chairmen”). Together, this decision-making group, after consultation with the Chairman of the relevant Regional Committee, will decide whether to accept or reject applications to become an MOU signatory based on the screening group’s recommendations. Prior to making any negative decision, the decision making group will notify the applicant in writing, identifying the specific MOU provisions for which the applicant lacks legal authority. The applicant will have an opportunity, upon request, to be heard by the decision-making group. 117

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(g) Upon a decision by the decision-making group of the applicant’s legal authority to meet the MOU provisions cited in the questionnaire, as described in I(f) above, the applicant will be invited by IOSCO to be a signatory. Appendix A will contain the names and signatures of all Authorities to the MOU and will be maintained and updated by the IOSCO Secretary General. The responses of applicants that are so invited to be signatories will be posted on the IOSCO members-only website. (h) Decisions of the Committee of Chairmen shall be made under the authority of the IOSCO Board. However, an applicant dissatisfied with the decision of the Committee of Chairmen may, by written notice to the Secretary General, request that the decision be reviewed by the IOSCO Board. Such request will be referred by the Secretary General to the next meeting of the IOSCO Board to be held at least thirty days following receipt of the request and shall be accompanied by such material and be dealt with under such procedures as the IOSCO Board may from time to time decide. The IOSCO Board may confirm the original decision of the Committee of Chairmen or may substitute a new decision or otherwise deal with the request as it considers fit. (i) An applicant notified of a negative decision pursuant to I(f) and I(h) above, may reapply to become a signatory, in accordance with the procedures in Part II(e)-(g) below, once it obtains the legal authority that IOSCO has determined is lacking.
II. Commitment to Become a Signatory
(a) Members that do not have the legal authority to meet all the MOU provisions cited in the questionnaire, may nonetheless complete the questionnaire, and voluntarily express in their responses, where appropriate, that they are committed to seeking the legal authority necessary to enable them to do so. (b) All completed questionnaires will be reviewed in the same manner set forth in I(c) and (d) above. Such review will be limited to verification that the laws, rules, and regulations submitted support the member’s legal authority to meet the MOU provisions cited in the questionnaire. (c) The screening group will notify the members in writing of the specific MOU provisions for which the member lacks legal authority. (d) Members that complete the questionnaire as provided for in Part II(a) above or that receive notification of a negative decision as provided for in Part I(f) above, may express to IOSCO their commitment to obtain the legal authority to meet all the MOU provisions cited in the questionnaire. Such members will be listed in an attachment to this Appendix B. This list will be maintained and updated by IOSCO’s Secretary General. The responses of such members, with their consent, will be posted on the IOSCO members-only website. (e) After obtaining the legal authority identified as lacking during the verification process, a member may apply to become a signatory to the MOU by: (1) submitting an updated response to the questionnaire identifying changes to the legal authority previously identified as lacking; and (2) confirming the continued accuracy of all other information previously submitted in response to the questionnaire. 118

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(f) The legal authority submitted in accordance with II(e)(1) will be verified in accordance with the procedures referenced in I(c) to I(g). (g) Upon verification of the legal authority submitted in accordance with II(e)(1), an applicant will be invited by IOSCO to be a signatory and to sign Appendix A of the MOU. The updated responses of such applicants will be posted on the IOSCO members-only website.
III. Monitoring of the Operation of the MOU
(a) In order to ensure the effective monitoring of the operation of the MOU, signatories will update as appropriate their responses posted on the IOSCO members-only website. (b) The MOU provides, in paragraph 12(a), for periodic consultation about certain significant, enumerated matters of common concern to the MOU signatories with a view to improving operation of the MOU. Such consultations will be conducted by the MOU signatories (“monitoring group”), with administrative support provided by the Secretary General. The monitoring group may establish procedures, in consultation wıth the IOSCO Board, to facilitate their periodic consultations. Such procedures will include written notice to signatories of the issues to be considered during consultations, and an opportunity to be heard and respond. The monitoring group may obtain the assistance of other IOSCO bodies in performing its consultation and recommendation functions. (c) The monitoring group has discretion to consider and recommend a range of possible options to encourage compliance in the event that a signatory demonstrates a change in its willingness or ability to meet the standards of the MOU provisions. The options might include: providing a period of time for the signatory to comply; full peer review of a signatory that may not be in compliance; public notice of non-compliance; suspension of a signatory from MOU participation; or termination from MOU participation as provided in the MOU (section 16(b)). (d) If further action is necessary as a result of such consultations, the monitoring group will forward recommendations to the decision-making group comprised of the Chairmen of the IOSCO Board, the Emerging Markets Committee, and the Monitoring Group (as defined in I(f) above). The decision-making group will consider the monitoring group’s recommendations and, where appropriate, take action. (e) If the IOSCO decision-making group determines, following notice and an opportunity to be heard, that there has been a demonstrated change in the willingness or ability of a signatory to meet the provisions of the MOU, as provided in paragraph 12(a)(ii) of the MOU, the decision-making group will notify the signatory of the determination and provide the signatory with a written explanation of the determination. The decisionmaking group will establish procedures to provide the signatory with an opportunity, upon request, to be heard and seek review of the determination. Upon a final determination, the decision-making group may take action to encourage the signatory’s compliance with the MOU, or where appropriate, the decision-making group may terminate the signatory’s participation in the MOU as provided in paragraph 16(b) of the MOU. 119

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(f) Decisions of the decision-making group shall be made under the authority of the IOSCO Board. In case of a decision of termination, if dissatisfied with the decision of the decision-making group, the member who is the subject of that decision may, by written notice to the Secretary General, request that the decision be reviewed by the IOSCO Board. Such request will be referred by the Secretary General to the next meeting of the IOSCO Board to be held at least thirty days following receipt of the request and shall be accompanied by such material and be dealt with under such procedures as the IOSCO Board may from time to time decide. The IOSCO Board may confirm the original decision of the decision-making group or may substitute a new decision or otherwise deal with the request as it considers fit. (g) Any decision involving an amendment to the MOU requires a unanimous recommendation from the signatories to the MOU.
IV. Questionnaire
GENERAL INSTRUCTIONS:
The responses and the accompanying material (including laws, rules and regulations) should be provided in one of the four official languages of IOSCO (English, French, Spanish or Portuguese). The following questions ask for information indicating your ability to comply with the provisions of the IOSCO Multilateral Memorandum of Understanding cited below. Please provide a complete response to each question, and copies of the laws, rules and regulations that support each response. Responses to the questionnaire should be sent to the IOSCO Secretary General. Completed questionnaires will be reviewed by in a manner authorized by IOSCO. 120

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QUESTIONS:

Please identify and explain the general or specific provisions of your laws, rules and
regulations (and provide copies of these provisions) that enable you, or a separate governmental body in your jurisdiction, to obtain:
(a) contemporaneous records sufficient to reconstruct all securities and derivatives transactions, including records of all funds and assets transferred into and out of bank and brokerage accounts relating to those transactions; (as required by Paragraph 7(b)(ii) of the MOU) (b) records for securities and derivatives transactions that identify:
(1) the client:
i. name of the account holder; and
ii. person authorized to transact business;
(2) the amount purchased or sold;
(3) the time of the transaction;
(4) the price of the transaction; and
(5) the individual and the bank or broker and brokerage house that handled the transaction. (as required by Paragraph 7(b)(ii) of the MOU) (c) information located in your jurisdiction identifying persons who beneficially own or control non-natural persons organized in your jurisdiction. (as required by Paragraph 7(b)(ii) of the MOU)
Please identify and explain the general or specific provisions of your laws, rules and
regulations (and provide copies of these provisions) that enable you, or a separate governmental body in your jurisdiction, to take or compel a person’s statement, or, where permissible, testimony under oath. (as required by Paragraph 7(b)(iii) of the MOU)
Please identify and explain the general or specific provisions of your laws, rules and
regulations (and provide copies of these provisions) that enable you to provide to foreign authorities:
(a) the information identified in 1(a) above;
(b) the information identified in 1(b) above;
(c) the information identified in 1(c) above;
(d) the information obtained through the powers described in 2 above; and (e) information and documents held in your files. (as required by Paragraph 7(b)(i) of the MOU)
Please identify and explain the general or specific provisions of your laws, rules and
regulations (and provide copies of these provisions) that enable you to provide the information and documents referenced in 3 above to foreign authorities in response to requests concerning the following:
121

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(a) insider dealing, market manipulation, misrepresentation of material information and other fraudulent or manipulative practices relating to securities and derivatives, including solicitation practices, handling of investor funds and customer orders; (b) the registration, issuance, offer, or sale of securities and derivatives, and reporting requirements related thereto; (c) market intermediaries, including investment and trading advisers who are required to be licensed or registered, collective investment schemes, brokers, dealers, and transfer agents; and (d) markets, exchanges, and clearing and settlement entities. (as required by Paragraph 7 of the MOU)
5. Please identify and explain the general or specific provisions of your laws, rules and
regulations (and provide copies of these provisions) that enable you to provide assistance referenced in 4 above to a foreign authority, regardless of whether you have an independent interest in the matter. (as required by Paragraph 7 of the MOU)
6. Please identify and explain the general or specific provisions of your laws, rules and
regulations (and provide copies of these provisions) that require maintenance of the following information and documents (including the period of time for which such information or documents are required to be maintained):
(a) information identified in 1(a) above;
(b) information identified in 1(b) above; and
(c) information identified in 1(c) above.
(as required by Paragraph 7 of the MOU)
7. Please identify and explain (and provide copies of) any domestic secrecy or
blocking laws, rules and regulations that relate to the collection for, or provision to, foreign authorities of:
(a) the information identified in 1(a) above;
(b) the information identified in 1(b) above;
(c) the information identified in 1(c) above;
(d) the information identified in 2 above; and (e) the information identified in 3(e) above. (As required by Paragraph 6(b)of the MOU) 122

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8. Please identify and explain (and provide copies of) any specific or general
provisions of your laws, rules and regulations which restrict or limit the following uses by foreign authorities of information and documents identified above in 1(a)- (c), 2 and 3(e) provided by you:
(a) for the purpose of ensuring compliance with (including investigation of potential violations of) laws and regulations related to:
(1) 4(a) above;
(2) 4(b) above;
(3) 4(c) above; and
(4) 4(d) above.
(b) for the purpose of conducting a civil or administrative enforcement proceeding, assisting in a self-regulatory organization's surveillance or enforcement activities or assisting in a criminal prosecution. (As required by Paragraph 10(a) of the MOU).
9. Please identify and explain (and provide copies of) any general or specific
provisions of your laws, rules and regulations that provide for the confidentiality of:
(a) requests for assistance made to you by foreign authorities, the contents of such requests, and any matters arising under such requests, including consultations between or among the authorities, and unsolicited assistance; and (As required by Paragraph 11(a)of the MOU) (b) documents and information received from foreign authorities. (As required by Paragraph 11(b) of the MOU) ____________ 0HPEHUV/LVWHGLQWKH,26&2028$QQH[%

http://www.iosco.org/about/?subSection=mmou&subSection1=signatories 123

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APPENDIX C
FORM FOR DRAFTING
REQUESTS FOR INFORMATION
This request is being made pursuant to the provisions of the IOSCO MOU concerning consultation and cooperation and the exchange of information. Description of the facts underlying the investigation:
¾ entities/individuals involved and whether regulated or not by the Requesting Authority ¾ type of scheme ¾ location of investors ¾ location of affected markets and whether regulated or not by the Requesting Authority ¾ timeframe of the suspected misconduct ¾ nature of the suspected misconduct ¾ location of assets ¾ chronology of relevant events Describe how the information requested will assist in developing the investigation. Description of uses for which assistance is sought, if other than in accordance with the provisions of the MOU. Description of the information needed or assistance sought (e.g., account opening documents, periodic account statements, trade confirmations, etc.). Time period for which documents should be gathered. Information useful for identifying the relevant documents (e.g., account number, name, address, date of birth of account holder, names of entities believed to control the accounts). Information useful for identifying the individual(s) from whom statements are needed (e.g., name, address, date of birth of individual, telephone number). Sources of information (e.g., regulated individuals and entities, investors, knowledgeable insiders). 124

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Preferred form in which information should be gathered.
Indication of wish to participate in any interview.
Special precautions.
Dates of previous requests in this matter.
Laws and regulations:
¾ provisions of the securities or derivatives laws that may have been violated ¾ brief description of the provisions ¾ explanation of how the activities being investigated may have constituted violations of such provisions Responsibility for administering and enforcing the securities or derivatives laws. Desired time for a reply. Preferred manner in which information is to be transmitted (e.g., telephone, courier, email, computer disk and format). Contact information :
¾ name of contact
¾ telephone and fax numbers
¾ e-mail address
Other relevant information.
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126

2 SECURITIES COMMISSION OF THE BAHAMAS
Our Mission
To effectively oversee and regulate the activities of investment funds, securities and the capital markets, to protect investors while strengthening public and institutional confidence in the integrity of those markets. 127

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128

Table of
CONTENTS
SECURITIES COMMISSION OF THE BAHAMAS
ANNUAL REPORT 2021
Transmittal Letter 5
Chairman’s Message 6
Structure and Membership of the Commission 8
Executive Director’s Remarks 10
Departments of the Commission 13
Management Team 14
Organizational Chart 15
Operations 16
Policy, Research and Compliance 17
Investor Education 22
Project Management and International Relations 23 Human Resources 26 Administration 29 Information Technology 29 Supervision, Risk Analytics and Examinations, and Enforcement 31 Supervision 32 Risk Analytics and Examinations 33 Enforcement 34 Licensing, Registration, and Examinations Overview 34 Legislation 44 Legislative Updates 45 Frequently Used Abbreviations and Terms 47 Financials 48 Financial Summary 49 Audited Financial Statements 50 129

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130

6 SECURITIES COMMISSION OF THE BAHAMAS
Chairman’s
Message
In recent years, the Securities Commission of The Bahamas has undergone significant changes allowing it to augment regulatory capacity and effectively adapt to market variations. The Commission continued on its trajectory of growth and development in 2021, as it evolved in tandem with domestic and international financial sectors. Transforming the Financial Services Sector The Commission remains a key driver in facilitating the transformation and innovation in the domestic financial services sector. The Digital Assets and Registered Exchanges Act, 2020 (DARE) is the nexus to new markets and opportunities in financial and corporate services in the jurisdiction. Following the coming into effect of DARE in December 2020, the Commission began registering firms pursuant to the legislation in 2021. This signalled international recognition of the sound regulatory framework put forth by DARE and the beginning of the expansion of the jurisdiction’s financial services sector into the digital space. The Commission remains committed to being a leader and game-changer with regulation of the crypto space. In order to do this, the Commission will continue to build on the framework established by DARE. In alignment with international standards, the existing framework will evolve to ensure effective systems of monitoring and supervision. The challenge for the Commission will be creating a wellregulated space that does not impede sector development and growth. The Commission will maintain a “Fintech Friendly” environment that continues to spur innovation. The Commission continues to develop ideas, recruit innovators and engage with investors to deepen the country’s capital markets and improve employment opportunities. This has culminated in plans to host a Fintech Festival in 2023 to further promote the jurisdiction. With the DARE Act’s place on the world stage and through its continual evolution, The Bahamas can be viewed as a harmonizer of the crypto space and enabler of growth of Fintech and digital asset markets. “The Commission remains a key driver in facilitating the transformation and innovation in the domestic financial services sector” 131

ANNUAL REPORT 2021 7
The Commission continues to modernize its legislative regime to facilitate development in the capital markets. In July, the Securities Industry (Business Capital) Rules, 2021 came into effect. The Rules establish a regulatory framework for equitybased crowdfunding in The Bahamas. In alignment with key regulatory standards and practices, the Rules help to reduce the costs and barriers associated with raising capital for Small and Medium sized Enterprises. Traditionally, SMEs have experienced difficulty raising capital, which made expansion, and in some cases viability, challenging. With these Rules in effect, the Commission is helping to create an environment that supports diversity, innovation and inclusion of SMEs who now have more funding avenues and investment opportunities. Corporate governance plays a pivotal role in the financial services industry. Good corporate governance is important to conducting business. With regard to corporate governance principles, the Commission is responsible for ensuring standards and practices are developed and applied. The Commission continues to work to ensure that these principles are enshrined in the legislative framework by reviewing and amending legislation to address corporate governance deficiencies highlighted by the World Bank. By doing so, we continue to develop an environment where good businesses can thrive and shareholder value is protected. Modernizing Operations Throughout 2021, The Bahamas endeavoured to mitigate the negative socio-economic effects of the COVID-19 pandemic. The continuation of social conditions imposed by the pandemic highlighted the relationship between resilience and preparation. The Commission progressed ongoing efforts to further modernize its operations. This is instrumental in the Commission’s ability to efficiently, and effectively execute its mandate. The Commission’s ongoing efforts to augment technical capacity will make the Commission digital at its core. The Commission’s digital transformation, specifically the automation of current processes, will improve engagement with registrants and licensees and enhance the Commission’s risk assessment capacity. Principally, the Commission seeks to improve the end-to-end user experience. Creation of Synergies with Other Regulatory Agencies During 2021, the Commission continued its tradition of proactively seeking to create and enhance synergies with other domestic and international regulatory agencies. The task for regulatory agencies, in overseeing activities in globalized marketplaces, remains standardizing cooperation across jurisdictions. Information-sharing agreements underpin cross-border cooperation and strengthen enforcement and surveillance capacities within jurisdictions. There must be balance in creating an environment for growth, while ensuring that there are frameworks in place to protect market participants. Given the nuanced nature of digital assets and its underlying technology, regulators are seeking ways to
promote growth, while allowing proper protections and having cross-border regulation is in place. Strengthening Operations Through Strategic Plan 2021-2024 Equipped with a reassessed SWOT analysis, the Board, along with management, progressed the planning of a comprehensive and bold strategic plan for the 2021-2024 period. Given the changing global environment, and the Commission’s expanded regulatory scope, our strategic plan will align our objectives with identified priorities and an action plan so that we realize SCB’s stated goals. In Closing The Commission is a community of persons bounded by a vision of what a best-in-class Bahamian financial regulator ought to be. I am pleased and proud of the work done by the Commission. Truly, it was my privilege to serve at the helm of the Commission during these transformative years. On behalf of the Board, I thank the management team and staff, led by Executive Director Rolle, for their continuing steadfastness and commitment to the Commission’s mandate. It is my pleasure to present the 2021 Annual Report. 132

8 SECURITIES COMMISSION OF THE BAHAMAS
Structure and Membership of the Commission
The Securities Commission of The Bahamas (the Commission) is a statutory body, established in 1995, pursuant to the Securities Board Act, 1995. The Act was repealed and replaced by the Securities Industry Act, 1999, and subsequent to that the Securities Industry Act, 2011 (SIA, 2011). The Commission’s membership, comprises a Chairman, Deputy Chairman, the Executive Director of the Commission (ex officio), and up to five members appointed by the Minister of Finance. The Minister appoints board members based on their experience or demonstrated capacity in matters relating to industry and the disciplines of commerce, law, finance, economics and administration. SIA, 2011 provides for the Chairman to hold office for a period of five years, and the Deputy Chairman and other members to hold office for a period not to exceed four years. The Act also allows for all members, including the Chairman, to be eligible for reappointment. The Commission’s Executive Director may hold office for a period of five years and to is eligible for a one-term reappointment on the recommendation of the Commission.
Table 1: Board of the Commission during 2021
Role of the Board
The Board is responsible for governance of the organization. The duties of the Board include overseeing the strategic focus; establishing rules and guidelines applicable to investment funds, securities and the capital market; and all policymaking with regard to the Commission. The Board has the authority to establish committees to assist it in the execution of its duties. During 2021, the Board held 12 regular meetings and 1 extraordinary board meeting. There were 7 Audit Committee meetings, and 2 Human Resource Committee meetings. No exceptional matters occurred in relation to the Board from a governance or structural perspective during the 2021 period. Operationally, during the pandemic the Board utilized Microsoft Teams to conduct virtual Board meetings and comply with COVID-19 protocols. Virtual meetings were held from January to December 2021. Name Position Appointment Robert V Lotmore Chairman 1 July 2017 Michael Paton Deputy Chairman 1 July 2017 Christina R Rolle Ex officio Member 26 January 2015 Dawn Patton Member 1 July 2017 Bede Sands Member 1 July 2017 Deno Moss Member 1 July 2017 Tonique Lewis Member 1 July 2017 to 1 October 2021 Peter T Carey Member 1 October 2020 133

ANNUAL REPORT 2021 9
Committees of the Board
Audit Committee
The Audit Committee (AC) advises and makes recommendations on matters relating to corporate governance, including internal financial controls, internal and external audits, and compliance with financial reporting requirements. It also assists the Commission in reviewing remuneration and other related policies for employees of the Commission. The AC held seven meetings during 2021. The 2021 membership of the AC consisted of Dawn Patton (Chair), Derek Sands, Peter T Carey and Christina R Rolle. Secretary to the Board Mechelle Martinborough also attended AC meetings as well as Monique Sands, the Commission’s Head of Finance, as a management representative. Human Resource Committee The Human Resource Committee (HRC) assists the Commission in establishing and reviewing remuneration, benefits and policies for employees of the Commission including salary scales, pensions, bonuses, leave entitlement and any other benefit or incentives. The HRC also hears and considers formal complaints and grievances raised by staff. Its functions also include the periodic review of staff turnover and other human resources reports. The HRC held two meetings during 2021. The 2021 membership of the HRC consisted of Michael Paton (Chair), Bede Sands, Deno Moss, Tonique Lewis and Christina R Rolle. Secretary to the Board Mechelle Martinborough also attended HRC meetings as well as Bernadette Gibson, Human Resources Senior Manager, as a management representative. Board of Directors As at 31 December 2021 Robert V Lotmore Michael Paton Christina R Rolle Ex officio Member Dawn Patton Bede Sands Deno Moss Peter T Carey 134

10 SECURITIES COMMISSION OF THE BAHAMAS
Executive
Director’s
Remarks
For the Securities Commission of The Bahamas, 2021 was both a period of reflection on the Commission’s recent regulatory accomplishments and an opportunity to strategically plan the path forward. Notwithstanding the ongoing COVID-19 pandemic and prevailing conditions, the Commission accomplished several noteworthy achievements during 2021. Digital Assets and Registered Exchanges Act, 2020 Developments Just over one year ago, the Digital Assets and Registered Exchanges Act, 2020 (DARE Act or DARE) came into effect signalling the jurisdiction’s eagerness to adapt to market changes and reap the benefits of market activity. The registration in 2021 of the first licensee under DARE has catapulted The Bahamas into the limelight for regulation. DARE established a regulatory framework for the digital asset space, facilitating the registration of digital token exchanges, initial token offerings as well as other digital asset businesses. Many of the provisions set out in DARE are based on capital markets as well as general consumer protection principles. They were designed to give the Commission broad regulatory powers and flexibility to address a very dynamic space. Naturally, the framework must evolve alongside market developments as new products and risks emerge. In the first quarter of 2022, the Commission is scheduled to release the draft Digital Assets and Registered Exchanges (Amendment) Bill, 2022, which will establish a framework for the monitoring and sanctioning of persons carrying on or purporting to carry on digital asset business activities without the requisite registration pursuant to the DARE Act. The proposed amendments will strengthen the Commission’s enforcement powers as it relates to Digital Assets Service Providers, including freezing powers and the authority to compel the production of information and evidence. The Commission also intends to release the draft Digital Assets and Registered Exchanges (Anti-Money Laundering, Countering Financing of Terrorism, and Countering Financing “The registration in 2021 of the first licensee under DARE has catapulted The Bahamas into the limelight for regulation.” 135

ANNUAL REPORT 2021 11 of Proliferation) Rules for public consultation, in the first quarter of 2022. The Rules will establish a legislative framework to address anti-money laundering (AML) and countering the financing of terrorism (CFT) and countering proliferation financing (CPF) in the digital assets market, in accordance with international standards and best practices, and The Bahamas’ AML/CFT/CPF legislative suite. With respect to other upcoming amendments to the regulatory framework for digital assets, the Commission anticipates addressing some of the emerging risks and concerns in the space. Among the Commission’s focus areas for 2022 are: potential amendments to the regulatory treatment of, and specific requirements for, stable coins; consideration with respect to whether an appropriate regulatory framework is required for non-fungible tokens (NFTs); regulation and/or guidance with respect to the “staking” of clients’ digital assets; and, addressing issues around how clients’ digital assets are held by exchanges and custodians. Other Legislative Highlights Securities Industry (Business Capital) Rules, 2021 The promulgation of the Securities Industry (Business Capital) Rules, 2021 in July was another of the Commission’s achievements. The Rules establish a regulatory framework for equity-based crowdfunding in The Bahamas. The Rules address easing access to capital for many entrepreneurs and providing an appropriate protection regime for retail investors, in keeping with key regulatory standards and best practices. Small- and medium-sized enterprises have long lamented the cost of raising business capital in The Bahamas, which has limited their capacity to grow, and in some cases, to compete and survive. Simultaneously, investors continue to seek greater diversity of investment products to choose from, to grow their personal wealth in alignment with their investment principles and personal philosophies. They also want confidence and protection from unfair practices, market misconduct and other securities and investment fraud. The Rules allow eligible small- or medium-sized businesses to raise up to $5 million BSD within a single 12-month period. They simultaneously reduce the regulatory burden otherwise associated with public offerings of securities. This is a typical example of the Commission’s embrace of its mandate for market development. It was our intention to provide alternative funding avenues for entrepreneurship which would then be a catalyst for growth in the broader Bahamian economy. Securities Industry Legislative Amendments The Commission completed its drafting and public consultation work to enhance the regulatory capital framework for its registrants under the Securities Industry Act, 2011 (SIA, 2011). The draft Securities Industry (Amendment) Regulations, 2021 and draft Securities Industry (Financial Resources) Regulatory Rules, 2021 were issued for consultation in the first quarter of 2021. These legislative developments
provide for a new framework and requirements with respect to the calculation of regulatory capital and will repeal and replace the Operational and Financial Report Form (Form 13). The proposed amendments to the SIA, 2011 strengthen enforcement tools of the Commission, including the power to revoke licenses and address the deficiencies highlighted in the World Bank Ease of Doing Business Survey. National Risk Assessment (NRA) An important project for the Commission in 2021 was our participation in The Bahamas’ National Risk Assessment (NRA) 2021. The NRA attempts to assess and risk-rate the country’s anti-money laundering and countering the financing of terrorism regulatory framework as well as the country’s progress with the implementation of that framework. For the NRA, the Commission was responsible for the Securities Module and contributed to the Financial Institutions and Designated Non-Financial Businesses and Professions Modules. In addition, the Commission took on the responsibility of performing risk assessments for virtual assets service providers and legal persons/legal arrangements. The Commission benchmarked and prepared surveys to determine the country’s national risk assessment rating in practice, as The Bahamas is already largely compliant in terms of legislation and policy framework. The surveys were distributed to registrants and licensees of the Commission, other GFSR members, and industry stakeholders, as applicable. At year-end, the surveys were being analysed and the rating report prepared. The periodic conduct of an NRA is part of the Financial Action Task Force’s (FATF) recommendations for the identification, assessment and understanding of ML/FT risks within the jurisdiction. 136

12 SECURITIES COMMISSION OF THE BAHAMAS
Investor education
With a focus on investor protection and financial resilience, the Commission launched two successful videobased investor education initiatives in 2021 to engage the young adult demographic. The first was a Financial Resilience Video series, which was released in August 2021. The series highlighted well-known Bahamians giving pointers to improve financial resiliency and how to be financially prepared for unforeseeable life events. The videos were well received, with some 48,600 views registered between August and September. The second initiative was the “Starting Out? Start Right!” video competition launched in October as a part of the Commission’s observance of World Investor Week 2021. The videos focused their messaging to young adults aged 18 to 25. Participants demonstrated their knowledge of investor education principles, and displayed praiseworthy creativity in crafting videos. The winning videos are scheduled to be announced in the first quarter of 2022. The Way Forward During 2021, the Commission commenced the development of its Strategic Plan 2021-2024 with the completion of internal and external stakeholder meetings aimed at getting ideas and feedback from the management team as well as various industry and government stakeholder groups. The 2021-2024 strategic plan is expected to be approved by the Commission’s board in 2022. Some of its objectives and priorities include enhancing operational capabilities and performance, improving the regulatory framework, implementation of enhanced monitoring tools and supporting data driven decisions. Some of these priorities will result in the launch of significant operational projects as we are looking to use technology to expand our supervisory capabilities. The Commission has also embarked on a project to review The Bahamas’ domestic capital markets, including its regulation and functioning, specifically to determine barriers to growth and opportunities for expansion. Once our analysis is complete, the Commission will make strategic recommendations to the government for improvements. Conclusion When I first came to the Commission in January 2015, I had two overarching concerns that drove my priorities, namely: 1) The Commission’s influence amongst its addressees, stakeholders and colleagues; and, 2) Contraction in the financial services sector in The Bahamas. Through improvements in our regulatory framework, engagement with licensees, registrants and other stakeholders, engagement and active participation in the International Organization of Securities Commissions (IOSCO) and other regional and international bodies, I believe that we have done much to address those two concerns. I believe now that it is time to turn my attention inward with a view of focusing on the Commission’s operational resilience. This will be one of the main themes underlying many of our objectives and projects for the next year or so and I look forward to engaging with our registrants and stakeholders as we engage on a
journey to transform the Commission. In concluding, I would be remiss if I did not thank the Commission’s board (particularly Chairman Lotmore and other outgoing board members), and the management as well as staff for their dedication to the advancement of the work of the Commission. Despite the prolonged upheaval and disruptions faced due to the COVID-19 pandemic, the Commission remains set to emerge from the pandemic more resilient, with enhanced operational capacity and efficiency, better empowered to protect investors and consumers of financial services, and outfitted with tools to gather and analyse data and communicate with licensees and other constituents. We look forward to what is ahead for 2022 and beyond. 137

ANNUAL REPORT 2021 13
Departments of the Commission
Office of the Executive Director
The Office of the Executive Director (OED) supports the Executive Director in managing the day-today operations of the Commission. The office has three units. Policy, Research and Compliance has responsibility for collecting, analysing and reporting statistical data; supporting the development of research and policy papers; providing technical support in the development of legislation; maintaining compliance with the internal procedures and policies of the Commission; and maintaining the Fintech innovation hub SCB FITLink. Investor Education and Communications is responsible for managing the Commission’s investor education programme, and overseeing public relations and communication. Project Management and International Relations oversees managing local and international stakeholder relationships; facilitating strategic planning; monitoring international standards setters and managing special projects. Supervision Department The Supervision Department (SUD) processes applications for the licensing and registration of persons wishing to conduct registrable and licensable activities. It is responsible for offsite monitoring and supervision of market participants under legislation administered by the Commission, and the review and registration of prospectuses for public offerings and private placements. The Department is divided into two units: Securities and Investment Funds, and Financial and Corporate Service Providers and Digital Assets and Registered Exchanges. Risk Analytics and Examinations Department The Risk Analytics and Examinations Department (RAED) consists of two complementary units: Risk Analytics and Examinations. The Risk Analytics Unit monitors solvency and operational and conduct risks of the Commission’s licensees and registrants, which includes continuous AML/CFT monitoring. The unit’s work informs the Examinations Unit’s priorities. The Examinations Unit is responsible for on-site examinations of all registrants and licensees. This includes processing and recommending applicants to act as the Commission’s agents for the on-site examination of financial and corporate service providers, and reviewing any examinations they conduct on behalf of the Commission. Office of Legal Counsel The Office of Legal Counsel (OLC) provides legal advice to the Commission. OLC spearheads the review and development of laws related to securities, the capital markets, financial and corporate services and financial sector legislation generally, assisting in development and review of the Commission’s guidelines and policies relating to the laws under the Commission’s administrative remit, and managing matters of international cooperation. Enforcement Department The Enforcement Department (END) primarily implements disciplinary actions pursuant to laws administered by the Commission. The department defends the Commission in litigation matters and, where deemed necessary, initiates litigation to enforce laws administered by the Commission. END also
investigates operations or entities (involving companies and individuals) that are operating in The Bahamas without a license or registration as required by law. Office of Financial Controller The Office of Financial Controller (OFC) is responsible for all aspects of the Commission’s financial matters, including preparation and monitoring of annual budgets and the preparation of financial statements. Human Resources Department Human Resources (HRD) is responsible for the daily management of the human resources of the Commission, which includes ensuring adequate human capital to facilitate the Commission’s mandate, as well as implementing and enforcing staff regulations. Administration Department Administration (ADD) plans and oversees general administrative support and office services including the Commission’s document management systems. The department is also responsible for general safety requirements within the premises and maintenance of the Commission’s equipment and vehicles. Information Technology Department Information Technology (ITD) facilitates the information and electronic communications needs of the Commission. 138

14 SECURITIES COMMISSION OF THE BAHAMAS
Management Team
As at 31 December 2021
CHRISTINA R ROLLE
Executive Director
CHRISTIAN ADDERLEY
Deputy Executive Director
Head of Policy, Research & Compliance
ALYSIA ARCHER-COLEBROOKE
Senior Manager
Administration
JOHN CLARKE
Manager
Information Technology
BERNADETTE GIBSON
Senior Manager
Human Resources
MECHELLE MARTINBOROUGH
Deputy Executive Director
Senior Legal Counsel
Office of Legal Counsel
STEWART MILLER
Manager
Investor Education & Communications
SHERINN MUNNINGS
Deputy Manager
Project Management
& International Relations
DANA MUNNINGS-GRAY
Manager, Securities and
Financial & Corporate
Services Providers
LESLEY PEARSON
Senior Manager
Risk Analytics & Examinations
MONIQUE SANDS
Finance Director
Head of Finance
Office of Financial Controller
MAGAN TAYLOR
Manager
Investment Funds
GAWAINE WARD
Senior Manager
Enforcement
139

MEMBERS OF THE COMMISSION
Robert V Lotmore
Chairman
EXECUTIVE
Christina R Rolle
Executive Director
OFFICE OF THE
EXECUTIVE DIRECTOR
POLICY, RESEARCH &
COMPLIANCE
Christian Adderley
Deputy Executive Director/
Head of Policy and Research
INVESTOR EDUCATION/
COMMUNICATIONS
Stewart Miller
Manager
PROJECT MANAGEMENT/
INTERNATIONAL RELATIONS
Sherinn Munnings
Deputy Manager
OFFICE OF THE
FINANCIAL
CONTROLLER
Monique Sands
Finance Director/
Head of Finance
RISK ANALYTICS & EXAMINATIONS
RISK
ANALYTICS
SUPERVISION
SECURITIES UNIT
Dana Munnings-Gray
Manager
FINANCIAL &
CORPORATE SERVICES
UNIT
Dana Munnings-Gray
Manager
INVESTMENT FUNDS
UNIT
Magan Taylor
Manager
ENFORCEMENT
DEPARTMENT
Gawaine Ward
Senior Manager
HUMAN
RESOURCES
DEPARTMENT
Bernadette
Gibson
Senior Manager
ADMINISTRATION
DEPARTMENT
Alysia ArcherColebrooke
Senior Manager
INFORMATION
TECHNOLOGY
DEPARTMENT
John Clarke
Manager
OFFICE OF LEGAL
COUNSEL EXAMINATIONS
RISK ANALYTICS &
EXAMINATIONS
Lesley Pearson
Senior Manager
OFFICE OF LEGAL COUNSEL
Mechelle Martinborough
Deputy Executive
Director/
Senior Legal Counsel
Organizational Chart
As at 31 December 2021
140

16 SECURITIES COMMISSION OF THE BAHAMAS
Operations
141

ANNUAL REPORT 2021 17
Policy, Research and Compliance
During 2021, the Commission focused its policy, research and compliance initiatives on the following areas:

Assisting Financial Services Regulators with completing The Bahamas’ National Risk Assessment (NRA);
Additional research, disseminating policy guidelines and guidance notes to enhance the Commission’s
Digital Assets and Registered Exchanges Act, 2020 (DARE) framework;
Facilitating the Commission’s local, regional, and international financial innovation efforts, via the financial
technology (Fintech) hub, SCB FITLink;
Researching and recommending improvements to the types and quality of statistical information and
reports produced by the Commission; and
Ongoing policy development.
National Risk Assessment (NRA) 2021
The Commission participated in The Bahamas’ national risk assessment (NRA) exercise. To assist with this endeavour, the Policy, Research and Compliance (PRC) Unit prepared background research aimed at assisting the internal NRA team with preparing appropriate risk assessment surveys and a comprehensive and cohesive report. The surveys were disseminated to the Commission’s registrants and licensees and allow The Bahamas to assess the risks posed by certain entities and the effectiveness of the mitigation measures to curtail those risks. NRA Research The Commission drafted a research paper, which examined the NRA outcomes and methodologies of various jurisdictions that have improved their Financial Action Task Force (FATF) Mutual Evaluation risk ratings. The paper also provided recommendations to assist The Bahamas in improving its overall rankings. The Commission reviewed two key tools used by these jurisdictions in conducting their national assessment – the World Bank National Risk Assessment Methodology and the FATF Methodology for Assessing Compliance with the FATF Recommendations. The World Bank and the FATF methodologies provide guidance on rating Money Laundering (ML) and Terrorist Financing (TF) risks in a jurisdiction and for assessing technical compliance with the FATF 40 Recommendations, respectively. The Commission’s final recommendations reflected the outcomes and priority actions set out in the FATF Mutual Evaluations and relative sections of the examined risk assessment and informed the Commission’s contribution to The Bahamas’ NRA. Countering Proliferation Financing (CPF) The Commission prepared an internal research paper that benchmarked the NRA outcomes and methodologies of various jurisdictions that have improved their Proliferation Financing (PF) risk ratings, as assessed by the World Bank. The paper also provides recommendations to assist The Bahamas in preparing for a national PF risk assessment. NRA Surveys To further assist the Commission with the NRA preparation, the PRC Unit developed three industry risk assessment surveys that were disseminated in November 2021. The surveys focused primarily on money laundering threats and mitigation tools with key themes related to the following:
Suspicious transaction reporting;
Record-keeping;
Monitoring client transactions;
Employee training; and
Internal controls and systems.
142

18 SECURITIES COMMISSION OF THE BAHAMAS
Thematic Reviews – Digital Asset Service
Providers (DASPs)
The Commission developed an industry thematic review related to digital asset service providers (DASPs) in an effort to robustly assess and understand the risks posed by this developing sector, and the mitigation measures that have been implemented by DASPs and other stakeholders (eg the government) to address those risks. The thematic review was modelled after the International Organization of Securities Commissions (IOSCO) recommendations and the FATF Recommendations and requirements. To this end, the Commission produced and disseminated a DASP thematic review survey, which included the following themes:

The FATF “Travel Rule” Requirements;
Internal systems and controls;
Transaction and client monitoring;
Proposed future plans;
Identification of other key risks and threats;
and
Identifying and assessing the quality of
implemented mitigation measures.
Respondents to the survey were registrants and potential registrants of the DARE Act and the Financial and Corporate Service Providers Act, 2020 (FCSPA), think tanks, accelerators, and industry experts. The results will be analysed and included in the SCB’s national sectoral risk assessment on virtual assets and virtual assets service providers (VASPs), which is expected to be completed by May 2022. Digital Assets and Registered Exchanges (DARE) Act, 2020 The DARE Act, regulates the issuance, sale and trade of digital assets in or from within The Bahamas. The Commission reviewed and assessed the emerging risks and concerns faced by the digital asset participants market, and aims to address such concerns with upcoming policy guidance for the digital asset sector. The purpose of the guidance is to create an environment that balances a suitable regulatory environment for digital assets while supporting market development. Policy guidance will address key issues such as the tokenization of securities, stable coin offerings, and the Commission’s policy on filing audited financial statements. Ongoing Requirements Paper The Commission is currently in the process of amending the DARE Act, and in efforts to provide recommendations, a research paper was completed that benchmarked the ongoing reporting requirements for digital asset businesses in each jurisdiction. The key conclusions from the paper assisted the Commission in amending certain aspects of the DARE Act, to provide regulatory clarity for digital asset stakeholders with regard to the information that should be submitted to the Commission on a continuing basis. The updated reporting requirements are expected to be issued for public consultation in 2022. DARE Act Frequently Asked Questions (FAQs) The FAQs were drafted to assist the industry with understanding and complying with the Commission’s digital assets regulatory framework. The FAQs address the most commonly asked questions by the public on matters relating to both registering and continuing to comply with DARE and addressed key areas including:
Physical presence requirements;
Regulatory capital requirements;
Application (registration and/or licensing)
processes; and
AML/CFT obligations.
Creation of DARE Policy
The Commission will continue its review and, where necessary, amends to DARE, to ensure a globally competitive, appropriately regulated jurisdiction. Facilitating Financial Innovation SCB Fintech Policy Development The Commission conducted a number of Fintechrelated reviews and policy updates, including:

Drafting the “Risks and Challenges” section of
IOSCO Fintech Network’s Decentralized Finance
Global Report, scheduled to be released in March
The Commission contributed to the report
by preparing the section on risks and challenges of DeFi (decentralized finance), some of which included:

Inherent risks/operational risks of DeFi;
Scalability limitations;
143

ANNUAL REPORT 2021 19

Regulatory clarity;
Customer abuse;
Market abuse; and
AML/CFT risks and threats.

Ongoing review and monitoring of DARE and the FCSPA, 2020 to ensure compliance with the FATF
Recommendation 15 and other internationally accepted digital assets supervisory best practices. This included drafting a policy memorandum comparing the FATF 15 AML/CFT requirements with that of the FCSPA, 2020, which assisted in developing the Digital Assets and Registered Exchanges (Anti-Money Laundering and Countering the Financing of Terrorism) Rules, 2022.
Drafting and publicly disseminating a policy memorandum outlining the policy position with respect to Rule
13, Securities Industry (Business Capital) Rules, 2021 (crowdfunding).
Progress of Statement of Intent (SOI) with US Commodities and Futures Trading Commission (CFTC) The Commission and the US Commodities and Futures Trading Commission (CFTC) continued to progress development of a statement of intent (SOI), which commenced in 2020. The SOI commits SCB and the CFTC to enter into an agreement of cooperation and exchange of Fintech information. The agreement will facilitate more effective and efficient regulation, and oversight of the financial markets and market participants, in light of the emerging technology in financial markets and services. The expected finalization and sign off of the SOI, by the respective authorities, is during the second quarter of 2022. SCB FITLink The Commission’s Fintech hub, SCB FITLink, serves as the central point of contact for the SCB’s engagement with the public on various issues related to Fintech, such as digital asset business, crowdfunding, distributed ledger technology, artificial intelligence and initial token offerings. Chart 1 and Chart 2 show categories of questions and percentage of questions by jurisdiction submitted to SCB FITLink in 2021. Industry Engagement and Meetings A primary activity of the Commission is its engagement with both local and international stakeholders, via its Fintech hub, SCB FITLink. Between 1 January and year-end 31 December 2021, SCB FITLink had held either in-person or virtual meetings with 75 stakeholders. SCB presented on the DARE Act to the International Financial Services Commission (IFSC) and the Financial Intelligence Unit of Belize authorities on subjects including:

The case for digital asset regulation;
SCB’s digital asset regulatory philosophy;
A review of the DARE Act;
SCB’s international initiatives; and
SCB FITLink.
FITLink staff attended New York FinTech Week hosted by Empire Startups in April 2021. The conference brought together innovators in the Fintech sector to discuss risks, threats, opportunities and possible solutions in the financial services sector. Other engagements included Global Financial Innovation Network (GFIN) membership meetings, and meetings with the Decentralized Finance Group formed to draft the IOSCO Fintech Network DeFi report. 144

20 SECURITIES COMMISSION OF THE BAHAMAS
64%
3% 5%
11%
8%
2%
7%
Crowdfunding
DARE
Fintech Festival
Fintech Hub
Securities Industry (Business Capital) Rules, 2021 Correspondence with International Regulatory Agencies Other 75 Inquiries Chart 2: Fintech questions, by jurisdiction, submitted to SCB FitLink in 2021. 63% 7% 16% 9% 1 1 % % 3% Central America Australia Unknown Asia North America Europe Caribbean Chart 1: Categories of Fintech questions submitted to SCB FITLink in 2021. 145

ANNUAL REPORT 2021 21
Improvement of the Quality of
Statistical Information
The Commission has committed to increasing the amount and improving the quality of statistical information publicly disseminated. The Commission’s goals of improving the amount and quality of statistical information are to:

Enable the Commission to gain better
understanding and insight of the securities and capital markets;
Provide the public access to data about what
are the securities and capital markets regulated sectors; and
Ensure supranational bodies, such as IOSCO
and the FATF, understand the industry, trends, opportunities, and risk mitigation efforts. The PRC Unit prepared an internal whitepaper recommending the production of four additional reports, which should derive the following results:
Greater levels of operational transparency;
Ease of access to an aggregation of facts
regarding the securities and capital markets; and
Increased internal efficiency, such as identifying
trends to determine regulatory updates and investor notices.
Recommendations stemming from the whitepaper encompasses the goals, benefits, and concerns voiced by industry participants. Ongoing Policy Development Suitability Requirements for Complex Financial Products In the fourth quarter of 2019, the Board reviewed a policy paper reviewing IOSCO’s Principles of Suitability for Complex Financial Products. The paper focused on consumer and investor protection and emphasized the importance of, and need for, the classification of investors according to both their financial net worth and knowledge of the products of services in which they are investing. As is consistent with international accepted best practices, the paper recommended that investments made on behalf of clients be suitable by considering investor needs, objectives and risk tolerance. In 2021, the Commission began to address the findings of the paper with the release of the Elective Professional Recategorization Guidelines (EPC), in February 2021, which provides a framework for retail investors involved in Contracts for Differences (CFD) trading to recategorize to an elective professional (accredited investor). The Commission will continue its work on this topic, culminating with the adoption of the Suitability Rules for Complex Financial Products, in 2023. Carbon Credits The Commission has commenced work on developing a regulatory framework for entities that intend to engage in a carbon credit initial offering and for exchanges that intend to facilitate the trading of carbon credits. The purpose of the new framework is to introduce a new category of registrant – a carbon credit exchange marketplace – that will facilitate the secondary trading of internationally transferred mitigation outcomes (carbon credits). Capital Markets The Commission will produce a comprehensive report on the current state of The Bahamas’ capital markets. The paper will provide a SWOT analysis of The Bahamas’ capital markets, benchmark the capital markets of emerging market countries, and, ultimately, recommend updates/improvements to existing capital markets legislation, including amended laws and trading rules. Fintech Festival The Commission is developing plans to host a Fintech Festival in 2023. Globally, Fintech festivals are becoming increasingly popular among regulators, as a means of promoting their jurisdiction as “Fintech friendly” and recruiting innovators and investors to deepen the country’s capital markets and improve employment opportunities. The Commission avers that hosting a Fintech Festival will bring both the domestic and international Fintech stakeholders together to discuss risks, opportunities, and solutions. The potential benefits are that, The Bahamas will be considered a prime jurisdiction to invest in and to develop proof of concept projects. This will aid in the overall expansion, growth and development of the country’s Fintech sector. 146

22 SECURITIES COMMISSION OF THE BAHAMAS
Investor Education
Financially literate investors with access to reliable, current investment information are better empowered to grow their wealth and protect themselves from falling victim to investment frauds, scams, and other misconduct. This underlying principle drives the Commission’s approach to investor education and the execution of its function to promote an understanding of the capital markets and its participants, and the benefits, risks and liabilities associated with investing. During 2021, the Commission’s investor education initiatives reinforced the need to be financially prepared for crises, and for financial resilience on a personal, community and national level. Due to enforced COVID-19 social distance protocols, the Commission advanced its investor education programme digitally. S Rosel Moxey, president of Sunshine Finance, was a participant in the SCB’s Financial Resilience Video Series. Financial Resilience Video Series On 19 August, the Commission launched a series of short videos focusing on financial resilience which aimed to foster awareness of the importance of financial resilience and provide practical tips to help Bahamians on their financial journey. Another goal of the video series was to encourage viewers to commit to taking tangible steps to improve their financial resilience. This video series was the culmination of the “I Will” social media campaign launched in tandem with the other members of the Caribbean Working Group of the Americas Chapter of the International Forum of Investor Education (IFIE) during World Investor Week (WIW) 2020. Like the video series, the “I Will” campaign encouraged persons to take action to be more financially resilient. The video series’ messaging included committing to develop and maintain a budget; setting long term financial goals and a plan to achieve them; tracking spending and eliminating unnecessary expenses; preparing financially for foreseeable and unforeseeable life events; and exploring alternative income streams. The videos featured well-known Bahamians and targeted the demographics of 25-40 and 41-60. The videos were posted to the Commission’s website, Facebook page and YouTube channel to ensure that the content was easily accessible. The videos ran on local cable networks during high viewership of local and international cable programming from 19 August to 30 September. During the period, the videos received more than 36,670 views. Facebook’s data analytics indicate that during the period, the videos had a reach of 46,688 and a click to play rate of 10,200. Additionally, a 30-second advertisement for the videos ran on local cable networks during local and international news programmes. This culminated in views of more than 48,691, for the aforementioned period. World Investor Week 2021 The Commission observed WIW the week of the 11–17 October 2021. Activities focused on increasing awareness of the importance of investor education and reinforcement of fundamental investor education and
financial literacy concepts. The Commission continued its efforts to ensure that retail investors were aware of the risks and benefits of investing in achieving financial resilience. Prime Minister, the Honourable Philip Davis, QC, declared the month of October “Investor Education Month” in support of the Commission’s celebration of WIW and as national recognition of the importance of financial literacy and investor education. 147

ANNUAL REPORT 2021 23
“Starting Out? Start Right!”
Video Competition
On 13 October, the Commission launched the
“Starting Out? Start Right!” video competition for Bahamians and residents aged 18 and older. The competition was well received with 15 submissions. Contestants produced a video of 2 to 4 minutes on fundamental financial literacy and investor education concepts and were to target persons between the ages of 18 and 25. The Commission anticipates leveraging the competition through the first quarter 2022 with viewers’ choice elements and special promotions with the winning entries. The videos are posted to the Commission’s website, Facebook page and YouTube channel. Webinars The Commission participated in the IFIE Caribbean Working Group Webinar on 28 October, under the theme: “Strengthening our Toolkit to Fight the Impact of Financial-Fraud during the COVID-19 Pandemic.” This joint initiative forms a part of participating Caribbean securities regulators’ WIW initiatives. Gawaine Ward the Senior Manager of Enforcement presented on the move to criminalize the promotion of fraudulent financial schemes through legislative provisions in the Financial and Corporate Service Providers Act, 2020. Stewart Miller the Manager of Investor Education and Communications moderated a segment on lessons learned about promoting investor education during a pandemic. Miller also presented on the Commission’s lessons learned using video as a communications medium in recent years. The webinar’s recording can be found on the Commission’s website and Facebook page. Social Media Campaigns The Commission posted daily informational posts under the theme “Be a smart investor” as one of its WIW celebration initiatives. The campaign focused on traditional investor education messaging with posts on the Commission’s Facebook page throughout the month of October. The campaign culminated in a total reach of 1,792. The Commission launched a WIW 2021 page:
https://www.scb.gov.bs/investing/world-investorweek-2021/. The page centralized the Commission’s financial literacy and investor education content related to its WIW 2021 theme, and other financial literacy and investment content, for ease of reference. The Commission launched a social media influencer pilot programme during the week. The influencer generated and hosted investor education content and referenced the Commission’s WIW activities and website. During the pilot, the influencer reached an audience of 2,410 persons with the article “Understanding the securities and capital markets – An Introduction”, 200 people with “Due Diligence Tips for Investors” and another 217 with “Investment Red Flags: Spotting an investment scam”. Harnessing Social Media In October, the Commission launched Instagram and Twitter profiles to ensure that its financial literacy and investor education content is accessible to younger demographics including 18-24 and 25-40. Additionally, the Commission launched a LinkedIn profile to increase the various professional communities’ accessibility to the regulator. Project Management and International Relations Affiliations and Memberships The Commission maintains membership in various international, regional and local organizations to stay abreast of regulatory and standards developments, and rising risks and threats, among other things. Some of these memberships also allow the Commission to represent stakeholder concerns and regulatory considerations specific to the jurisdiction at international fora. International Organization of Securities Commissions (IOSCO) The International Organization of Securities Commissions (IOSCO) is the global standard setter for securities and capital markets regulators. The Commission has been an ordinary member of IOSCO since September 1996, and became a signatory to Appendix A of its Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU) on 27 December 2012. The Commission became an early adopter and signatory to Appendix A of the Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (EMMoU) on 21 November 2018. The EMMoU was established “to keep pace with 148

24 SECURITIES COMMISSION OF THE BAHAMAS technological, societal and market developments; to bolster deterrence; and to ensure that IOSCO continues to meet its objectives.” The IOSCO Board is the governing and standard setting body of IOSCO and comprises 34 securities regulators. The Commission is currently a Board member and a member of six IOSCO committees and a number of groups:

Growth and Emerging Markets Committee
(GEMC) seeks to promote the development and efficiency of emerging securities and futures markets.
Inter-American Regional Committee (IARC)
discusses regional issues to contribute a regional perspective to Board debates and policy work. The Commission’s executive director currently serves as Vice-chair of IARC having been appointed in April 2020 first for the remainder of the term 2018-2020 and then for the term 2020-2022.
Assessment Committee (AC) assesses
implementation of IOSCO Principles and
Standards across the IOSCO membership.
MMoU Monitoring Group consists of all MMoU
signatories and is tasked with monitoring the operation of the IOSCO MMoU.
MMoU Monitoring Group Steering Committee
(MMoU MG SC) serves to review problematic issues identified through use of the MMoU and make recommendations to the Monitoring Group as to how these should be addressed.
MMoU Screening Group is tasked with
reviewing MMoU applications to establish if applicants meet the requirements for becoming signatories to the MMoU.
Committee on Enforcement and the Exchange
of Information (Committee 4) aims to help prevent and detect the breaches of securities laws and regulations in global financial markets and seeks to implement global enforcement cooperation under the IOSCO MMoU.
Committee on Regulation of Market
Intermediaries (Committee 3) seeks to promote investor protection and market efficiency through its recommendations on issues relating to market intermediaries.
Operational Resilience Group (ORG) was
formed to examine the operational resilience of regulated entities during the COVID-19 pandemic and to identify any themes and gaps in existing IOSCO and other international organizations’ principles and guidance on operational resilience. Caribbean Group of Securities Regulators (CGSR) The Caribbean Group of Securities Regulators (CGSR), formed in 2002, aims to facilitate information sharing and collaboration between Caribbean securities regulators to enhance regional securities supervision. Council of Securities Regulators of the Americas (COSRA) The Council of Securities Regulators of the Americas (COSRA), established in 1992 as a forum for securities regulators in North, South and Central America, and the Caribbean, focuses on investor protection, the maintenance of market integrity, regulatory cooperation and information-sharing. This regional group usually meets in conjunction with ISOCO’s IARC due to their shared membership. Global Financial Innovation Network (GFIN) The Global Financial Network (GFIN), launched in 2019, is an international network of financial services regulators and related organizations committed to supporting financial innovation. GFIN aims to create a framework for cooperation between financial services regulators on innovation topics and sharing of experiences and approaches. It also seeks to provide efficient ways for innovative firms to interact with regulators and navigate between countries. The Commission attained membership in December 2020. Group of Financial Services Regulators (GFSR) The Group of Financial Service Regulators (GFSR) comprises domestic financial services regulators, the Central Bank of The Bahamas, the Compliance Commission of The Bahamas, the Financial Intelligence Unit, The Gaming Board of The Bahamas, the Insurance Commission of The Bahamas, and the Securities Commission of The Bahamas. The group serves as a medium for information sharing between its members and international financial services regulators. Members use this forum to discuss unique and shared regulatory challenges. 149

ANNUAL REPORT 2021 25
International Forum for Investor Education (IFIE) The International Forum for Investor Education (IFIE), formed in 2005, aims to unite and engage global organizations across sectors to help improve financial capability and investor education. The Bahamas has been a member since 2020. The IFIE Americas Chapter, formed in 2011, works on priority issues and needs of the Americas region, benefitting from the resources, programming and experience of the IFIE global network of partners and other global-regional chapters. The Bahamas is a founding member of the IFIE Americas Chapter Caribbean Working Group (CWG), whose focus is developing programmes on financial capability and investor education within the Caribbean context.
Table 2: Membership meetings and activities attended during 2021.
Meeting/Conference/Date Place Theme/Topic
International Organization of Securities Commissions (IOSCO) Annual Meeting of IOSCO 8-16 November Virtual No physical meeting due to the COVID-19 pandemic. Series of virtual meetings held in lieu of. GEMC 11 November Virtual Discussions on recent work (published reports and projects), market developments and regulatory updates in member jurisdictions. C3 (Committee on Regulation of Market Intermediaries) 23 March 13 April 25 May 14 June 18 November Virtual Information not available to the public. C4 (Committee on Enforcement and the Exchange of Information) and Screening Group 26-27 January 25-26 May 28-29 September Virtual Information not available to the public. Operational Resilience Group (ORG) 24 June 19 August 7 October Virtual Discussions on updates to IOSCO’s BCP guidelines with respect to regulators and registrants. Inter-American Regional Committee (IARC)/Council of Securities Regulators of the Americas (COSRA) IARC/COSRA 29 March Virtual Discussions on regional priorities, status of global capital markets and their trends and vulnerabilities, survey findings on Fintech and regional cybersecurity and training issues. IARC 9 November Virtual Discussions on updates to the Board, financial innovation, and mutual funds. Caribbean Group of Securities Regulators (CGSR) Annual Meeting 8 July Virtual Discussions on regional emerging challenges specifically COVID-19, its impact, members’ responses, and the increase in fraudulent schemes observed. 150

26 SECURITIES COMMISSION OF THE BAHAMAS
Table 3: Number of employees by department
Full Time
Temporary/
Contract
Administration
Enforcement
Human Resources
Information Technology
Office of the Executive Director
Office Financial Controller
Office of Legal Counsel
Risk Analytics & Examination
Supervision
0 5 10 15 20 25
14
3
4
3
6
9
6
1
8
16
21
Global Financial Innovation Network (GFIN)
Quarterly Meeting
22 June Virtual Discussions on workstream updates.
Regulatory Technology (RegTech) and
Supervisory Technology (SupTech)
Showcase
29 June 2021
Virtual Discussions to share RegTech and SupTech progress.
Annual Meeting
6 October Virtual
Discussions on participation in working groups, review and analysis on Fintech surveys, and formulating strategic focus areas for 2022. Human Resources As at 31 December 2021, the Commission’s staff complement stood at 91 consisting of 84 full-time employees and 7 temporary/contract employees. Staff Meetings During 2021, the Commission held 4 (quarterly) staff meetings. All meetings were held virtually due to the COVID-19 pandemic. Staff Education and Training During 2021, the Commission continued its incentivebased support of staff development in order to strengthen its capacity to execute its functions and ongoing priorities. The Commission continued to offer opportunities to employees including travel as permitted. However, due to the pandemic, the majority of training was restricted to online webinars, conferences and seminars only. Health and Wellness Initiatives The Commission seeks to create a proactive environment for the health and wellness of the staff. In its effort to increase benefit offerings, improve employee health, and manage health plan costs, the Commission continues to facilitate its insurance provider’s health program, with staff incentives and accommodation of initiatives on offer. Participants have the opportunity to increase their awareness of health and wellness, through a number of initiatives that provide the tools to make informed lifestyle choices. All continued virtually with several webinars during 2021.
Table 2 (continued)
151

ANNUAL REPORT 2021 27
Table 5: Qualifications of Commission employees across positions
No Degree
Associates
Bachelors
Masters or Above
Professional Certification
Other Seminar Certifications
Administrative
Management
Officer
Other
0 10 20 30 40
1
1
8
20
34
9
13
2
6
2
1
1
2
Table 4: Number of employees by position

Other represents 6 clerical workers and 1 investigations officer on contract.
Administrators
Administrative Assistants
Administrative Clerks
Assistant Managers
Clerks
Deputy Managers
Junior Officers
Managers
Officers
Other*
Senior Administrators
Senior Managers
Senior Officers
Supervisors
7
4
12
18
1
19
14
0
6
2
0
0
7
0 5 10 15 20
1
35
152

28 SECURITIES COMMISSION OF THE BAHAMAS
Meeting/Conference Place Staff Attended
Bahamas Business Outlook 2021 Virtual 2
CPF Training for CFATF Member Jurisdictions Virtual 21 CESRA Informational Webinar Session Virtual 1 INVITATION TO GFSR: 2021 Empirical Research Conference on Approaches to AML and Financial Crime Suppression Virtual 13 The London School of Economics and Political Science: Regulation: Theory, Strategy, and Practice Virtual 13 FINTECH & Digital Tokens Virtual 3 The Malta Workshops Virtual All employees of SUD and RAED 2021 Bahamas Economic Outlook Virtual 1 5th IOSCO/PIFS-Harvard Law School Global Certificate Program for Regulators of Securities Markets Virtual 10 IOSCO’s Capacity Building Online Toolkit Virtual All employees of SUD and RAED GFIN RegTech & SupTech Showcase Virtual 7 CFA Institute Financial Regulatory Symposium 2021 Virtual All employees of SUD and RAED SHRM21 Annual Conference & Expo Virtual 3 2021 EA Summit Chicago, Il 1 Fraud Prevention Virtual 3 STEP LATAM Conference Riviera, Mexico 4 Bentac (OSINT) Training Virtual 25 IFSCA Global Fintech Event Infinity Forum 2021 Virtual 2 Offshore Alert Global 2021 Conference Virtual 2 ACAMS Annual Caribbean Conference Virtual 9 IOSCO/PIFS-HLS Global Certificate ProgrammePhase II Virtual 10 IOSCO SPAC Network Stakeholder Meeting Virtual 1
Table 6: International, domestic and virtual training and capacity building opportunities afforded to
Commission staff in 2021
153

ANNUAL REPORT 2021 29
Administration
Business Continuity Plan (BCP)
Since 2020, the Commission has been engaged in an ongoing effort to augment its business continuity plan (BCP) to ensure that the Commission is able to prevent and withstand as many foreseeable and unforeseeable challenges as possible. This process has involved review of Commission-wide operating procedures and the resilience of those procedures. Moving forward, SCB will test the BCP annually. In June 2021, the Commission conducted a successful test, which focused on the Commission’s information technology data backup and recovery processes. Efficiency Initiatives The Commission remains committed to efficiency efforts that not only improve operations but also reduce inefficient spending. For 2021, the Commission continued to realize expense reductions in the overhead cost of operations. These reductions are a result of the Commission’s staff working remotely. COVID-19 Cleaning and Safety Throughout 2021, the Commission’s premises were sanitized daily. On a quarterly basis, the Commission’s premises underwent a comprehensive deep cleaning and sanitizing to ensure that the environment met the highest health standards for persons requiring access to the premises. In September 2021, the Commission introduced an alternating work team rotation to facilitate staff working on premises. Among other arrangements made to accommodate this transition, mandatory COVID-19 testing at the start of each work rotation ensured that persons working from the Commission’s premises were not at increased risk of exposure to the coronavirus. Document Management Software Solution In mid-2021, the Commission implemented a new Document Management Software Solution (DMSS), OnBase. The application, chosen in part because of the capability to allow users to easily create functional workflows, allows for greater efficiency as documents may be shared more efficiently. The workflows present opportunities for process enhancements as documents are funneled through various channels designed to increase efficiency. Completion of the initial phase of the implementation took place during the second half of the year, and included the transition of all data and documents from the previous DMSS, along with relevant workflows and other functionality. Phase two of the DMSS implementation was in progress at year-end and will provide additional software functionality and workflow efficiencies. Data Warehouse Solution RFP In an effort to raise the level of automation and digitization within the Commission, an RFP for the implementation of a data warehouse was issued in November 2021. The SCB aims to select a candidate to provide the necessary services by the end of quarter one, 2022. The operational advantages of a data warehouse include reductions in task completion time, workflows that are more efficient and improvements in data quality. This implementation will also aid the Commission in making data-driven decisions based on the organizations’ accrued business intelligence. Information
Technology Compliance and Regulatory Interface (CoRI) The major technological improvement for the Commission during the year was the Compliance and Regulatory Interface (CoRI). CoRI is a web-based filing portal, introduced in 2021, which allows registrants and licensees to electronically submit required filings to the Commission, safely, swiftly and conveniently. Although introduced in direct response to social distancing protocols during the pandemic, CoRI will be maintained and upgraded into the future, to continually improve regulatory filing convenience for constituents and help position the SCB for transition to a data-driven work environment. 154

30 SECURITIES COMMISSION OF THE BAHAMAS
Server Infrastructure
The Commission made great strides toward future-proofing its digital capabilities by upgrading and enhancing the server infrastructure. The industry leading solution delivers increased redundancy, availability and responsiveness while allowing for the continued growth of the Commission’s information processing needs. Other Updates The Commission developed a progressive testing schedule as an integral part of the information security framework. The schedule includes routine testing of the internal and external network components by a third party security vendor to uncover and mitigate vulnerabilities. This will enhance future security efforts. The Commission continues to explore new and innovative ways to maintain a secure environment. 155

ANNUAL REPORT 2021 31
Supervision,
Risk Analytics & Examinations, and Enforcement 156

32 SECURITIES COMMISSION OF THE BAHAMAS
Supervision
Supervisory Approach
The Commission deploys a risk-based approach to the supervision of registrants, licensees and the markets, which in turn informs enforcement initiatives and strategies. Under this risk-based approach, supervisory, examinations and enforcement priority is given to the areas the Commission identifies as presenting the greatest risk to the public, the capital markets, the financial system, and the reputation of the jurisdiction as an international wealth management centre. The Commission publishes its priorities annually, which allows industry practitioners to review and improve their operations for compliance in the identified focus areas. To determine supervisory and enforcement priorities, the Commission considers a number of factors, including:

high-risk areas identified by global standards setters, such as IOSCO and CFATF;
risk areas prioritized under the country’s National Risk Assessment program, particularly with respect to
anti-money laundering, the financing of terrorism and the proliferation of weapons of mass destruction;
compliance and non-compliance trends of its constituents stemming from on-site and offsite reviews/
examinations, including the findings of surveys, such as the desk-based thematic reviews conducted during 2020;
global financial crime trends; and
its own observations and experiences.
Supervision Priorities 2021
Corporate governance
Corporate governance is essential to the effective and efficient operation of any organization. Registrants and licensees may expose themselves to regulatory, legal and reputational risk where their corporate governance frameworks are not sufficiently comprehensive or adhered to, and may pose systemic risk to the financial services sector where frameworks are weak. Focus was given to the fitness and propriety of key personnel, oversight levels by the board and committees of the board, and the development of annual board confirmations. Corporate governance frameworks were reviewed to ensure they were sufficiently comprehensive and that they did not pose systemic risk to the financial services sector. Compliance with reporting obligations Following the relaxing of reporting timelines in 2020 due to the pandemic, the Commission focused on fostering strict compliance with reporting obligations in an effort to mitigate risks arising from lack of regulatory monitoring. This effort was enhanced by the implementation of the Commission’s recently launched compliance and regulatory interface, CoRI. Particular attention was paid to compliance with the following obligations:
Compliance with filing of self-risk assessment;
Compliance with filing of Financial and Operational Report, and maintenance of regulatory capital
requirements; and
Statistical information and performance reports for investment funds.
Enhanced Industry Outreach
In 2021, the Commission significantly increased its meetings with registrants and licensees, specifically to enhance the consultation process for the development and implementation of new laws and standards. While social distancing restrictions remained in place, these took the form of increased virtual meetings to focus constituents’ attention on and encourage dialogue about the various regulatory issues and solutions being contemplated. 157

ANNUAL REPORT 2021 33
Capital Markets Overview
The Bahamas International Securities Exchange
(BISX) continued to serve as a crucial element in the Bahamian capital markets as the only registered securities exchange. As at 31 December 2021, the market comprised 37 primary market listings (2020:
37) which included 20 ordinary shares with a market
capitalization of $4.84 billion (2020: $4.51 billion), 8 preference shares with a market capitalization of $249 million, 9 Bahamas Government Stock (BGS) and corporate bonds with a face value of $462 million, and 231 Bahamas Registered Stock (BRS) with a face value of $3.7 billion. The volume of shares traded on BISX in 2021 was
12.045 million (valued at $108.438 million) in contrast
to 2020 when the volume of shares traded was 5.558 million (valued at $27.886 million). Additionally, as at 31 December 2021 the BISX All-share index closed at 2,228.24 compared to 2,092.46 in 2020, which represented a 6.50% increase. Risk Analytics and Examinations Self-Risk Assessments In accordance with Part II–Duty of Financial Institutions, Section 5–Conduct of Risk Assessment of the Financial Transactions Reporting Act (FTRA), 2018, the Commission requires licensees and registrants to self-assess their identified risk(s), inclusive of Money Laundering, Financing of Terrorism and Proliferation Financing risk (AML/CFT/PF), and develop a comprehensive risk management system in order to take appropriate measures to manage and mitigate those risks. A major component of the risk assessment is identifying, assessing and understanding the risk in relation to its facility holders and the jurisdictions of origin and operation and its products, services, transactions and delivery channels. This assessment should be documented, kept up-to-date and approved by Senior Management. Further, the risk assessment must be updated if any of these events occur:

prior to the launch of a new product or business
practice;
prior to the use of new or developing
technologies; and
when there is a major event or development in
the management and operation of the group.
Self-risk assessments were due at the end of
December 2021. A self-risk assessment template disseminated to licensees and registrants increased the compliance rate for submission of self-risk assessments to 100% for both SIA and IFA registrants and licensees and over 85% for FCSPA licensees. Examinations The examinations conducted by the Commission are categorized as routine and “for cause”. Routine examinations are performed with an average frequency of four years. Inspections for cause are based upon credible information coming to the Commission’s attention and are performed on an “as needed” basis. In cases where banks and trust companies fall under the regulatory scope of both the Commission and the Central Bank of The Bahamas (CBOB) examinations may be conducted jointly with the CBOB. Resumption of On-site Examinations On site hybrid examinations resumed February 2021. Examiners took COVID-19 PCR tests prior to on site file reviews. Additionally, Microsoft Teams folders were set up to allow licensees and registrants to submit required documents for review and limit the time on premises. Other Updates In February, the Commission held its annual virtual Agent Training for BICA licensees interested in being approved agents to conduct FCSPA examinations on behalf of SCB. A virtual discussion was held in March on the SIA (Financial Resources) Rules, 2021 to assist firms with the Regulatory Capital Calculation. Moving forward the Commission intends to conduct more annual training sessions to engage licensees and registrants on their required reporting (Interims, Audited Financial Statements, Regulatory Capital) and speak to areas of concern noted during the period under review. Examinations Priorities 2021 Common Reporting Standards (CRS) – Proper tax filing (tax evasion/avoidance) Examinations included a review of whether entities potentially pose a risk to the jurisdiction due to improper, inadequate or non-existent tax reporting. Particular focus was given to complex structuring, 158

34 SECURITIES COMMISSION OF THE BAHAMAS which may have the potential to confuse the reporting responsibilities of licensees and registrants. The Commission distributed, in 2021, a desk-based thematic review to all licensees and registrants on this topic. Business continuity planning/Disaster recovery (BCP/DR) Examination programs included a review of disaster recovery plans to test the robustness of the securities sector in the aftermath of various disaster scenarios. Examinations focused on:

operational capacity and contingency planning;
record retention with emphasis on wireless restoration and client access to data during downtime;
safeguards for clients’ privacy with electronic security of client information, including encryption policies,
data management and accessibility;
data protection; and
proper configuration of network storage devices.
Advisory fees and valuations for investment funds Examinations reviewed disclosures related to fees and valuation controls and practices. Emphasis was placed on the valuation of client assets, due diligence, the oversight of investment managers, and how fees are calculated, tested and monitored to ensure accurate reporting to investors. Enforcement The Enforcement arm of the Commission was impacted by the implementation in early 2021 of the FCSPA, 2020, which criminalized “financial schemes”. The definition covers, inter alia, pyramid and Ponzi schemes and makes them unlawful activities. The Commission previously investigated such activities, but could not address them administratively or via criminal prosecution. The Commission now has the authority to prosecute such schemes as now they attract criminal liability under the FCSPA, 2020. Enforcement Priorities Improved communication and coordination with stakeholders The Enforcement Department (END) worked to improve communication and coordination with bodies essential to carrying out its functions, such as the Financial Crime Unit of the Royal Bahamas Police Force, when addressing securities-related matters and matters under the FCSPA, 2020 that carry criminal penalties. The END aimed to work to improve relations with the Department of Public Prosecutions to streamline the handling of indictable criminal matters. Streamlining of investigations into fraud schemes Since late 2019, the Commission observed an upward trend in financial schemes, particularly involving online multi-level marketing internet-based Ponzi schemes as well as “Asue-branded” schemes. This trend appears to have steadily increased moving into 2021. As a result of the promulgation of the FCSPA, 2020, which criminalizes the launch or promotion of certain criminal financial schemes, and recent amendments to securities laws, the Commission has been actively investigating such matters, and plans to actively prosecute them. Licensing, Registration and Examinations Overview Securities Industry Act (SIA), 2011 Firms under the SIA In 2021, the Commission approved 10 new firms under the Securities Industry Act (SIA). 5 firms upgraded their license to conduct registrable securities business. 6 firms surrendered their license in 2021. As at 31 December 2021, there were 167 registered securities firms in the industry, which represents an increase of 4 firms when compared to 31 December 2020. 159

ANNUAL REPORT 2021 35
Table 7: Firms registered under the SIA
Registered
Firms as at
31 December
Newly Approved
Firms as at
31 December
Surrenders
Completed
Registered
Firms as at
31 December
Category 2020 2021
Dealing as principal or agent 3 0 0 3
Dealing as agent only 9 0 0 9
Arranging deals in securities only 0
Managing securities only 12 1 0 13
Advising on securities only 9 0 1 8
Dealing as agent only and
Arranging deals in securities 11 0 0 11
Dealing as agent only and
Advising on securities 1 0 0 1
Arranging deals in securities and Managing securities 1 0 0 1 Arranging deals in securities and Advising on securities 0 1 0 1 Managing securities and Advising on securities 46 1 3 44 Dealing as principal or agent and Advising on securities 1 0 0 1 Dealing as principal or agent, Arranging deals in securities 12 3 0 15 Dealing as principal or agent, Managing securities and Advising on securities 4 0 0 4 Dealing as principal or agent, Arranging deals in securities and Advising on Securities 1 0 0 1 Dealing as principal or agent, Arranging deals in securities and Managing Securities 2 1 0 3 Arranging deals in securities, Managing securities and Advising on securities 2 1 0 3 Dealing as principal or agent, Arranging deals in securities, Managing securities and Advising on securities 18 1 2 17 Dealing as agent only, Arranging deals in securities, Managing securities and Advising on securities 29 0 0 29 Clearing facilities 1 0 0 1 Marketplaces 1 1 0 2 Total 163 10 6 167 *Figure revised from SCB Annual Report 2020 The surrenders includes surrenders completed from previous years that had not been reported. * 160

36 SECURITIES COMMISSION OF THE BAHAMAS
Market breakdown by activity
The SIA provides for five categories of registrable activities.
Table 8: Firms by registrable activities
Individuals under the SIA
In 2021, 73 individuals were approved under the SIA. From the individuals recorded as registered at the end of 2020, a total of 588 individual registrations were surrendered or not renewed. As at 31 December 2021, there were 564 registered individuals under the SIA.
Table 9: Individuals registered under the SIA
Registered Individuals as at 31 December
Newly Approved
Individuals as at 31 December
Registered Individuals as at 31 December
Category 2020 2021 2021
CEO 163 5 157
Compliance officer 163 24 162
Representative – Trading 239 20 151
Representative –
Discretionary management 118 2 147
Representative – Advising 165 8 192
CEO and Representative – Trading 8 3 7
CEO and Representative –
Discretionary management 43 0 34
CEO and Representative – Advising 13 1 9
Representative – Trading and Discretionary management 17 1 13 Representative – Trading and Advising 29 6 24 Representative – Discretionary management and Advising 49 1 35 CEO, Representative – Trading and Advising 2 0 1 CEO, Representative – Discretionary management and Advising 32 0 27 Representative – Trading, Discretionary management and Advising 28 1 26 CEO, Representative – Trading, Discretionary management and Advising 10 1 9 Total 1,079 73 564 *The figures for Discretionary Management and Advising Representatives include approvals from previous years that had not been reported. The surrenders for individuals includes surrenders completed from previous years that had not been reported. Category 2021 Dealing as principal or agent 46 Dealing as agent only 50 Arranging deals in securities 83 Managing securities 119 Advising on securities 115 * * 161

ANNUAL REPORT 2021 37
Market breakdown by activity
The SIA provides for three categories of registrable activities for individuals. A single individual may be registered for a combination of these activities.
Table 10: Individuals by registrable activities
Category 2021
Trading Representative 200
Discretionary management Representative 291
Advising Representative 323
Securities Industry Act (SIA), 2011 Examinations On-site Examinations of SIAs During 2021, pursuant to the SIA, 2011, 15 on-site examinations for firms registered to conduct securities business were conducted. Of these, 14 were Routine and 1 was For Cause. There were no Joint On-Site examinations of licensees conducted with CBOB during 2021.
Table 11: Inspections by category of registration
Category 2021
Dealing as agent only 1
Managing securities only 1
Dealing as agent only and Arranging deals in securities 1 Managing securities and Advising on securities 1 Dealing as principal or agent, Arranging deals in securities and Managing on securities 1 Arranging deals in securities, Managing securities and Advising on securities 1 Dealing as principal or agent, Arranging deals in securities, Managing securities and Advising on securities 8 Dealing as agent only, Arranging deals in securities, Managing securities and Advising on securities 1 Total 15 162

38 SECURITIES COMMISSION OF THE BAHAMAS
Investment Funds Act, 2019
On 1 September 2019, the Investment Funds Act, 2019 (IFA) came into force providing for the administration of a Bahamas-based fund by a foreign administrator (licensed or established in a prescribed jurisdiction), and removing the category of exempt* investment fund administrator. Investment Fund Administrators During 2021, 3 investment fund administrators were licensed by the Commission including a previous exempt investment fund administrator that transitioned to a restricted investment fund administrator. As at 31 December 2021, there were 45 licensed investment fund administrators. During 2021, 3 foreign fund administrators acted on behalf of Bahamas-based funds. At the end of December 2021, 26 licensed investment funds were being self-administered pursuant to section 8 of the IFA, 2019.
Table 12: Investment Fund Administrator Approvals
Licensed
Administrators as at 31 December
Newly Approved
Licensed Administrators as at 31 December
Surrenders as at 31 December
Licensed
Administrators as at 31 December
Category 2020 2021
Exempt* 1 0 1 N/A
Unrestricted 33 1 2 32
Restricted 14 2 3 13
Total 47 3 5 45
IFA, 2019 Examinations
Investment Fund Administrators
A total of 8 examinations of licensed investment fund administrators were conducted during 2021. Investment Funds In 2021, 77 investment funds were approved and licensed; of those, the Commission licensed 9, and 68 were licensed by unrestricted investment fund administrators and filed with the Commission. During the 2021 period, 80 funds entered into liquidation or indicated a surrender of their license; additionally, 101 investment funds satisfactorily completed the process by year-end resulting in 683 licensed investment funds at year-end. The Professional Fund and SMART fund model 007 continue to have new applications and approvals despite a net decrease in funds over the year. 163

ANNUAL REPORT 2021 39
Licensed and filed by UIFAs
Licensed by
SCB
Standard Fund N/A 1
Professional Funds 18 6
SMART Fund Model 001 0 0
SMART Fund Model 002 13 0
SMART Fund Model 003 0 0
SMART Fund Model 004 6 1
SMART Fund Model 005 0 0
SMART Fund Model 006 0 0
SMART Fund Model 007 31 1
Total 68 9
Funds as at 31 December
Newly Approved
Funds as at 31 December
Funds as at 31 December
Category 2020 2021 2021
Standard Funds 32 1 29
Professional Funds 226 24 214
SMART Fund Model 001 7 0 12
SMART Fund Model 002 133 13 130
SMART Fund Model 003 9 0 3
SMART Fund Model 004 144 7 123
SMART Fund Model 005 4 0 4
SMART Fund Model 006 1 0 2
SMART Fund Model 007 156 32 166
Total 712 77 683
Table 14: Investment Funds licensed during 2021 by category
Investment Funds Sector Net Asset Values (NAVs) The Commission licenses investment funds in The Bahamas that invest in numerous underlying investments such as private equity, stocks, fixed income, real estate, ETFs, derivatives and cryptocurrency; in various structures, including hedge funds, fund of funds and feeder funds. Total net asset value by all investment fund administrators at 31 December 2021 was $50.0 billion, compared to $49.8 billion for the period ending 31 December 2020, an increase of 0.6%.
Table 13: Investment Funds Registered Under IFA, 2019
164

40 SECURITIES COMMISSION OF THE BAHAMAS
Financial and Corporate Service Providers Act (FCSPA), 2020 On 14 December 2020, the Financial and Corporate Service Providers Act (FCSPA), 2020 was promulgated enhancing the regulatory framework for the industry. In 2021, post COVID-19 pandemic, emphasis was placed on transitioning licensees under the FCSP, 2000 to the new FCSPA, 2020. The transitional period was six months following the implementation of the new Act. The FCSPA, 2020 allowed licensees to be licensed in the category of Corporate Services, Financial Services or Financial and Corporate Services, based on their business activity. The FCSPA, 2020 now requires persons engaged in areas such as financial advisory/consultancy services, financial intermediation, financial leasing services, money broking, custody of digital assets and wallet providers to be licensed by the Commission. During 2021, 102 financial and corporate service providers (FCSPs) were either newly licensed or transitioned under the new legislation, while 198 licenses were either surrendered or did not transition under the new legislation. As at 31 December 2021, there were 246 licensed FCSPs. This comprised 184 licensees in the category of Corporate Service Provider, 28 licensees in the category of Financial Service Provider, and 34 licensees in the category of Financial and Corporate Service Provider.
Table 15: Registered Financial and Corporate Service Providers as at 31 December 2021
FCSPs as at 31 December
Approved/
Transitioned
Surrenders/
Non-Transitioned
FCSPs as at 31 December
Category 2020 2021
Companies 201 65 90 176
Partnerships 30 3 18 15
Individuals/
Unincorporated Bodies 111 34 90 55
Total 342 102 198 246
FCSPA, 2020 Examinations
A total of 15 examinations of financial and corporate service providers were conducted during 2021; 8 were conducted by the Commission and 7 conducted by the Commission’s appointed agents. Category Conducted by SCB Conducted by Agents Corporate Services only 8 4 Financial Services only 0 2 Financial and Corporate Services 0 1 Total 8 7
Table 16: Examinations by category of Financial and Corporate Service Providers during 2021
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ANNUAL REPORT 2021 41
Digital Assets and Registered Exchanges Act, 2020 (DARE) Ever focused on innovation, the Commission enacted legislation that placed The Bahamas at the forefront of digital asset regulation. The Digital Assets and Registered Exchanges Act (DARE), 2020 came into force on 14 December 2020, providing for the regulation of digital asset business offered in or from within The Bahamas. At 31 December 2021, there were 3 firms registered to conduct digital assets business. Of those, 1 was a new registrant licensed as a digital token exchange under DARE, and 2 were current licensees of the Commission, registered under other legislation, which added digital assets business to their portfolio. DARE, 2020 Examinations Licensees were not registered under the DARE Act until the last quarter of 2021, thus would not have come up for routine examination in the 2021 period. However, the Commission’s vigorous on-boarding process of all licensees and registrants includes a review of the systems and policies in place as well as Fit and Proper assessments of Key Personnel. Enforcement Matters There were 12 enforcement matters brought forward from 2020. During 2021, there were no matters opened or closed. As at 31 December 2021, 12 enforcement matters remained open, of which 9 involved litigation and 3 were administrative matters. Administrative matters primarily concern non-compliance with filing obligations and client files/records under the Securities Industry Act and Regulations. During 2021, END continued to monitor the mentioned outstanding matters.
Table 17: The nature of enforcement matters in 2021
Type of Matter
Matters brought forward from previous years into 2021 New matters opened in 2021 Matters closed in 2021 Matters referred to another agency in 2021 Matters that remained open as at 31 December 2021 Litigation 9 0 9 Administrative 3 0 3 Criminal 0 Other 0 Total 12 0 12 The Commission issued 10 enforcement-related notices in 2021. The full text of Public Notices, investor alerts and press releases issued by the Commission, along with copies of judgements, are available on SCB’s website.
Table 18: Public Notices issued during 2021
Notice Issue Date Description*
QUBITTECH 19 March 2021
Public Notice No 3. It was brought to the attention of the Commission that Qubittech may be carrying out activities that are registrable under one or more of the Acts. Enquiries determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. 166

42 SECURITIES COMMISSION OF THE BAHAMAS
Notice Issue Date Description*
WISELING 19 March 2021
Public Notice No 4. It was brought to the Commission’s attention that Wiseling may be carrying out activities that are registrable under one or more of the Acts. The Commission, in the course of its investigation, noted that the entity and/or its affiliates were not registered with the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. KARATBARS INTERNATIONAL GmbH aka KARATBARS INTERNATIONAL aka KARATBIT FOUNDATION or KARATBARS BAHAMAS KARATBIT 19 March 2021 Public Notice No 5. It was brought to the attention of the Commission that an entity called Karatbars International GmbH, aka Karatbars International, aka Karatbit Foundation, aka Karatbars Bahamas or Karatbit may be carrying out activities that are registrable under one or more of the Acts. An investigation was conducted and it was determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. ENTITIES NOT REGULATED BY THE SECURITIES COMMISSION OF THE BAHAMAS 19 March 2021 Public Notice No 6. It was brought to the attention of the Commission that Assetval PLC, EX97 PLC, Forex PLC, Ifxon PLC, Globalval PLC, Metaex PLC, Popsmart PLC, Profitpro Plc, Traderx Plc and Uniten-Ex Plc all provided a false statement on their website, claiming to be authorized and regulated by the Commission. Therefore, a Notice was issued warning the public about doing business with these entities and their agents/ representatives. TRADEVOLT 19 March 2021 Public Notice No 7. It was brought to the attention of the Commission that Tradevolt may be carrying out activities that are registrable under one or more of the Acts. An investigation was conducted and it was determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. ANS-AK.COM 10 May 2021 Public Notice No 8. It was brought to the attention of the Commission that ans-ak.com provided a false statement on their website, claiming to be authorized and regulated by the Commission. An investigation was conducted and it was determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. RUIMEI GLOBAL, aka RUIMEI GLOBAL GROUP, Aka RUIMEI GLOBAL ENTERPRISE GROUP or COOLCAT 21 June 2021 Public Notice No 9. It was brought to the attention of the Commission that an entity called Ruimei Global, aka Ruimei Global Group, aka Ruimei Global Enterprise Group or Coolcat provided a false statement on their website, claiming to be authorized and regulated by the Commission. An investigation was conducted and it was determined that the entity nor any affiliate was registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity and its affiliates.
Table 18: Public Notices issued during 2021 (continued)
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ANNUAL REPORT 2021 43
Notice Issue Date Description*
RAY-E SECURITIES
INVESTMENT COMPANY
(RAY-E) 22 July 2021
Public Notice No 10. It was brought to the attention of the Commission that Ray-E Securities Investment Company aka Ray-E provided a false statement on their websites, claiming to be authorized and regulated by the Commission. An investigation was conducted and it was determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. ASUE MAXXED (ASM), aka ASUE MAXX, aka AMAXX, aka AMAXX FINANCIALS, aka AMAXX INVESTMENTS, aka AMAXX CASH MANAGEMENT or aka AMAXXED FINANCIAL INC. 26 August 2021 Public Notice No 11. It was brought to the attention of the Commission that that an entity called Asue Maxxed (ASM), aka Asue Maxx, aka Amaxx, aka Amaxx Financials, aka Amaxx Investments, aka Amaxx Cash Management or aka Amaxxed Financial Inc. may be carrying out activities that are registrable under one or more of the Acts. An investigation was conducted and it was determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity. FX PRIMARY LTD or FXPRIMARY LLC (FX PRIMARY) 27 August 2021 Public Notice No 12. It was brought to the attention of the Commission that FX Primary Ltd or FX Primary LLC (FX Primary) provided a false statement on their websites claiming to be authorized and regulated by the Commission. An investigation was conducted and it was determined that the entity was not registered with or licensed by the Commission. Therefore, a Notice was issued warning the public about doing business with this entity.

The full text of Public Notices Investor Alerts and press releases issued by the Commission by law along with
copies of judgements, are available on SCB’s website Other Updates The END underwent a one-week OSINT (Open Source Intelligence) training programme in December 2021. The training was centered on online investigations for purposes of identifying persons behind online unlawful activity with a view to bringing actions against those persons. Additional training will continue in 2022. During 2021, the Commission formally sought the assistance of overseas regulators, using the IOSCO MMoU, with providing information to assist with the Commission’s ongoing investigations. To date, the Enforcement Department continues to see the usefulness of this resource. The department sent two overseas requests for information during the course of the year. As at the 31 December 2021, the Commission had received responses to both requests, as well as the response to an outstanding overseas regulatory request sent in 2020.
Table 18: Public Notices issued during 2021 (continued)
168

44 SECURITIES COMMISSION OF THE BAHAMAS
Legislation
169

ANNUAL REPORT 2021 45
Legislative Updates
Securities Industry (Business Capital) Rules,
2021
Gazetted 23 June 2021
The Securities Industry (Business Capital) Rules, 2021 (the Business Capital Rules) are designed to allow small businesses to seek business capital (funding) in the capital markets without having to file a prospectus with the Commission. The Business Capital Rules establish the standards and obligations for persons wishing to engage in crowdfund offerings, and relax various regulatory requirements, representing a lighter touch regulation of crowdfund offerings when compared with traditional initial public offerings. Overall, the Business Capital Rules make the capital raising process for small businesses less costly and burdensome, while still ensuring the level of investor protection that currently exists in securities laws. The Business Capital Rules regulate “business funding” as an exempt distribution under section 92(i) of the Securities Industry Act 2011 to source or obtain business capital, and “crowdfunding” of a project or venture by raising money from the public through a crowdfund digital platform. The Business Capital Rules apply to persons –

sourcing business capital as an eligible person;
operating or participating or intending
to operate or participate in equity-based crowdfunding by distributing securities;
investing in an eligible person; or
registered or intending to be registered as
an equity-based crowdfunding platform or restricted marketplace.
Consultation Documents
A critical part of the development of legislation is the public consultation process. As a part of the process, draft documents are disseminated to Commission registrants, licensees and stakeholders and posted on SCB’s website for comments and input. Securities Industry (Amendment) Bill, 2021 The Bill proposes to amend the Act to require disclosure where a material contract is entered into with a public issuer and a director of the issuer is a party or beneficiary to that contract; require a public issuer to cause its financial statements to be posted on the company’s website or published in the newspaper; and make the provision of a register of public issuers mandatory. The Bill also proposes to provide for the automatic revocation of a license, where a licensee fails to meet requirements to renew its license, submit its annual filings, or pay its annual fees. Issue date: 23 April 2021 Securities Industry (Amendment) Regulations, 2021 The proposed Securities Industry (Amendment) Regulations intend to provide for a new regulatory capital calculation, and repeal and replace the Operational and Financial Report form (Form 13) in the First Schedule to reflect proposed financial resource requirements. Consultation period: 12 March – 7 May 2021 Securities Industry (Financial Resources) Regulatory Rules, 2021 The proposed Rules intend to update the current regulatory capital requirements and calculations, as well as ensure initial and ongoing capital and other prudential requirements for registered firms to reflect the risks that they undertake. Consultation period: 12 March – 7 May 2021 International Obligations (Economic and Ancillary Measures) Act (IOEAMA) The International Obligations (Economic and Ancillary Measures) Act (IOEAMA) operationalizes the international obligations of The Bahamas, and provides for the imposition of economic sanctions, and the application of counter measures as required. In accordance with the requirements of IOEAMA and the Anti-Terrorism Act 2018, the Commission issues notices of United Nations Security Council Resolutions (UNSCRs), relevant annexes, schedules, and amendments thereto, to licensees and registrants for appropriate action. The Commission monitors the compliance of licensees and registrants with required actions through quarterly confirmations of compliance, and annual declarations of compliance, and as a component of onsite examinations. 170

46 SECURITIES COMMISSION OF THE BAHAMAS
The Commission disseminated 27 IOEAMA UNSC resolution related notices in 2021. Caribbean Financial Action Task Force (CFATF) Update The CFATF mutual evaluation report provides a summary of the Anti-Money Laundering/Counter Financing of Terrorism and Proliferation Financing (AML/CFT/PF) measures in place within the country. The report also gives an analysis of the country’s level of compliance with the FATF 40 Recommendations, the level of effectiveness of the AML/CFT/PF regime, and recommendations on how the regime could be strengthened. The Bahamas has committed to implement and maintain an appropriate and effective AML/CFT/ PF regime inclusive of implementation of a vigorous AML/CFT legislative framework, a National Risk Assessment framework, and AML/CFT Guidance Notes. The National AML/CFT/CFP Risk Assessment (NRA) commenced in February 2021 with the assistance of an international risk assessment expert secured through the Group of Financial Services Regulators and is scheduled for completion in the first quarter of 2022. In May 2021, The Bahamas applied for technical compliance rerating to the CFATF regarding its compliance with 10 of the FATF Recommendations. At this time, The Bahamas was rated as Compliant or largely compliant with 30 of the FATF 40 Recommendations. The rerating process significantly increased The Bahamas’ technical compliance ratings, and the country is currently rated as Compliant or largely compliant with 38 of the FATF 40 Recommendations. The application for rerating followed the delisting of The Bahamas from the FATF list of Jurisdictions Under Increased Monitoring, in December 2020, due to remediation efforts by The Bahamas regarding the effectiveness of its AML/CFT/CPF regime. International Cooperation Pursuant to Sections 34 and 36 of the Securities Industry Act, 2011 (SIA), the Commission is authorized to exchange information with its international counterparts for administrative, supervisory and enforcement purposes including criminal proceedings related to securities laws. The Commission is an ‘A’ signatory to IOSCO’s Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU). Where the Commission receives a request from an international counterpart that is also an ‘A’ signatory to the MMoU, information is exchanged in accordance with the terms of the MMoU. Prior to exchanging information, the Commission evaluates every request received to ensure that it meets minimum information sharing requirements, as set out in legislation and the terms of the MMoU. In 2021, 15 requests were received by The Commission and 23 requests were brought forward from previous periods. Of the 15 requests received, 4 originated from the United States, 5 from France, 1 from the United Kingdom, 3 from Italy, 2 from Canada (1 from British Columbia and 1 from Quebec). During 2021, 13 requests were closed, 3 of those matters were from the 7 previously stayed matters brought over
from 2020. At the end of 2021, 25 matters remained open. No new matters were stayed or denied in 2021.

During 2021, the Commission made requests of two Overseas Regulators pursuant to the IOSCO MMoU, namely: 1 to Cyprus Securities & Exchange Commission and 1 to Superintendencia del Mercado de Valores (Panama). At year’s end, the Commission had received responses to all two of the requests made and received a response relative to a request made in 2020. 171

ANNUAL REPORT 2021 47
Frequently Used Abbreviations and Terms
AC – Audit Committee
AML/CFT/PF – Anti-money laundering /Countering the financing of terrorism/Proliferation of weapons of mass destruction ATA, 2018 – Anti-Terrorism Act, 2018 BCP – Business continuity plan BICA – Bahamas Institute of Chartered Accountants BISX – Bahamas International Securities Exchange CBOB/Central Bank – The Central Bank of The Bahamas CFD – Contracts for Differences CFTC – Commodities and Futures Trading Commission CFATF – Caribbean Financial Action Task Force CGSR – Caribbean Group of Securities Regulators CRS – Common Reporting Standard of the OECD CWG – Caribbean Working Group COSRA – Council of Securities Regulators of the Americas DARE – Digital Assets and Regulated Exchanges Act, 2020 DASPs – Digital Asset Service Providers DR – Disaster recovery EPC – Elective Professional Recategorization Guildelines Ex officio member – A member of the Board by virtue of the office he or she holds FATF – Financial Action Task Force FCSP – Financial and Corporate Service Provider FCSP, 2000 – Financial and Corporate Service Providers Act, 2000 FCSPA, 2020 – Financial and Corporate Service Providers Act, 2020 GEMC – Growth and Emerging Markets Committee GFSR – Group of Financial Services Regulators HRC – Human Resource Committee IARC – Inter-American Regional Committee IFA, 2019 – Investment Funds Act, 2019 IFSC – International Financial Services Commission IFIE – International Forum of Investor Education IOEAMA – International Obligations (Economic and Ancillary Measures) Act IOSCO – International Organization of Securities Commissions IOSCO EMMoU – Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information IOSCO MMoU – Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information MMoU MG SC – MMoU Monitoring Group Steering Committee NAV – Net Asset Value NRA – National Risk Assessment ORG – Operational Resilience Group OSINT – Open Source Intelligence PF – Proliferation Financing SCB – Securities Commission of The Bahamas SIA, 2011 – Securities Industry Act, 2011 SMART Fund – Specific Mandate Alternative Regulatory Test Fund SWOT – Strength, Weakness, Opportunity, Threat The Commission – Securities Commission of The Bahamas UIFA – Unrestricted Investment Fund Administrator UNSC – United Nations Securities Council UNSCR – United Nations Securities Council Resolution VASP – Virtual Assets Service Providers 172

48 SECURITIES COMMISSION OF THE BAHAMAS
Financials
173

ANNUAL REPORT 2021 49
Financial Summary
The audited financial statements that appear on the following pages of this Annual Report represent the financial position of the Securities Commission of The Bahamas (the Commission) as at 31 December 2021 along with the Commission’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Comparative figures for the year ended 31 December 2020 are shown. The Commission’s income is mainly generated from fees charged to licensees, registrants and applicants under the Securities Industry Act, 2011 (SIA), the Investment Funds Act, 2019 (IFA), and the Financial and Corporate Services Providers Act, 2020 (FCSPA) as well as funding from the Government of The Bahamas (the Government). The Financial and Corporate Service Providers (Fees) Rules, 2020 and the Securities Industry (Fee) Rules, 2020 both came into effect on 30 December 2020. The enactment of both pieces of legislation positively impacted the Commission’s 2021 financial performance. The restructuring of the annual corporate service provider fee to account for the number of active international business companies administered by a registered agent/registered office, along with the establishment of fees for various other financial and corporate services, resulted in an increase in fees from FCSPA licensees in the amount of $1.45 million. Fees from SIA registrants increased by $1.43 million. While there was some contraction in the overall number of licensees and registrants supervised by the Commission, the new fee rules contributed to a $3.61 million increase in fee income, a 49% change over the prior year. Overall, expenses remained relatively steady with a 2% increase of approximately $0.20 million. The fraud loss expense of $0.85 million (booked in 2020) was replaced in 2021 by increases in other expenses including salaries, wages and employee benefits as well as provisions for expected credit losses of $0.75 million and $0.19 million respectively. The changes to the fee structure combined with a relatively low increase in overall expenses led to net comprehensive income of $2.95 million. Net assets grew by 57% from $5.15 million in 2020 to $8.10 million in 2021. Positive cash flows from operations was the major contributing factor to the $2.48 million increase in the Commission’s most liquid asset, cash on hand and at banks. In the short to medium term, the Commission plans to utilize available cash to facilitate changes to its regulatory framework (including the SIA, IFA and digital assets) and increase investments in its technological infrastructure to improve operational efficiency and achieve strategic initiatives. 174

50 SECURITIES COMMISSION OF THE BAHAMAS
PricewaterhouseCoopers, 2 Bayside Executive Park, West Bay Street & Blake Road, P.O. Box N-3910, Nassau, Bahamas T: + 1 242 302 5300, F: + 1 242 302 5350, www.pwc.com/bs Independent auditors’ report To the Members of the Securities Commission of The Bahamas Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Securities Commission of The Bahamas (the Commission) as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. What we have audited The Commission’s financial statements comprise:

the statement of financial position as at 31 December 2021;
the statement of comprehensive income for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the financial statements, which include significant accounting policies and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Commission in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Other information Management is responsible for the other information. The other information comprises The Securities Commission of The Bahamas 2021 Annual Report (but does not include the financial statements and our auditors’ report thereon). Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with 175

ANNUAL REPORT 2021 51 the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Commission’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Commission or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Commission’s financial reporting process. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Commission’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Commission’s ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our 176

52 SECURITIES COMMISSION OF THE BAHAMAS auditors’ report. However, future events or conditions may cause the Commission to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Other matter This report, including the opinion, has been prepared for and only for the Members in accordance with the terms of our engagement letter and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Chartered Accountants Nassau, Bahamas 22 June 2022 177

ANNUAL REPORT 2021 53
4
The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas (Established under the laws of the Commonwealth of The Bahamas) Statement of Financial Position As at 31 December 2021 (Expressed in Bahamian dollars) 2021 2020 $ $ ASSETS Cash on hand and at banks 2,823,634 340,378 Accounts receivable, net (Note 6) 661,802 314,237 Prepaid expenses and other assets 30,955 105,741 Investments in debt securities (Note 4) 7,903,468 5,901,481 Right-of-use assets (Note 5) 2,914,240 3,504,836 Property and equipment (Note 8) 882,968 770,394 Total assets 15,217,067 10,937,067 LIABILITIES Accounts payable and accrued expenses 1,494,850 849,077 Other liabilities 298,991 444,902 Lease liabilities (Note 5) 3,287,531 3,798,956 Deferred income (Note 9) 2,032,007 692,747 Total liabilities 7,113,379 5,785,682 NET ASSETS 8,103,688 5,151,385 REPRESENTED BY:
Surplus 4,011,508 1,220,490
Revaluation reserve (Note 10) (197,820) (189,105) Reserve fund (Note 10) 4,170,000 4,000,000 Special purpose reserve (Note 10) 120,000 120,000 8,103,688 5,151,385 APPROVED AND AUTHORISED FOR ISSUE BY THE MEMBERS OF THE SECURITIES COMMISSION OF THE BAHAMAS AND SIGNED ON THEIR BEHALF BY:
Securities Commission of The Bahamas
(Established under the laws of the Commonwealth of The Bahamas) Statement of Financial Position As at 31 December 2021 (Expressed in Bahamian dollars) 178

54 SECURITIES COMMISSION OF THE BAHAMAS
5
The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 2021 2020 $ $ INCOME Fee income Securities industry licensees and registrants 5,050,322 3,624,131 Investment funds 2,446,498 2,074,334 Investment fund administrators and managers 1,124,973 1,013,813 Financial and corporate service providers 1,927,726 472,758 Digital assets and registered exchanges 48,976 - Penalties 232,099 96,443 Securities exchange 46,406 13,500 Other 35,025 10,557 Total fee income 10,912,025 7,305,536 Government subvention (Note 9) 170,000 1,863,992 Interest income 308,995 264,466 Other income 1,349,935 336,948 Total income 12,740,955 9,770,942 Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 5 The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 2021 2020 $ $ INCOME Fee income Securities industry licensees and registrants 5,050,322 3,624,131 Investment funds 2,446,498 2,074,334 Investment fund administrators and managers 1,124,973 1,013,813 Financial and corporate service providers 1,927,726 472,758 Digital assets and registered exchanges 48,976 - Penalties 232,099 96,443 Securities exchange 46,406 13,500 Other 35,025 10,557 Total fee income 10,912,025 7,305,536 Government subvention (Note 9) 170,000 1,863,992 Interest income 308,995 264,466 Other income 1,349,935 336,948 Total income 12,740,955 9,770,942 179

ANNUAL REPORT 2021 55
5
The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 2021 2020 $ $ INCOME Fee income Securities industry licensees and registrants 5,050,322 3,624,131 Investment funds 2,446,498 2,074,334 Investment fund administrators and managers 1,124,973 1,013,813 Financial and corporate service providers 1,927,726 472,758 Digital assets and registered exchanges 48,976 - Penalties 232,099 96,443 Securities exchange 46,406 13,500 Other 35,025 10,557 Total fee income 10,912,025 7,305,536 Government subvention (Note 9) 170,000 1,863,992 Interest income 308,995 264,466 Other income 1,349,935 336,948 Total income 12,740,955 9,770,942 6 The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) (Continued) 2021 2020 $ $ EXPENSES Salaries, wages and employee benefits (Note 11) 6,445,865 5,698,868 Fraud loss (Note 13) - 850,000 Rent (Note 5) 506,618 606,078 Depreciation on right-of-use assets (Note 5) 602,305 601,439 Professional fees 315,377 401,735 Office 376,595 332,761 Depreciation on property and equipment (Note 8) 416,464 296,294 Training and conferences 303,469 238,270 Interest expense on lease liabilities (Note 5) 196,234 224,015 Utilities and property charges 102,284 109,113 Advertising and public relations 25,476 69,648 Repairs and maintenance 53,975 45,586 Membership fees 46,736 41,426 Printing and publications 18,904 22,269 Bank charges 35,028 21,544 Investor education 124,149 13,383 Provision for expected credit losses (Note 6) 194,249 - Legislative initiatives 8,742 - Miscellaneous 7,467 9,408 Total expenses 9,779,937 9,581,837 Net income 2,961,018 189,105 Other comprehensive loss Items that may be reclassified to net income Change in fair value of investments in debt securities at fair value through other comprehensive income (8,715) (189,105) Total comprehensive income 2,952,303 - Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) (Continued) 6 The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Comprehensive Income For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) (Continued) 2021 2020 $ $ EXPENSES Salaries, wages and employee benefits (Note 11) 6,445,865 5,698,868 Fraud loss (Note 13) - 850,000 Rent (Note 5) 506,618 606,078 Depreciation on right-of-use assets (Note 5) 602,305 601,439 Professional fees 315,377 401,735 Office 376,595 332,761 Depreciation on property and equipment (Note 8) 416,464 296,294 Training and conferences 303,469 238,270 Interest expense on lease liabilities (Note 5) 196,234 224,015 Utilities and property charges 102,284 109,113
Advertising and public relations 25,476 69,648 Repairs and maintenance 53,975 45,586 Membership fees 46,736 41,426 Printing and publications 18,904 22,269 Bank charges 35,028 21,544 Investor education 124,149 13,383 Provision for expected credit losses (Note 6) 194,249 - Legislative initiatives 8,742 - Miscellaneous 7,467 9,408 Total expenses 9,779,937 9,581,837 Net income 2,961,018 189,105 Other comprehensive loss Items that may be reclassified to net income Change in fair value of investments in debt securities at fair value through other comprehensive income (8,715) (189,105) Total comprehensive income 2,952,303 - 180

56 SECURITIES COMMISSION OF THE BAHAMAS
7
The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Changes in Net Assets For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) Special Revaluation Reserve Purpose Surplus Reserve Fund Reserve Total $ $ $ $ $ Balance as at 1 January 2020 1,031,385 - 4,000,000 120,000 5,151,385 Net income 189,105 - - - 189,105 Other comprehensive loss - (189,105) - - (189,105) Total comprehensive income 189,105 (189,105) - - - Balance as at 31 December 2020 1,220,490 (189,105) 4,000,000 120,000 5,151,385 Balance as at 1 January 2021 1,220,490 (189,105) 4,000,000 120,000 5,151,385 Net income 2,961,018 2,961,018 Other comprehensive loss - (8,715) - - (8,715) Total comprehensive income/(loss) 2,961,018 (8,715) - - 2,952,303 Transfer to the reserve fund (Note 10) (170,000) - 170,000 - - Total transfers (170,000) - 170,000 - - Balance as at 31 December 2021 4,011,508 (197,820) 4,170,000 120,000 8,103,688 Securities Commission of The Bahamas Statement of Changes in Net Assets For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 7 The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Changes in Net Assets For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) Special Revaluation Reserve Purpose Surplus Reserve Fund Reserve Total $ $ $ $ $ Balance as at 1 January 2020 1,031,385 - 4,000,000 120,000 5,151,385 Net income 189,105 - - - 189,105 Other comprehensive loss - (189,105) - - (189,105) Total comprehensive income 189,105 (189,105) - - - Balance as at 31 December 2020 1,220,490 (189,105) 4,000,000 120,000 5,151,385 Balance as at 1 January 2021 1,220,490 (189,105) 4,000,000 120,000 5,151,385 Net income 2,961,018 2,961,018 Other comprehensive loss - (8,715) - - (8,715) Total comprehensive income/(loss) 2,961,018 (8,715) - - 2,952,303 Transfer to the reserve fund (Note 10) (170,000) - 170,000 - - Total transfers (170,000) - 170,000 - - Balance as at 31 December 2021 4,011,508 (197,820) 4,170,000 120,000 8,103,688 181

ANNUAL REPORT 2021 57
8
The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Cash Flows For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 2021 2020 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net income 2,961,018 189,105 Adjustments for:
Interest income (308,995) (264,466)
Depreciation on property and equipment (Note 8) 416,464 296,294 Depreciation on right-of-use assets (Note 5) 602,305 601,439 Interest expense on lease liabilities (Note 5) 196,234 224,015 Interest received 298,293 242,293 Changes in operating assets and liabilities:
Increase in accounts receivable, net (347,565) (28,902) Decrease/(increase) in prepaid expenses and other assets 74,786 (22,467) Increase/(decrease) in accounts payable and accrued expenses 645,773 (101,946) Decrease in other liabilities (145,911) (49,381) Increase in deferred income 1,339,260 107,132 Net cash provided from operating activities 5,731,662 1,193,116 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of debt securities (2,000,000) (2,000,000) Purchases of property and equipment (Note 8) (529,038) (226,511) Net cash used in investing activities (2,529,038) (2,226,511) CASH FLOWS FROM FINANCING ACTIVITIES Interest paid on lease liabilities (196,234) (224,015) Principal paid on lease liabilities (523,134) (476,463) Net cash used in financing activities (719,368) (700,478) Net increase/(decrease) in cash and cash equivalents 2,483,256 (1,733,873) Cash and cash equivalents as at beginning of year 340,378 2,074,251 Cash and cash equivalents as at end of year 2,823,634 340,378 CASH AND CASH EQUIVALENTS:
Cash on hand and at banks 2,823,634 340,378
Securities Commission of The Bahamas
Statement of Cash Flows
For the Year Ended 31 December 2021
(Expressed in Bahamian dollars)
8
The accompanying notes are an integral part of these financial statements. The Securities Commission of The Bahamas Statement of Cash Flows For the Year Ended 31 December 2021 (Expressed in Bahamian dollars) 2021 2020 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net income 2,961,018 189,105 Adjustments for:
Interest income (308,995) (264,466)
Depreciation on property and equipment (Note 8) 416,464 296,294 Depreciation on right-of-use assets (Note 5) 602,305 601,439 Interest expense on lease liabilities (Note 5) 196,234 224,015 Interest received 298,293 242,293 Changes in operating assets and liabilities:
Increase in accounts receivable, net (347,565) (28,902) Decrease/(increase) in prepaid expenses and other assets 74,786 (22,467) Increase/(decrease) in accounts payable and accrued expenses 645,773 (101,946) Decrease in other liabilities (145,911) (49,381) Increase in deferred income 1,339,260 107,132 Net cash provided from operating activities 5,731,662 1,193,116 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of debt securities (2,000,000) (2,000,000) Purchases of property and equipment (Note 8) (529,038) (226,511) Net cash used in investing activities (2,529,038) (2,226,511) CASH FLOWS FROM FINANCING ACTIVITIES Interest paid on lease liabilities (196,234) (224,015) Principal paid on lease liabilities (523,134) (476,463) Net cash used in financing activities (719,368) (700,478) Net increase/(decrease) in cash and cash equivalents 2,483,256 (1,733,873) Cash and cash equivalents as at beginning of year 340,378 2,074,251 Cash and cash equivalents as at end of year 2,823,634 340,378 CASH AND CASH EQUIVALENTS:
Cash on hand and at banks 2,823,634 340,378
182

58 SECURITIES COMMISSION OF THE BAHAMAS
9
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021

General Information
The Securities Commission of The Bahamas (the Commission) was established in 1995 and operates as a body corporate, under the Securities Industry Act, 2011 (the Act), of the Commonwealth of The Bahamas (The Bahamas). The Act establishes the structure, governance and funding of the Commission; accordingly, the Commission is not deemed to have a parent. The offices of the Commission are located at Poinciana House, East Bay Street, Nassau, Bahamas. The functions of the Commission are to monitor and regulate the securities industry in The Bahamas, the participants of which include: entities and individuals dealing in securities, arranging deals in securities, managing securities and advising on securities; investment funds; and investment fund administrators. The Commission regulates the industry in accordance with the Act; the Investments Funds Act, 2019; and the related rules and regulations. In addition, the Commission has responsibility for regulating financial and corporate service providers in accordance with the Financial and Corporate Service Providers Act, 2020, and related regulations.
Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The financial statements are prepared under the historical cost convention, except as disclosed in the accounting policies below. The preparation of financial statements in accordance with IFRS requires management to exercise judgment in the process of applying the Commission’s accounting policies. It also requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 183

ANNUAL REPORT 2021 59
10
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(b) Changes in applicable accounting policies i) New standards, amendments and interpretations adopted by the Commission Certain new accounting standards, amendments to accounting standards and interpretations to published standards that became effective for the Commission’s financial year beginning on 1 January 2021 were not relevant or not significant to the Commission’s operations and accordingly did not have a material impact on the Commission’s accounting policies or financial statements. ii) New standards and interpretations not yet adopted by the Commission Certain new accounting standards, amendments and interpretations to existing accounting standards that have been published but are not mandatory for the year ending 31 December 2021 have not been early adopted by the Commission. These standards, amendments or interpretations are not expected to have a material impact on the Commission in the current or future reporting periods and on foreseeable future transactions. (c) Foreign currency translation The financial statements are presented in Bahamian dollars, which is the Commission’s functional and presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from settlement of such transactions and from translation of monetary assets and liabilities at year-end exchange rates are recognised in the statement of comprehensive income. (d) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand, demand deposits with banks and term deposits with banks with original contractual maturities of three months or less from the date of acquisition. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 184

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(e) Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. i) Financial assets Classification The Commission classifies its financial assets, at initial recognition in the following measurement categories: at amortised cost and at fair value through other comprehensive income (FVOCI). The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Commission’s business model for managing them. In order for a financial asset to be classified and measured at amortised cost or FVOCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Commission’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets at amortised cost The Commission measures financial assets at amortised cost if both of the following conditions are met:

The financial asset is held within a business model with the objective to hold financial
assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 185

ANNUAL REPORT 2021 61
12
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(e) Financial instruments (continued) i) Financial assets (continued) Classification (continued) Financial assets at FVOCI The Commission measures financial assets at FVOCI if both of the following conditions are met:

The financial asset is held within a business model with the objective of both holding to
collect contractual cash flows and selling the financial asset and;
The contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding. The Commission reclassifies financial assets when and only when its business model for managing those assets changes. Recognition and Derecognition Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular-way trades) are recognised on the trade date, which is the date that the Commission commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Commission has transferred substantially all risks and rewards of ownership. If the Commission has neither transferred nor retained substantially all the risks and rewards of ownership, an assessment is made whether the Commission has retained control of the financial assets. Gains or losses arising from sales of financial assets are recognised in the statement of comprehensive income as a part of net income in the financial period in which they arise.

Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
186

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13
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(e) Financial instruments (continued) i) Financial assets (continued) Measurement At initial recognition, the Commission measures a financial asset at its fair value plus, in the case of financial assets not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Financial assets at amortised cost are subsequently measured using the effective interest rate method and are subject to impairment. Gains and losses are recognised in net income in the statement of comprehensive income when the asset is derecognised, modified or impaired. The Commission’s financial assets at amortised cost includes ‘cash on hand and at banks’, ‘accounts receivable’ and other receivables included in ‘prepaid expenses and other assets’ in the statement of financial position. For financial assets at FVOCI, interest income and impairment losses or reversals are recognised in net income in the statement of comprehensive income. The remaining fair value changes are recognised in other comprehensive income (OCI). Upon derecognition, the cumulative fair value change previously recognised in OCI is recycled to net income. Interest income from these financial assets is calculated using the effective interest rate method. The Commission’s financial assets at FVOCI includes ‘investments in debt securities’ in the statement of financial position. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 187

ANNUAL REPORT 2021 63
14
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(e) Financial instruments (continued) i) Financial assets (continued) Impairment of financial assets The Commission recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss and accounts receivable. For debt instruments, ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Commission expects to receive, discounted at an approximation of the original effective interest rate. ECLs are recognised in a three-stage model. The ECL model includes the use of forwardlooking information and classification of financial assets in three stages as summarized below and further explained in Notes 4, 6 and 14:

Stage 1 – 12-month ECL: represents the expected credit loss arising from default
events possible within 12 months from the reporting date. This is applicable to financial assets that originated or were purchased without credit recovery issues and whose credit risk has not significantly increased since initial recognition;
Stage 2 – Lifetime ECL: considers all possible default events over the expected life of
a financial instrument. A loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of default. This is applicable to financial assets that originated or were purchased without credit recovery issues and whose credit risk has increased significantly since initial recognition; and
Stage 3 – Lifetime ECL for credit-impaired assets: considers all possible default
events over the expected life of a financial instrument. The measurement of assets classified in this stage is different from Stage 2 due to the recognition of interest income by applying the effective interest rate to the amortized cost (net of allowance for ECLs) rather than to the gross carrying amount. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 188

64 SECURITIES COMMISSION OF THE BAHAMAS
15
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(e) Financial instruments (continued) i) Financial assets (continued) Impairment of financial assets (continued) A financial asset will migrate from a stage as its relative credit risk since initial recognition subsequently increases or decreases. Therefore, a financial asset that migrated to stages 2 and 3 may return to stage 1, unless it was originated or purchased with credit recovery issues. Management determined that a significant increase in credit risk would result from, amongst others, a financial asset’s credit rating migrating from investment grade to noninvestment grade, and deterioration of credit ratings applicable to non-investment grade financial assets. For accounts receivable, the Commission applies a simplified approach in calculating ECLs. Therefore, the Commission does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Commission has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The carrying amount of the financial asset is reduced through the use of an allowance account and the amount of the ECL is recognised in the statement of comprehensive income. If in a subsequent period the amount of the ECL decreases, the previously recognised ECL is reversed by adjusting the allowance account. The amount of the reversal is recognised in the statement of comprehensive income. The Commission writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery. The write offs represent a derecognition event. The uncollectible financial asset is written off against the related allowance account. Recoveries of accounts previously written off are recognised directly in the statement of comprehensive income. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 189

ANNUAL REPORT 2021 65
16
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(e) Financial instruments (continued) ii) Financial liabilities Financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The Commission’s financial liabilities comprise accounts payable and other liabilities. Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). (f) Property and equipment Property and equipment are carried at historical cost, less accumulated depreciation and any accumulated impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Commission and the cost of the item can be measured reliably. Repairs and maintenance costs are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets as follows:
Computer equipment 3 years
Furniture and fittings 3 – 5 years
Vehicles 3 – 5 years
Leasehold improvements Lesser of lease term and 3 – 5 years Assets’ useful lives are reviewed, and adjusted if appropriate, at each date of the statement of financial position or when an event has occurred that indicates a need to re-evaluate useful lives. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 190

66 SECURITIES COMMISSION OF THE BAHAMAS
17
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(f) Property and equipment (continued)
Assets subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use. Gains and losses on disposals are determined by comparing proceeds with the carrying amounts and are included in the statement of comprehensive income. (g) Income and expense recognition Fee income of the Commission is comprised of application fees, registration fees, annual renewal fees, filing fees and other administrative fees charged to its licensees. Revenue is recognised at a point in time upon the completion of the document evaluation process of each of the activities described above. There are no post-performance obligations after the completion of the document evaluation processes to which each fee relates. All licence fees are for fixed amounts. Appropriations by Parliament (termed Government subvention) received to subsidise operating expenses and specific projects of the Commission, are deferred and recognised as income in the financial period in which any conditions attached to them has been satisfied and by reference to the financial period in which the Commission recognises as expenses the related costs that the Government subvention is intended to compensate. These amounts are presented gross in the statement of comprehensive income. Government subvention, received to subsidise capital acquisitions, is recorded as deferred income and recognised as income over the useful lives of the applicable assets. Interest income is recognised using the effective interest method. All other income and expenses are recognised on the accrual basis of accounting. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 191

ANNUAL REPORT 2021 67
18
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(h) Employee benefits
The Commission has a defined contribution pension plan for all eligible employees, whereby the Commission makes contributions to a privately administered pension plan. The Commission has no legal or constructive obligations to pay further contributions if the plan does not hold sufficient assets to pay all employees the benefits relating to employee service in the current or prior years. The Commission’s contributions to the defined contribution pension plan are recognised in the statement of comprehensive income in the financial period to which they relate. Salaries, wages and other employee benefits are recognised on the accrual basis of accounting. (i) Leases The Commission leases a property for its office use and vehicles for its employee use. Lease contracts are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date on which the leased asset is available for use by the Commission. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

Fixed payments less any lease incentives receivable;
Variable lease payments that are based on an index or a rate, initially measured using
the index or rate as at the commencement date.
Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. Refer to Note 3 for how the Commission determines the lease term with extension and termination options. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 192

68 SECURITIES COMMISSION OF THE BAHAMAS
19
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(i) Leases (continued)
The lease payments are discounted using the interest rate implicit in the lease. Where that rate is not readily determined, which is the case for the Commission’s lease, the Commission’s incremental borrowing rate is used, being the rate the Commission would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Refer to Note 3 for how the Commission determines the incremental borrowing rate. Lease payments are allocated between principal and finance cost. The finance cost is charged to the interest expense in the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following:

The amount of the initial measurement of the lease liability;
Any lease payments made at or before the commencement date less any incentives
received;
Any initial direct costs; and
Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 193

ANNUAL REPORT 2021 69
20
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
2. Significant Accounting Policies (Continued)
(j) Taxation
The Commission is established under the laws of The Bahamas and therefore is not subject to income, capital gains or other corporate taxes. The Commission’s operations do not subject it to taxation in any other jurisdiction. (k) Corresponding figures Where necessary, corresponding figures are adjusted to conform with changes in presentation in the current year.
3. Critical Accounting Estimates and Assumptions
The information presented below provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the financial statements. Measurement of ECL allowance The measurement of the ECL allowance for financial assets measured at amortised cost and at FVOCI is an area that requires the use of a model and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of licensees defaulting and the resulting losses). Explanation of the inputs, assumptions and estimation techniques used in measuring the ECLs are further detailed in Note 14. A number of significant judgements are also required in applying the accounting requirements for measuring the ECLs, such as:

Determining the criteria for significant increase in credit risk;
Choosing appropriate models and assumptions for the measurement of ECLs;
Establishing the number and relative weightings of forward-looking scenarios for each type of
product and the associated ECLs;
Establishing groups of similar financial assets for the purposes of measuring the ECLs.
Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
194

70 SECURITIES COMMISSION OF THE BAHAMAS
21
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
3. Critical Accounting Estimates and Assumptions (Continued)
Leases – lease term and incremental borrowing rate In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The Commission cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Commission would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Commission ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Commission estimates the IBR using observable inputs (such as market interest rates or internal) when available and is required to make certain entity-specific adjustments. Detailed information about the judgements and estimates made by the Commission in the above areas is set out in Notes 5, 6 and 14.
4. Investments in Debt Securities
The Commission ranks its investments in debt securities based on the hierarchy of valuation techniques required by IFRS, which is determined based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Commission’s market assumptions. These two types of inputs lead to the following fair value hierarchy:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This hierarchy requires the use of observable market data when available. The Commission considers relevant and observable market prices in its valuations where possible. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 195

ANNUAL REPORT 2021 71
22
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
4. Investments in Debt Securities (Continued)
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset.

The determination of what constitutes ‘observable’ requires significant judgment by the Commission. The Commission considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The fair value of financial instruments traded in active markets is based on quoted market prices as of the reporting date. A market is regarded as active if quoted prices are readily and regularly available from the exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. These instruments are included in Level 1. Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 196

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23
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
4. Investments in Debt Securities (Continued)
Investments in debt securities are as follows:
2021 2020
$ $
Stage 2 - ECL
Level 2
Debt securities at FVOCI 7,802,180 5,810,895
Accrued interest 101,288 90,586
Total investments in debt securities 7,903,468 5,901,481 Bahamas Government Registered Stock 2021 2020 Nominal Fair Nominal Fair Interest Value Maturity Date Rate $ $ 29-Oct-22 3.10% 2,000,000 2,002,424 - - 25-Jul-25 4.40% 3,000,000 3,056,137 3,000,000 3,054,874 15-Oct-38 5.00% 1,000,000 917,885 1,000,000 912,376 21-Apr-40 5.30% 425,900 397,733 425,900 399,005 21-Apr-50 5.69% 1,574,100 1,428,001 1,574,100 1,444,640 Total investments in debt securities at FVOCI 7,802,180 5,810,895 Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 197

ANNUAL REPORT 2021 73
24
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
5. Leases
The Commission entered into a non-cancellable operating lease agreement for a fixed period of five years with Poinciana SPV Ltd., commencing 1 January 2019, with an option to renew for three years, which was assessed as reasonably certain to be exercised. The Commission also leases vehicles for employee use. The statement of financial position shows the following amounts:
2021 2020
$ $
Right-of-use assets
Office space 2,914,240 3,497,090
Vehicles - 7,746
2,914,240 3,504,836
For the year ended 31 December 2021, there were no direct costs incurred by the Commission upon entering a lease. 2021 2020 $ $ Lease liabilities Current 550,759 511,432 Non-current 2,736,772 3,287,524 3,287,531 3,798,956 The IBRs applied to the lease liabilities of the office space and vehicles are 5.5% and 6.5%, respectively. Common area maintenance and other additional rent charges not included in the measurement of lease liabilities are presented under ‘Rent’ in the statement of comprehensive income. The statement of comprehensive income shows the following amounts:
2021 2020
$ $
Depreciation on right-of-use assets 602,305 601,439 Interest expense on lease liabilities 196,234 224,015 798,539 825,454 The total cash outflow for leases in 2021 was $719,368 (2020: $700,478). Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 198

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
6. Accounts Receivable
2021 2020
$ $
Investment funds and investment fund administrators 80,666 81,327 Financial and corporate service providers 399,790 191,373 Securities industry licensees and registrants 455,078 105,645 Other 92,769 163,144 1,028,303 541,489 Allowance for expected credit losses (366,501) (227,252) Total accounts receivable, net 661,802 314,237 Movements in the allowance for expected credit losses comprise:
2021 2020
$ $
As at 1 January 227,252 1,056,734
Provision for expected credit losses 194,249 - Bad debts written off (55,000) (829,482) As at 31 December 366,501 227,252 Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 199

ANNUAL REPORT 2021 75
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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
6. Accounts Receivable (Continued)
The allowance for expected credit losses as at 31 December was determined as follows for accounts receivable:
As at 31 December 2021
0 to 90 days
91 to 180 days
181 to 270 days
271 to 360 days
Over 360 days Total
$ $ $ $ $ $
Gross carrying amount 403,078 28,950 227,101 224,625 144,549 1,028,303 Allowance for expected credit losses 61,236 10,893 93,636 123,106 77,630 366,501 As at 31 December 2020 0 to 90 days 91 to 180 days 181 to 270 days 271 to 360 days Over 360 days Total $ $ $ $ $ $ Gross carrying amount 85,101 112,305 11,077 75,661 257,345 541,489 Allowance for expected credit losses 2,298 27,948 736 60,007 136,263 227,252
7. Investment in SPV
In September 2017, the Commission agreed to hold 100% of the shares of Poinciana SPV Ltd. (a special purpose vehicle (SPV) incorporated in The Bahamas) on behalf of the Government of The Bahamas (the Government). The Commission’s holding of the shares of Poinciana SPV Ltd. is expected to be temporary. The Commission evaluated if it controls or exerts significant influence over Poinciana SPV Ltd. based on the guidance in IFRS 10 - Consolidated financial statements and IAS 28 - Investments in associates and joint ventures respectively and concluded that it does not have controlling power or significant influence over Poinciana SPV Ltd. (See Note 13 for further information). There were no movements in the investment in the SPV in 2021 and 2020. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 200

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
7. Investment in SPV (Continued)
Poinciana SPV Ltd. owns real estate located on East Bay Street, Nassau, Bahamas which is comprised of land and two Class A office buildings known as the Poinciana House North and South. The following table summarises the unaudited financial information of Poinciana SPV Ltd. as at and for the year ended 31 December. The prior year corresponding figures have been amended to reflect reclassifications and ECL allowances. Summary Statement of Financial Position 2021 2020 $ $ Current assets 1,543,282 2,444,016 Investment property 19,915,454 20,695,836 Total assets 21,458,736 23,139,852 Current liabilities 1,065,600 2,181,196 Borrowings 13,812,500 14,662,500 Total liabilities 14,878,100 16,843,696 Share capital 2 2 Contributed capital 9,568,603 9,568,603 Accumulated deficit (2,987,969) (3,272,449) Total equity 6,580,636 6,296,156 Total liabilities and equity 21,458,736 23,139,852 Summary Statement of Comprehensive Income 2021 2020 $ $ Total income 2,588,808 2,110,483 Total expenses (2,304,328) (1,817,991) Net comprehensive income (loss) 284,480 292,492 Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 28 The Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued)
8. Property and Equipment
Computer
Equipment
Furniture and
Fittings
Leasehold
Improvements Art Work Total
$ $ $ $ $
For the year ended
31 December 2021
Cost
1 January 2021 2,126,025 759,589 57,163 22,864 2,965,641 Additions 525,552 1,486 - 2,000 529,038 Disposals - - - - - 31 December 2021 2,651,577 761,075 57,163 24,864 3,494,679 Accumulated depreciation 1 January 2021 1,861,931 310,450 22,866 - 2,195,247 Depreciation expense 251,316 153,715 11,433 - 416,464 Disposals - - - - - 31 December 2021 2,113,247 464,165 34,299 - 2,611,711 Net book value as at 31 December 2021 538,330 296,910 22,864 24,864 882,968 For the year ended 31 December 2020 Cost 1 January 2020 1,911,406 747,697 57,163 22,864 2,739,130 Additions 214,619 11,892 - - 226,511 Disposals - - - - - 31 December 2020 2,126,025 759,589 57,163 22,864 2,965,641 Accumulated depreciation 1 January 2020 1,729,366 158,154 11,433 - 1,898,953 Depreciation expense 132,565 152,296 11,433 - 296,294 Disposals - - - - - 31 December 2020 1,861,931 310,450 22,866 - 2,195,247 Net book value as at 31 December 2020 264,094 449,139 34,297 22,864 770,394 201

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
8. Property and Equipment
Computer
Equipment
Furniture and
Fittings
Leasehold
Improvements Art Work Total
$ $ $ $ $
For the year ended
31 December 2021
Cost
1 January 2021 2,126,025 759,589 57,163 22,864 2,965,641 Additions 525,552 1,486 - 2,000 529,038 Disposals - - - - - 31 December 2021 2,651,577 761,075 57,163 24,864 3,494,679 Accumulated depreciation 1 January 2021 1,861,931 310,450 22,866 - 2,195,247 Depreciation expense 251,316 153,715 11,433 - 416,464 Disposals - - - - - 31 December 2021 2,113,247 464,165 34,299 - 2,611,711 Net book value as at 31 December 2021 538,330 296,910 22,864 24,864 882,968 For the year ended 31 December 2020 Cost 1 January 2020 1,911,406 747,697 57,163 22,864 2,739,130 Additions 214,619 11,892 - - 226,511 Disposals - - - - - 31 December 2020 2,126,025 759,589 57,163 22,864 2,965,641 Accumulated depreciation 1 January 2020 1,729,366 158,154 11,433 - 1,898,953 Depreciation expense 132,565 152,296 11,433 - 296,294 Disposals - - - - - 31 December 2020 1,861,931 310,450 22,866 - 2,195,247 Net book value as at 31 December 2020 264,094 449,139 34,297 22,864 770,394 Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 202

78 SECURITIES COMMISSION OF THE BAHAMAS
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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
9. Deferred Income
2021 2020
$ $
Government subvention 2,000,000 678,065
Securities industry licensee and registrant fees 9,932 500 Financial and corporate service provider fees 22,075 14,182 Total deferred income 2,032,007 692,747 All deferred income is eligible to be recognised in the following year in the statement of comprehensive income. Movements in Government subvention comprise:
2021 2020
$ $
As at 1 January 678,065 542,057
Government subvention received 2,000,000 2,000,000 Government subvention utilised – transfer to reserve fund (170,000) - Government subvention utilised – operations - (1,863,992) Government subvention utilised – transfer to Consolidated fund (508,065) - As at 31 December 2,000,000 678,065
10. Reserves
Revaluation reserve
The Commission’s investments in debt securities are measured at FVOCI, as explained in note 2(e)(i). Changes in fair value of these investments are accumulated within the revaluation reserve within equity. The accumulated changes in fair value are transferred to net income when the investment is derecognised or impaired. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 203

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
10. Reserves
Reserve fund
Upon obtaining approval from the Ministry of Finance, the Commission established a reserve fund on 30 April 2018 in accordance with Section 20(2) of the Act. Section 21(1) of the Act enables the Commission to determine the management of the fund. This reserve fund will be used for the Commission’s development with the approval of its members. During the year, the Minister of Finance approved an addition of $170,000 (2020: $Nil) to the reserve fund. The reserve fund as at 31 December 2021 totaled $4,170,000 (2020: $4,000,000). Special purpose reserve
Section 22(3) of the Act requires that administrative fines levied by the Commission be used
for the sole purpose of promoting public understanding of the financial system. Accordingly, the Commission established a special purpose reserve for this purpose. The special purpose reserve as of the year end, net of provision for ECLs is shown below:
2021 2020
$ $
Balance of the special purpose reserve, gross 120,000 175,000 Provision for ECLs - (55,000) Balance of the special purpose reserve, net 120,000 120,000
11. Employee Benefits
Pension costs recognised in the statement of comprehensive income in the current year totaled $367,315 (2020: $340,926). The Commission’s contributions to the pension plan vest 50% with employees upon completion of 5 years of employment, incrementally vesting annually, with full vesting upon completion of 10 years of service. During the year, the Commission received reimbursements totaling $7,354 (2020: $38,349) representing the unvested portion of pension contributions relating to former employees of the Commission. The unvested contributions were credited to salaries, wages and employee benefits in the statement of comprehensive income. As of 31 December 2021, the Commission employed 91 (2020: 81) persons. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 204

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
12. Related Party Balances and Transactions
Related parties comprise: i) Government ministries and departments; ii) Government corporations and agencies; iii) entities controlled by the Government; iv) entities in which the Government has a significant ownership interest; and v) key management personnel, including members of the Commission. Balances and transactions with related parties, not otherwise disclosed in the financial statements, include:
2021 2020
$ $
Assets
Cash at banks 846,634 69,961
Accounts receivable 11,000 140,347
Prepaid expenses and other assets 1,260 1,260
Investments in debt securities 7,903,468 5,901,481 Right-of-use assets – SPV 2,914,240 3,497,089 Liabilities Accounts payable and accrued expenses 3,119 24,907 Other liabilities - due to the Compliance Commission 289,991 444,901 Lease liabilities – SPV 3,287,526 3,790,537 Income Interest income 308,358 264,446 Other income 92,400 92,400 Expenses Depreciation on right-of-use assets - SPV 582,848 582,848 Interest expense on lease liabilities - SPV 195,841 222,780 Utilities and property charges 51,965 60,420 Compensation of key management personnel for the year ended 31 December 2021 comprised $667,823 (2020: $556,623) for salaries and other short-term benefits and $30,240 (2020: $28,840) for pension benefits. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 205

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32
The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
13. Commitments and Contingencies
Other commitments
During 2015, the Commission acted as executing agent on behalf of the Government in relation to a purchase agreement for land and buildings. Initial funding was provided by the Government. During 2016, the Ministry of Finance (the Ministry) decided to acquire that land and buildings through Poinciana SPV Ltd., the special purpose vehicle referred to in Note 7. The Ministry subsequently decided that the Commission would hold the shares of Poinciana SPV Ltd. The Commission expects that the holding of shares of Poinciana SPV Ltd. will be temporary. Contingencies The Commission is a defendant in several legal proceedings and would be liable for claims and legal costs in the event of an adverse finding by the courts. However, it is not possible to either predict the decision of the courts or estimate the amount of such awards. Management does not expect that the resolution of these matters will have a material impact on the Commission’s financial position and accordingly, no provisions have been made in these financial statements relative to the legal proceedings. In early February 2020, the Commission discovered that it had experienced a cash at bank fraud resulting in losses in the amount of B$850,000. No contingent asset has been recognised as receivable as at 31 December 2021 (2020: $Nil).
14. Financial Risk Management
The Commission engages in transactions that expose it to credit risk, liquidity risk and interest rate risk in the normal course of business. The Commission’s financial performance is affected by its capability to understand and effectively manage these risks. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 206

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
14. Financial Risk Management (Continued)
(a) Credit risk
Credit risk arises from the potential failure of a counterparty to perform according to the terms of the contract. The Commission’s exposure to credit risk is concentrated in its cash at banks, accounts receivable, other receivables included in prepaid expenses and other assets and investments in debt securities. The Commission mitigates the risk associated with cash at banks by placing its deposits with domestic financial institutions in good standing with the Central Bank of The Bahamas, including a related party. The risk associated with accounts receivable is mitigated by the monitoring of payment history before continuing to extend credit to licensees. Transactions in securities are conducted with brokers in good standing with the Commission. The investment in debt securities consists of debt securities issued by the Government which were downgraded to noninvestment grade credit ratings during the prior year, indicating a significant increase in credit risk. As a result, the investment securities were reclassified from stage 1 to stage 2, where a lifetime expected credit loss is recognised, for the purpose of assessing ECLs. Impairment The Commission has assessed the ECL for cash at banks, investments in debt securities and other receivables included in prepaid expenses and other assets. The identified impairment losses based on the credit quality of the counterparties were determined to be immaterial and are not recorded in these financial statements. Accounts Receivable The Commission applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all accounts receivable. To measure the ECLs, accounts receivable have been grouped based on shared credit risk characteristics and the days past due. The Commission has therefore, concluded that the expected loss rates for accounts receivable are a reasonable approximation of the loss rates for the contract assets. The expected loss rates are based on the payment profiles of licensing fees over a period of 24 months before 31 December 2021 (2020: 48 months before 31 December 2020) and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Commission has identified the Gross Domestic Product (GDP) of The Bahamas to be the most relevant factor, and accordingly adjusts the historical loss rates based on expected changes in this factor. See Note 6 for the aged analysis of accounts receivable. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 207

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
14. Financial Risk Management (Continued)
(b) Liquidity risk
The objective of liquidity management is to ensure the availability of sufficient funds to honour all of the Commission’s financial commitments as they become due. As of 31 December 2021, all of the Commission’s accounts payable and accrued expenses and other liabilities are due within one year. (c) Interest rate risk Interest rate risk is the risk that the future cash flows or fair values of financial instruments will fluctuate because of changes in market interest rates. The Commission’s exposure to cash flow interest rate risk is concentrated in cash at banks, which is not considered significant as amounts earned on these balances are minimal. The Commission is exposed to fair value interest rate risk on its Bahamas Government Registered Stock (BGRS) investments, which are at fixed interest rates.
15. Fair Value of Financial Instruments
Financial instruments utilised by the Commission include the recorded financial assets and liabilities disclosed in the financial statements. Their estimated fair values approximate their carrying values due to the relatively short-term nature of the instruments or the instruments being carried at fair value. The fair value hierarchy of financial instruments is principally Level 2.
16. Capital Management
The capital of the Commission is represented by its net assets. The Commission’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to support its regulatory powers and associated operations. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 208

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The Securities Commission of The Bahamas
Notes to the Financial Statements
31 December 2021
(Continued)
17. Subsequent Event
Subsequent to 31 December 2021, the Commission received subvention of $2,000,000, to be utilised by the Commission for its general operations and capital expenditure. Securities Commission of The Bahamas Notes to the Financial Statements 31 December 2021 (Continued) 209

210

211

212

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 2 Contents

Definitions............................................................................................................................................. 5
Introduction .......................................................................................................................................... 7
2.1. Introduction to the Securities Commission of The Bahamas........................................................ 8
The Bahamas’ Digital Asset Business Regulatory Philosophy and Approach ....................................... 8
3.1. Digital Assets Regulatory Vision.................................................................................................... 9
3.2. Digital Assets Regulatory Mission................................................................................................. 9
3.3. Objectives....................................................................................................................................10
3.4. Development of the DARE Act....................................................................................................10
3.4.1. Crypto Asset Working Group ..............................................................................................10
3.4.2. Initial Research and Benchmarking.....................................................................................11
3.4.3. First Draft of the DARE Bill ..................................................................................................11
3.4.4. DARE Bill and FATF Recommendation 15 ...........................................................................11
Digital Assets Sector - Regulatory Framework....................................................................................12
4.1. What Does the DARE Act Do?.....................................................................................................12
4.1.1. Regulatory Capital...............................................................................................................13
4.2. The Financial and Corporate Service Providers Act, 2020 - Licensing Regime for Wallet Service
Providers and Custody Services..............................................................................................................13
4.3. Exemptions from the DARE Act ..................................................................................................13
4.4. Digital Assets AML/CFT/CPF Provisions......................................................................................13
4.4.1. Activity-based registration by competent authority ..........................................................14
4.4.2. Risk-based supervision and customer due diligence and prevention measures................14
4.5. Expectations of DARE Act Registrants.........................................................................................14
4.5.1. Behavioural Standards........................................................................................................14
4.5.2. Management and Operational Standards ..........................................................................15
Risks and Concerns..............................................................................................................................15
Mitigating Risks and Concerns............................................................................................................16
6.1. Digital Asset Sector National Risk Assessment ...........................................................................16
6.2. Capacity Building Efforts.............................................................................................................16
6.2.1. Restructuring and Updating Supervisory Departments......................................................16
6.2.2. Creation of SCB FITLink .......................................................................................................17
6.2.3. Staff Training.......................................................................................................................19
213

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 3
6.2.4. Collaboration with the University of The Bahamas............................................................19
6.2.5. National Cooperation Efforts..............................................................................................19
6.3. International Cooperation and Agreements...............................................................................20
7. Additional Consumer and Investor Protection Measures...................................................................20
8. Future Strategy and Next Steps for the Digital Asset Regime ............................................................21
Annex I: DARE Act Frequently Asked Questions.........................................................................................24
Annex II: DARE Application Process for a Digital Asset Business................................................................32
214

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 4

Questions or
Comments
Please send any questions or comments related to PS1/2022 to:
Office of the Executive Director
Policy and Research Unit
2nd Floor, Poinciana House
31A East Bay Street
P.O. Box N-8347
Nassau, The Bahamas
242-397-4100
Email: info@scb.gov.bs or
FITLink@scb.gov.bs
215

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 5

Definitions
TERM DEFINITION/INTERPRETATION
AML/CFT/CPF Anti-Money Laundering/Countering the Financing of Terrorism/Countering Proliferation Financing ATA Anti-Terrorism Act, 2018 CBOB Central Bank of The Bahamas CDD Customer Due Diligence DAB Digital Asset Business has the same meaning as Virtual Asset Service Provider (VASP) as defined by the Financial Action Task Force DARE ACT Digital Assets and Registered Exchanges Act, 2020 DARE RULES Digital Assets and Registered Exchanges (Anti-Money Laundering, Countering Financing of Terrorism and Countering Financing of Proliferation) Rules DEFI Decentralised Finance DPC Digital Asset Policy Committee FATF Financial Action Task Force FATF 15 FATF’s Recommendation 15 FAQ Frequently Asked Questions Toolkit FCSPA Financial and Corporate Service Providers Act, 2020 FCSPA RULES Financial and Corporate Service Providers (Anti-Money Laundering and Countering the Financing of Terrorism) Rules, 2019 FINTECH Financial Technology FIU Financial Intelligence Unit FTRA Financial Transactions Reporting Act, 2018 IFA Investment Funds Act, 2019 ITO Initial Token Offering KYC Know Your Customer MLRO Money Laundering Reporting Officer ML/TF/PF Money Laundering / Terrorist Financing / Proliferation Financing NFT Non-Fungible Token POCA Proceeds of Crime Act, 2018 SIA Securities Industry Act, 2011 THE COMMISSION Securities Commission of The Bahamas Key words and abbreviations used throughout this document. 216

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 6 VASP Virtual Asset Service Provider WIRE TRANSFERS REGULATIONS Financial Transactions Reporting (Wire Transfers) Regulations, 2018 217

7 The Bahamas’ Approach to the Regulation of Digital Asset Businesses
2. Introduction Digital assets, businesses, services, products, and technologies that utilise decentralised platforms1 have
the potential to foster financial innovation and inclusion, and to generate wealth and financial opportunities for investors and other stakeholders. The products, technologies, and services are profound and have a unique potential to transform the financial services, securities and capital markets sector unlike ever before. Cryptocurrencies such as Bitcoin, and other digital assets such as stablecoins, not only promise the potential to redefine what regulators and consumers once thought of as the functions of money, but also have created a new category of entrepreneur, whose existence is disrupting traditional financial services incumbents. However, the cross-border nature and pseudo-anonymous features associated with these assets and activities create new opportunities for criminals to perpetrate illegal schemes, launder proceeds and finance illicit activities. Given the development of – and inherent risks associated with – these new digital assets and digital asset businesses (“DABs”) in the financial services sector, the Securities Commission of The Bahamas (“the Commission”), as the statutory regulator of the securities and capital markets sector in The Bahamas, monitored the digital asset sector for several years. The Commission observed the potential that DABs represented to the entire financial services sector to grow, and the threat represented if the sector was left behind. Finally, consistent with our mandate of protecting investors, fostering market integrity and reducing systemic risks, the Commission saw the need to provide legal clarity for DABs in order to facilitate the orderly growth and development of this sector and to adopt an appropriately regulated and internationally compliant regulatory framework. Ultimately, the Commission’s development of the regulatory framework for the digital assets sector in The Bahamas has been thoughtful and deliberate, culminating with the adoption of both the Digital Assets and Registered Exchanges Act, 2020 (“DARE Act”) and the Financial and Corporate Service Providers Act, 2020 (“FCSPA”). This Policy Statement (“the Statement”) does the following:

Explains the Commission’s considerations in developing the digital asset regulatory framework,
including examining the risks and threats associated with digital asset activities and the respective measures to mitigate those activities;
Describes the Commission’s philosophy regarding the regulation of DABs;
Clarifies the registration and supervision process for DABs; and
Outlines the Commission’s future legal and regulatory considerations for the digital asset sector.
Finally, the Statement is intended to assist DABs and prospective DABs with both understanding and complying with the Commission’s regulatory requirements, including registering with and adhering to the Commission’s ongoing monitoring requirements. To assist with this, the Statement, among other things, includes a DARE Act Frequently Asked Questions Toolkit (“the FAQ”) in Annex I, which explains the Commission’s policy position on the most frequently asked questions received from stakeholders since the adoption of the DARE Act.

1 Such as distributed ledger technologies, inclusive of smart contracts, and layer 1 and layer 2 protocols, which facilitate the creation of smart contracts. 218

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 8
2.1. Introduction to the Securities Commission of The Bahamas
The Commission is a statutory body established in 1995, under the Securities Board Act, 1995, which has since been repealed and replaced. The Commission is the sole competent authority responsible for overseeing The Bahamas’ securities, capital markets, investment funds, financial and corporate service providers, and digital asset businesses via the following legislation:

Securities Industry Act, 2011;
Investment Funds Act, 2019;
Financial and Corporate Service Providers Act, 2020; and
Digital Assets and Registered Exchanges Act, 2020.
The functions of the Commission are to2
:
a. Advise the Minister (Finance) on all matters relating to the capital markets and it participants; b. Maintain surveillance over the capital markets and ensure orderly, fair and equitable dealings in securities;
c. Foster timely, accurate, fair and efficient disclosure of information to the investing public and the
capital markets; d. Protect the integrity of the capital markets against any abuses arising from financial crime, market misconduct and other unfair and improper practices; e. Promote an understanding by the public of the capital markets and its participants and the benefits, risks, and liabilities associated with investing; f. Create and promote conditions that facilitate the orderly development of the capital markets; and g. Perform any other function conferred or imposed on it by securities and digital asset laws or Parliament to support our statutory mandate and obligations. As part of its functions, in recent years, the Commission has worked to ensure growth in its regulated sectors through innovative and necessary legislation and policies. Some of the initiatives include:
Update of the investment funds’ regulatory regime;
Expansion of the financial and corporate service providers’ regulatory regime; and
The expanded coverage in the securities and capital markets with the introduction of the:
Securities Industry (Contracts for Differences) Rules, 2020; and
Securities Industry (Business Capital) Rules, 2021.

The Bahamas’ Digital Asset Business Regulatory Philosophy and
Approach The Commission recognizes the important opportunities that the digital assets sector presents to all stakeholders and we are cognizant of our role in creating and facilitating a regulatory environment that

2 Securities Industry Act, available at: https://www.scb.gov.bs/wp-content/uploads/2019/04/Gazetted-SecuritiesIndustry-Act-2011-1.pdf. 219

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 9 allows entrepreneurs to develop their commendable business activities, while ensuring that the market operates with fairness to and equity for all participants. We do not consider that regulation and innovation are mutually exclusive, but rather are equally necessary to ensure that markets perform at their optimum. The regulator should define the rules of engagement to operate in a jurisdiction and participants should be made aware of which DAB activities are allowed, which are excluded, and which can receive an exemption. A transparent regulatory framework presents no surprises both to entrepreneurs, who can be assured that they will not be subject to the capricious and arbitrary decisions of the regulator, and to consumers and investors, who will be afforded basic regulatory safeguards such as disclosure of information, recourse against bad actors and access to suitable financial products. Our regulatory philosophy is that digital asset activity is a part of the capital markets in general, but we recognise that there are aspects, which do not fall within traditional capital markets activity, thus we created a bespoke framework for digital assets that addresses the peculiar nuances of this sector. The Commission’s regulatory framework provides a holistic approach, giving digital assets their own space without boxing them in due to the many different forms and characteristics of DAs. A key principle underlying our regulatory approach is that of technology-neutrality. Accordingly, our regulatory requirements apply regardless of the technological platform or the technology involved. As technology changes, evolves, and can become obsolete, our digital assets regulatory framework has sufficient flexibility to apply the framework to existing technologies as well as to evolving and emerging technologies, without requiring extensive revisions. Finally, our philosophy is that an appropriate regulatory framework should be adopted to address regulatory gaps, not create tedious, frustrating and overlapping regulatory requirements among regulators. We believe that the DARE Act encourages innovative companies, while concurrently allowing for the protection of investors and the mitigation of consequential risks.
3.1. Digital Assets Regulatory Vision
The Commission’s vision is to contribute to the establishment of The Bahamas as an international FinTech hub, through strategic collaboration and progressive and ‘best-in-class’ legislation and policies.
3.2. Digital Assets Regulatory Mission
To actualise its vision, the Commission’s mission is to:

Maintain honesty, integrity and fairness by prescribing robust ethical and professional conduct
requirements, and monitoring compliance with those standards.
Facilitate the orderly growth and development of the digital assets sector, through the legislative
framework, supervisory function, enforcement actions, and using the FinTech hub, SCB FITLink, to develop rules, policy, guidance and codes of practice in connection with the conduct of DABs and other market participants.
Promote Investor and Market Education including digital asset risks, opportunities and
AML/CFT/CPF obligations.
Collaborate and engage with industry stakeholders, including DABs, industry leaders,
government agencies, market participants, think tanks, accelerators, and domestic and international regulators, to ensure an appropriately regulated digital asset sector that promotes 220

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 10 financial innovation and inclusion, while adhering to the traditional and effective regulatory tenets of investor protection and mitigating systemic risks.
3.3. Objectives
The Commission’s approach to developing an appropriate and robust digital assetframework is supported by five objectives:

Consumer Investor Protection – Digital assets are risky and many of the market participants in
this sector are not necessarily familiar with establishing or adhering to appropriate investor and consumer protections, such as disclosure of information and product suitability. A core objective of the Commission’s regulatory framework was establishing an appropriate registration and supervision process to ensure the protection of investors and other stakeholders.
Robust AML/CFT Framework – DABs are obliged to have the same full set of AML/CFT obligations
as traditional financial institutions and designated non-financial businesses and professions. The framework requires DABs to examine and understand the ML/TF/PF risks associated with digital asset activities, to design and implement a risk-based AML/CFT/CPF regulatory and supervisory framework for those activities, including the application of preventative measures such as customer due diligence, record-keeping and suspicious transaction reporting, and to take appropriate mitigating measures to address those risks.
Manage Risks – The framework aims to minimise risks, especially systematic and contagion risks,
and requires DABs to demonstrate an understanding of the risks posed by digital asset activities and to take appropriate mitigating measures to address the identified risks.
Growth and Innovation – To facilitate the orderly growth and development of DAB activities and
to promote financial innovation.
Capacity Building – To promote an understanding of the public of the various typologies of digital
assets and DABs, and to ensure that the Commission’s staff both understands and can apply consistent supervisory procedures to facilitate fair and equitable treatment of investors.
3.4. Development of the DARE Act
As the sole competent authority for the securities and capital markets sector, in line with the Financial Action Task Force’s (“FATF”) Recommendation 15, the Commission noted the increasing popularity of and participation in the sale of digital assets3 in other jurisdictions and also received and fielded multiple inquiries from a number of persons relevant to the digital asset market. Many of these inquiries were from persons who were interested in either buying and selling digital assets or creating their own digital assets for sale in the Bahamian investment market. Crypto Asset Working Group In March 2018, the Commission began an initiative with the purpose of initiating a collective regulatory review and analysis of digital tokens4 and their potential offerings in The Bahamas. As a result, in May 2018, a Crypto Asset Working Group (the “Working Group”) was formed to comprehensively review the

3 Note on terminology: The Statement will interchangeably use the term “digital assets” and “crypto assets”. 4 Note on terminology: “Digital tokens” is the Commission’s generic term for all digital representations of value. Some digital tokens, such as asset tokens, are under the purview of the DARE Act. Other digital tokens, such as nonfungible tokens, do not fall under the purview of the DARE Act. 221

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 11 considerations and requirements for the registration of DABs in or from within The Bahamas. The Working Group comprised various governmental agencies and regulators that had a stake in the orderly growth and development of the financial technology and digital asset sector in The Bahamas. Initial Research and Benchmarking In July 2018, the Commission conducted the initial benchmarking exercise to determine how other jurisdictions regulated DABs. Later, we engaged a leading international consultant to support the research and development phase. The consultant also performed benchmarking and, in all, thirteen (13) jurisdictions were benchmarked5 . In addition to the jurisdictions benchmarked, the Commission also monitored industry expectations and evolving international regulatory standards, such as FATF’s “Guidance for a Risk-Based Approach for Virtual Assets and Virtual Asset Service Providers”, as outlined in their Recommendation 15. First Draft of the DARE Bill After extensive research and benchmarking, considering the unique businesses, assets, technology, characteristics and risks associated with this nascent sector, the Commission determined that establishing customized legislation for this emerging sector was crucial to further the development of The Bahamas’ financial services industry. Moreover, the bespoke legislation helps to ensure that market participants and stakeholders were robustly protected. During the fourth quarter of 2018, the Commission commenced working on the first draft of the DARE Bill, which encompassed international best practices for digital asset regulation and considered the responsible development of The Bahamas’ financial services industry. This draft served as the foundation for the current version of the DARE Act and was subsequently internally reviewed, analysed and amended. The DARE Bill was issued to the public for consultation on 3 April 2019 to request input and comments from industry participants and other stakeholders. The consultative process yielded significant response and comments, which were collected, reviewed, and taken into consideration for further amendment. DARE Bill and FATF Recommendation 15 In December 2019, the Commission initiated the process of updating the DARE Bill and the national AML/CFT/CPF legislative framework (“national framework”) to comply with the updated recommendations set out in the FATF Guidance on Virtual Assets and Virtual Asset Service Providers (“FATF 15”). The most significant amendments to the national framework, as well as to the DARE Bill, were ensuring that DABs were incorporated under The Bahamas’ national framework, including the Proceeds of Crime Act, 2018 (“POCA”), the Anti-Terrorism Act, 2018 (“ATA”), and the Financial Transactions and Reporting Act, 2018 (“FTRA”). The inclusion of the digital asset framework in the national AML/CFT/CPF regime ensures that, at a minimum:

The competent authority is required to conduct a national risk assessment on all digital asset
activities;
A country-wide risk-based approach and coordination for all digital asset activities;

5 Namely: Bermuda, Malta, Switzerland, Singapore, United States of America, Luxembourg, Jersey, Gibraltar, Thailand, Hong Kong, Abu Dhabi, United Kingdom, and Ireland. 222

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Requirement that DABs take action to identify the natural/legal persons that carry out digital asset
activities;
Enforcement and sanctions applicable to DABs for failure to comply;
Timely access to material and accurate information about DAB activities; and
Information exchange and cooperation between domestic and international competent
authorities.
The DARE Act was adopted on 14 December 2020.

Digital Assets Sector - Regulatory Framework The regulatory framework consists of the:

DARE Act;
FCSPA;
Digital Assets and Registered Exchanges (Anti-Money Laundering, Countering Financing of
Terrorism and Countering Financing of Proliferation) Rules, 2022;
Financial and Corporate Service Providers (Anti-Money Laundering and Countering the Financing
of Terrorism), Rules 2019; and
Policy guidance.
4.1. What Does the DARE Act Do?
The DARE Act regulates the issuance, sale and trade of digital assets, in or from within The Bahamas. Additionally, the DARE Act prescribes the registration process for any person that intends to be involved in a DAB in or from within The Bahamas. DABs include:
A digital token exchange;
Providing services related to a digital token exchange;
Operating as a payment service provider business utilising digital assets;
Operating as a digital asset service provider, including providing DLT platforms that facilitate:
o the exchange between digital assets and fiat currencies; o the exchange between one or more forms of digital assets; and o the transfer of digital assets;
Participation in and provision of financial services related to an issuer’s offer or sale of a digital
asset; and
Any other activity that may be prescribed by regulations.
The DARE Act requires all persons carrying on or involved in digital assets business, operating in or from within The Bahamas, to be registered or licensed. This includes companies, partnerships, trusts and any other legal entity. The Commission is the sole competent authority responsible for registering and licensing DABs. The DARE Act also requires registrants to maintain professional conduct and to comply with all other aspects of the Act. Examples of professional conduct requirements include duties to act honestly and fairly, to have effective corporate governance arrangements in place, to refrain from improper or illegal conduct, and to have effective arrangements in place to protect client assets and money. 223

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 13 Regulatory Capital
Section 11 of the DARE Act requires DABs to meet all financial requirements that may be prescribed. The
Commission does not currently, but intends to prescribe regulatory capital for DABs. As demonstration of its financial resources requirement, however, a DAB should satisfy the Commission that the company, at a Board of Directors’ meeting, has reviewed and discussed the appropriate regulatory capital commitment, having regard to the size, nature and complexity of the digital asset business.
4.2. The Financial and Corporate Service Providers Act, 2020 - Licensing Regime for
Wallet Service Providers and Custody Services
The FCSPA applies to all persons engaged in the business of providing financial or corporate services as defined by this Act, in or from within The Bahamas. The FCSPA provides a robust AML/CFT framework for persons wishing to license as these types of businesses, which includes conduct requirements, reporting requirements, and customer due diligence requirements. A license is required under the FCSPA to engage in two specific DAB activities: wallet service providers6 and custody of digital assets7 , unless it is as an ancillary service to a digital token exchange registered under the DARE Act.
4.3. Exemptions from the DARE Act
Generally, the DARE Act’s remit encompasses the financial conduct or activity surrounding digital assets and how it poses money laundering and terrorism financing risks. Consequently, the DARE Act does not seek to capture closed-loop tokens that are non-financial, non-exchangeable, non-transferable and nonfungible. Accordingly, the DARE Act expressly exempts non-fungible tokens (“NFTs”) 8 and other digital representations used within an online game, game platform or family of games sold by a publisher or offered on a gaming platform.9 Additionally, the DARE Act does not regulate electronic money (electronic representations of fiat currency), specifically Central Bank Digital Currencies (“CBDCs”), which for the purposes of the DARE Act, are defined as electronic representations of a fiat currency. CBDCs are regulated by the Central Bank of The Bahamas, under the Central Bank of The Bahamas’ Payment Act, 2012.
4.4. Digital Assets AML/CFT/CPF Provisions
The digital asset regulatory framework includes robust AML/CFT/CPF provisions, which are embedded in various legislation including, POCA, ATA and the FTRA.

6
Wallet Services Provider means a person who provides digital wallet services by use of a computer software or program that interfaces with fiat and virtual currencies and assets, stores private and public keys and interacts with distributed ledger technology to enable users to send, receive and monitor their digital assets. 7 Custody of digital assets means any arrangement under which a person is authorized to hold directly or indirectly a customer’s access keys, smart contracts or other forms of digital assets. 8 A unique digital token for use in specific applications, which cannot be divided and is not interchangeable with any other type of digital token. The DARE Act is activity and functioned based, accordingly an “NFT” may be required to register under the DARE Act if its functions and characteristics are determined to be consistent with the Commission’s definition of a digital asset. 9 See Section 3(2), DARE Act. 224

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 14 Additionally, the Commission recently published both the Digital Assets and Registered Exchanges (AntiMoney Laundering, Countering Financing of Terrorism and Countering Financing of Proliferation) Rules, 2022 (“the DARE Rules”)and the Financial and Corporate Service Providers (Anti-Money Laundering and Countering the Financing of Terrorism) Rules, 2019 (“the FCSPA Rules”) (together, the “Rules”). In particular, the Rules were adopted to clarify how AML/CFT/CPF requirements apply specifically to digital asset activities and registered DABs, and to help entities seeking to engage in digital asset activities to better understand their AML/CFT/CPF obligations. Activity-based registration by competent authority The DARE Act imposes specific activity-based AML/CFT/CPF requirements on DABs to ensure compliance with these obligations and includes both remedial and administrative sanctions for non-compliance. The regime also establishes a risk-based approach for DABs, including registration and ongoing supervision requirements. In accordance with internationally accepted best practices, the DARE Rules further prescribe risk-based preventative measures such as customer due diligence (“CDD”), record keeping, suspicious transaction reporting, enforcement measures and international cooperation and mandates that DABs have the same full set of AML/CFT/CPF obligations as financial institutions and designated non-financial businesses or professions. Risk-based supervision and customer due diligence and prevention measures The DARE Rules prescribe risk-based preventative measures such as CDD processes that assist DAB in assessing the ML/TF/PF risks associated with digital activities, in either established business relationships or occasional transactions above a certain threshold. CDD also comprises identifying the customer and verifying the customer’s identity and using enhanced due diligence measures to mitigate potential higher risks. The AML/CFT/CPF Rules also require that DABs:

Have specific record keeping requirements (7 years);
Have appropriate risk management systems in place, beyond normal CDD;
Have internal controls in place with a view to establishing the effectiveness of AML/CFT/CPF
policies;
Appoint a compliance officer and a money laundering reporting officer with the requisite
experience and education with digital asset activities;
Report suspicious transactions to the Financial Intelligence Unit; and
Comply with the FTRA.
4.5. Expectations of DARE Act Registrants
DARE Act registrants are expected to conduct their business in accordance with behavioral, management, and AML/CFT/CPF standards that align with the legal and regulatory requirements of the DARE Act. Behavioural Standards DARE Act registrants should conduct their business as follows:
Business activities should be conducted with honesty, integrity, fairness, and professionalism;
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Exercise appropriate due care, regard, skill and diligence when conducting business on behalf of
clients;
Timely and proper communication with clients in a fair, clear and non-misleading manner;
Special consideration of risks relating to its own business, those of its clients, and relevant
exchanges when reviewing products and services;
Have primary responsibility for the conduct of their employees;
Uphold the integrity and reputation of The Bahamas; and
Avoid conflicts of interest, where possible. When such conflicts occur,
o customers are to be treated fairly; and o relevant conflicts of interest are disclosed. Management and Operational Standards DARE registrants are required to comply with the following:
Uphold fit and proper management standards, which include:
o Adequate educational requirements or other qualifications; o Have good reputation and character; and o The ability to conduct business competently and reliably.
Ensure that the business has adequate processes and procedures in place in relation to:
o Segregation of client’s assets; o Digital asset purchases, sales, and transfers; and o Internal compliance and risk management systems and policies.
Retention of full responsibility, liability and accountability for outsourced activities.
Collection and maintenance of beneficial owner information.
Proper policies and procedures in place for regulatory reporting.

Risks and Concerns The digital asset sector has many potential benefits, inclusive of faster and cheaper transactions and the
integration of disadvantaged individuals into the financial system. However, it also presents material risks, challenges and concerns for participants and stakeholders, including regulators. The digital asset regulatory framework was created in accordance with the Commission’s core mandate and functions, including investor protection and mitigating systemic risks. To accomplish this, the Commission identified key risks and concerns, inherent to the nature of digital assets and their underlying technologies, to ensure that the applicable legislation adequately addresses the identified risks and concerns and incorporates effective and proportional mitigation measures to address the risks. The most significant risks identified are as follows:
Fraud Risks – Typically, consumers rely on the integrity and robust disclosures of the creator/coder in assessing whether a digital asset is as described or that proceeds raised will be utilised as disclosed. However, not all participants in this sector have operated honestly, ethically or with due care. Generally, fraudulent schemes include front running, rug pulls and Ponzi schemes. Cybersecurity Risks – Digital elements such as wallets, protocols, and smart contracts are susceptible to hacking; consequently, a responsible regulatory framework should require that 226

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 16 DABs have the appropriate data protection systems in place. Hacks can result in the leak of sensitive information and the loss of funds, often with no recourse. Market Abuse – Digital assets activities can involve risks associated with traditional markets, such as speculative trading, pump and dump schemes, lending and borrowing, sometimes involving highly leveraged strategies. These risks include those caused by trading and price misinformation or manipulation and conflicts of interest. AML/CFT Risks – Many jurisdictions have either not adopted or have inconsistently applied AML/CFT measures, presenting potentially significant cross-border, money laundering and terrorist financing risks. Further, there is the risk of illicit actors using sophisticated anonymityenhancing technologies, such as anonymity-enhanced cryptocurrencies (AECs), mixers, tumblers and other technologies, to obfuscate the details of financial transactions. The result is that, under the cloak of anonymity, they can easily circumvent traditional AML/CFT frameworks and similar supervisory regimes, store proceeds of crime, elude sanctions, and launder money.
6. Mitigating Risks and Concerns To supplement the legal and regulatory framework, the Commission has implemented a variety of
initiatives to mitigate the risks posed by digital assets and DABs.
6.1. Digital Asset Sector National Risk Assessment
In line with FATF’s standards requiring countries to identify, assess and understand the country’s exposure to DAB activities, the Commission engaged an international consultant to conduct a VASP national risk assessment (“VASP NRA”), which was completed in 2022. As a part of that assessment, the international consultant, using the World Bank’s VASP methodology, evaluated digital asset activities in The Bahamas to assess the risks these activities and businesses posed to The Bahamas. After a thorough and robust VASP NRA, overall, The Bahamas was assessed as having a low risk rating. The result of the VASP NRA indicates that there is a low threat of ML risks for VASPs in The Bahamas.
6.2. Capacity Building Efforts
The Commission has increased its internal capacity building efforts to ensure that the appropriate departments and staff have sufficient knowledge and subject matter expertise to assess the types of DABs applying for registration, and to assess the potential risks posed to the market, the customer and the jurisdiction if those businesses are registered to engage in digital asset activities. The following initiatives have been introduced in order to ensure proficiency in this regard:

Restructuring and updating Supervisory departments;
Establishment of SCB FITLink, the Commission’s FinTech Hub;
Staff Training; and
Collaboration with the University of The Bahamas.
Restructuring and Updating Supervisory Departments Since the adoption of the DARE Act, the Commission has restructured and updated the following departments:
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Supervision; and
Examinations.
The Supervision Department (“SUD”) is responsible for processing applications for the licensing and registration of persons wishing to conduct registrable and licensable activities in The Bahamas, under the DARE Act, SIA, IFA, and FCSPA (“the Acts”). Additionally, SUD is responsible for the offsite monitoring and supervision of all of the Commission’s registrants and licensees, including the review and registration of prospectuses for initial public offerings and private placements. Upon the adoption of the DARE Act, the Commission created a new unit within SUD that is responsible for the review, registration and offsite monitoring of DABs, solely. The committed resources for the new unit underscores the Commission’s commitment to both protecting investors, facilitating the orderly growth and development of the digital asset sector, and establishing a progressive and internationally compliant registration and supervisory regime. The DARE Application process is illustrated in Annex II. The Examinations department (“ED”) is responsible for the onsite examinations of all of the Commission’s registrants and licensees. Since the adoption of the DARE Act, the Commission has restructured and updated ED by creating a new onsite work plan customised for registrants under the DARE Act. The 11 objectives of the DARE Act work plan are:

Ensure Corporate Governance rules are fulfilled;
Ensure AML/CFT/CPF Rules are being adhered to;
Ensure the registrant or licensee has effective policies and procedures, as well as adequate
systems and/or software;
Determine whether the registrant has implemented an appropriate risk rating framework;
Ensure that the staff are appropriately qualified and experienced for the level of their
responsibility;
Determine whether the registrant/licensee is carrying out proper customer and employee due
diligence;
Certify that registrants obtain independent and reliable source documents, data and other
information;
Determine whether transaction records are properly maintained and verify whether any
suspicious transaction reports were reported to the FIU;
Determine the cross jurisdictional activity of the registrant;
Inspect, determine and document whether any client complaints et al were made during the
year.l.
Creation of SCB FITLink
SCB FITLink10 (the “Hub”) is the Commission’s FinTech Hub, and was approved for launch in October 2019. The establishment of SCB FITLink is a proactive and clear signal that The Bahamas recognises the importance of FinTech and innovation in the financial services industry and is willing to collaborate with market participants to ensure a robust and appropriately regulated securities and capital markets sector.

10 Financial Innovation and Technology Link.
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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 18 SCB FITLink serves as the central point of contact for the Commission’s engagement with the public on various issues related to FinTech, such as virtual asset business, crowdfunding, distributed ledger technology, artificial intelligence and initial token offerings. The duties of the Hub include:

Assist FinTech innovators and incumbents with navigating the Commission’s digital asset
regulatory landscape;

Research, establish, and create policy, rules, and guidelines for
FinTech-related products and services; • Educate the Commission’s staff about emerging FinTech trends, opportunities and risks;

Provide website updates to assist industry participants with understanding FinTech policies; and
Consult with domestic and overseas regulatory authorities regarding innovative technologies.
In addition to regulatory consultation, another primary activity of SCB FITLink is to engage with both local and international stakeholders. Between 1 January 2021 and year-end 31 December 2021, SCB FITLink held either in-person or virtual meetings with 75 stakeholders. The ensuing pie chart depicts the most frequently asked questions that were submitted to the Commission, via SCB FITLink in 2021.11 The pie chart below shows both the various jurisdictions that met with SCB FITLink and the percentage of questions asked from each jurisdiction.

11 All questions and the Commission’s responses are attached as Annex I. 5% 64% 7% 2% 8% 11% 3% Percentage of FinTech Communication Log Questions Crowdfunding DARE FinTech Festival FinTech Hub Securities Indsutry (Business Capital) Rules,2020 Correspondence with International Regulatory Agencies Other 75 Inquiries Securities Industry (Business Capital) Rules, 2020 229

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 19 Staff Training With continued efforts to ensure proficiency in the digital assets sector, the Commission offers and fully subsidises training courses on cryptocurrency, blockchain technologies, decentralised finance, etc. to our staff. Select courses that staff have participated in and have received certificates include:

Cambridge FinTech and Regulatory Innovation;
MIT Media Lab – Cryptocurrency Course;
Wharton Economics of Blockchain and Digital Assets; and
MIT Management Executive Education – Blockchain Technologies: Business Innovation and
Application.
Collaboration with the University of The Bahamas As a part of its functions, the Commission promotes an understanding by the public of the capital markets, its participants and the benefits, risks, and liabilities associated with investing in digital assets. To further this endeavour, the Commission intends to collaborate with the University of The Bahamas on three 8- week courses focused on the digital assets sector. These courses will serve as professional continuing education courses and will provide the foundational knowledge needed to work with DAB and FinTech, and to understand The Bahamas’ DAB regulatory framework. Attendees will earn a certificate, upon successful completion of the course, which can be used to demonstrate to the Commission that the individual possesses the requisite education and knowledge to engage in DAB registrable activities in The Bahamas. National Cooperation Efforts The Commission maintains that cooperation with domestic and international supervisory authorities is essential. At the national level, the Government of The Bahamas (”GoB”) is establishing a Digital Advisory Panel (“the Panel”), comprising digital asset experts, to continually monitor digital assets and related digital developments, emerging trends, and associated risks. The Panel is primarily tasked with keeping 9% 16% 7% 63% 3%1%1% Percentage Of FinTech Communication Log Questions Based On Jurisdictions Asia North America Europe Caribbean Central America Australia Unknown 75 Inquiries 230

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 20 the GoB and the Digital Asset Policy Committee (“DPC”) regularly updated, with the aim of solidifying The Bahamas as the preeminent digital asset jurisdiction. Additionally, the Executive Director of the Commission is a member of the DPC, which is a committee formed by the GoB to ensure that The Bahamas’ digital asset and FinTech policy objectives are implemented and that all branches of government and the private sector are aligned and working together to deliver desired outcomes.
7.2. International Cooperation and Agreements
A primary tenet of effective DAB supervision is that international supervisors must exchange relevant information. This is particularly important as, to date, there remains no uniform digital asset standards or typologies. To mitigate against digital asset market fragmentation, the Commission has executed a number of international cooperation and agreements, and is a committee member of various international digital asset standards setting bodies. A significant membership is with the International Organization of Securities Commissions (“IOSCO”), of which the Commission is also an “A signatory” of the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (“MMoU”) and a signatory of the Enhanced Multilateral Memorandum of Understanding (“EMMoU”) Concerning Consultation and Cooperation and the Exchange of Information. According to IOSCO, the EMMoU “fosters greater cross-border enforcement cooperation and assistance among securities regulators, enabling them to respond to the risks and challenges posed by globalisation and advances in technology.” As a part of the IOSCO membership, the Commission sits on various committees, including the IOSCO FinTech Steering Group, which allows members to share and discuss opportunities, challenges, and experiences in all areas related to FinTech, including digital assets, initial token offerings, and FinTech regulation and solutions. The Commission is also a member of the following:

The Global Financial Innovation Network (“GFIN”), which is an organisation that was launched in
January 2019, and currently consists of 57 members. The United Kingdom’s Financial Conduct Authority presently chairs GFIN. The purpose of GFIN is to support financial innovation and protect investors and consumers on a global scale. On 22 January 2020, The Commission’s application to become a member was approved. The Commission is a member of one of GFIN’s work streams.
The Caribbean Group of Securities Regulators’ (“CGSR”) FinTech Group, which is the technology
network comprising select Caribbean securities and capital markets regulators. CGSR’s mandate is to grow and regulate FinTech in the region.

Additional Consumer and Investor Protection Measures As a key component of the Commission’s mandate is to protect the interest of investors and consumers,
the DARE Act has a number of embedded provisions aimed at protecting investors, specifically as it relates to the ITO process. Moreover, the recently adopted DARE Rules assists with protecting against money laundering and fraud. The Commission intends to release additional guidance on ongoing requirements for DARE Act registrants, as well. 231

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 21 The protections embedded in the DARE Act related to ITOs are the obligations of a token issuer to disclose, the purchaser’s right to recession or damages, and the purchaser’s right of withdrawal. Continuing obligations of an issuer to disclose Disclosure is important aspect of raising funds from the public as it encourages trust in the financial system. The Commission is adamant that purchasers should be able to make a sound and informed decision with proper disclosure mechanisms in place. The DARE Act has a number of disclosure requirements for ITOs that must be outlined in the offering memorandum for the benefit of investors. Through this process, there is complete transparency, which is a top priority to the Commission. If an issuer fails to disclose in the time disclose relevant information specified in the DARE Act, the issuer might be subject to penalties and/or sanctions. Purchaser’s right to rescission or damages If an issuer publishes an offering memorandum – or any amendments – which contains a material misrepresentation, a purchaser shall have a right of action against the issuer for the rescission of the subscription or damages. Purchaser’s right of withdrawal A purchaser of a token offered under the provisions of the DARE Act is entitled to withdraw their purchase by written notice to the issuer within 72 hours. Once a notice is made, an issuer has within two days of the purchaser’s request to pay all funds to the purchaser. Commission’s authority to investigate The Commission has the authority to conduct onsite or offsite inspections of the business of any DARE Act registrant to ensure that they are complying with the Commission’s regulatory framework and that of any other relevant law.
9. Future Strategy and Next Steps for the Digital Asset Regime Having met the minimum AML/CFT/CPF and regulatory thresholds currently required in the VASP sector,
the Commission intends to monitor developments in this area for the immediate future, with a view to determining the appropriate regulatory response as the need arises, and to use these experiences to inform the establishment of a comprehensive digital asset regime as the industry develops. In this regard, there are immediate plans to review and update the DARE Act, where necessary, to develop a regulatory approach for the following FinTech and digital asset trends. Contemplated updates may include:

Regulatory accounting considerations and treatment of digital assets. As part of our objective
to ensure the orderly growth and development of the digital asset sector and the protection of consumers and investors, the Commission is likely to prescribe rules requiring DABs to disclose the risks to investors from digital assets held on behalf of customers.
Segregation of client assets. The Commission expects DABs to hold client assets “off balance
sheet”. The Commission will likely approve the use of a segregated omnibus account for this purpose. 232

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Decentralised Finance (“DeFi”). DeFi is an emerging FinTech that involves peer-to-peer financial
services on public blockchains. Effectively, DeFi removes traditional financial services gatekeepers such as central securities depositories and traditional financial institutions. Proponents of DeFi assert that removing the gatekeepers allows for the faster, more efficient and cheaper execution of transactions. However, the gatekeepers perform essential market and investor protections that seek to, among other things, minimise fraud, reduce systemic risks and contribute to the fair and equitable treatment of investors. Further, DeFi protocols are becoming a popular alternative channel for financial crime, including fraud and money laundering. The Commission will review this area with a view to curtailing the risks associated with DeFi activities.
Staking. Commonly used in proof of stake consensus mechanisms, staking is a process that
involves committing participants’ digital assets into a smart contract to support a blockchain network and confirm transactions. Participants pledge their digital assets to the protocol, the protocol chooses validators to confirm blocks of transactions from those participants, and then the validators are rewarded when a new block is added to the blockchain. Participants earn rewards with their staked digital assets, however, there are customer risks associated with staking activities. Though the Commission may not necessarily regulate staking, at a minimum, we will require that networks, including exchanges that offer staking services, must provide certain disclosures for participants in the staking program. Such disclosures will include, but are not limited to:
o How the staking program works? o Validator selection process. o Types of rewards offered (crypto/governance controls/etc.). o How are the awards earned? o Limitations to the size of the staking pool, if applicable. o Server “uptime” for a prescribed period. o Minimum lock up periods, if any. o Reward limitations, if any. o Process and length of unstaking process. o Minimum and maximum staking investment, if applicable.
Yield Farming. In this activity, a decentralised exchange is used to facilitate the lending and/or
borrowing of digital assets. A purchaser can stake coins to earn interest on a digital asset by depositing them for a certain period. At a minimum, the Commission intends to prescribe a disclosure regime for this activity.
Advertising of Digital Assets to Investors. The use of social media and internet platforms to
advertise, sell and/or distribute products, particularly on a cross-border basis, has increased. The potential risks of this activity include the offering of unsuitable products to investors, data privacy issues and the potential to circumvent securities and capital markets laws (market surveillance and enforcement limitations). The Commission will consider what measures will be adopted to promote investor protection for retail investors in the internet environment.
Stablecoins. Stablecoins are digital assets whose values are fixed to that of a currency, algorithm
or basket of securities, with the purpose of reducing the inherent volatility of the digital assets. There are key considerations that the Commission will review, including customer protection, AML/CFT, and where digital currencies interact with traditional fiat currency the potential for contagion risks, in traditional financial markets. At a minimum, the Commission will aim to 233

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The Bahamas’ Approach to the Regulation of Digital Asset Businesses 23 introduce a regulatory regime that adheres to international principles and standards that are applicable to stablecoins, while ensuring financial and monetary stability. To support the regulatory regime, the Commission will also introduce valuation and financial disclosure requirements, in particular prescribing that registrants disclose the nature/composition of the underlying assets, the basis for valuation of the underlying assets, outlining how reserves are held and mandating attestation/audit requirements.

Web3. An alternative version of the internet, built using decentralised blockchains, most often,
the Ethereum blockchain.
NFTs. As mentioned in section 4.3, NFTs are currently exempt from the Commission’s regulatory
framework. The Commission intends to examine and define the categories of NFTs, the characteristics, use and manner in which an NFT is offered and sold or resold, and the structure and rights attached to the NFT to determine whether the NFT is either a consumer asset or financial asset used to facilitate capital market activity. Depending on the recommendations provided, as well as the Commission’s own research and judgment, either amendments will be made to the respect legislation or additional policy statements will be issued by the Commission. In the interim, the Commission will continue to actively engage in discussions with market participants and stakeholders to cultivate a regulatory environment that not only encourages innovation and economic growth, but also discourages and provides effective enforcement measures against bad actors. We look forward to continued collaboration with all stakeholders during this very exciting period.

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24 The Bahamas’ Approach to the Regulation of Digital Asset Businesses
Annex I: DARE Act Frequently Asked Questions
I. Overview

What is the role of the Securities Commission of The Bahamas (the “Commission”) as it relates to
the DARE Act?
For the purposes of the DARE Act, the role of the Commission is to:
a) Regulate, monitor and supervise the issuance of digital assets and persons conducting digital asset business in or from within The Bahamas; b) Develop rules, guidance and codes of practice in connection with the conduct of digital asset business and initial token offers; c) Advise the Minister on all matters relating to digital asset business; and d) Promote investor education and other conditions that facilitate innovation and development of digital asset business within The Bahamas.
To whom does the DARE Act apply?
The DARE Act applies to:
a) Any person who as organiser, issuer, founder, purchaser or investor participates in the formation, promotion, maintenance, organizsation, sale or redemption of an initial token offering (ITO); and b) Any legal entity carrying on digital asset business in or from within The Bahamas, irrespective of the physical location from where the activity is carried out.
What is a digital asset business?
A digital asset business is defined as:
a) A digital token exchange; b) Providing services related to a digital token exchange; c) Operating as a payment service provider business utilising digital assets; d) Operating as a digital asset service provider, including providing distributed ledger technology platforms that facilitate:
i) the exchange between digital assets and fiat currencies; ii) the exchange between one or more forms of digital assets; and iii) the transfer12 of digital assets; e) Participation in and provision of financial services related to an issuer’s offer or sale of a digital asset; and f) Any other activity which may be prescribed
How does a digital token exchange differ from other digital asset businesses?

12 As defined in Section 2, DARE Act.
235

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 25 A digital asset business is one of the businesses defined in question three. A digital token exchange is a virtual platform, which uses distributed ledger technology, or other decentralised technology, for the sale, trade or exchange of digital tokens, whether for fiat currency or one or more digital assets (tokens). Generally, digital token exchanges have more rigorous application requirements than that of other digital asset businesses.
II. Conduct and Compliance Requirements
5. Can firms trade digital assets for its own account?
There are no restrictions from trading digital assets for a digital asset businesses’ own account.
6. What is the regulatory capital requirement for firms registered under the DARE Act?
The Commission does not currently, but intends to prescribe regulatory capital for DABs; however, registrants are required to have adequate resources to both meet the nature, scope and complexity of its business activities, to remain solvent and to meet its risks in the event of disruption, suspension or termination of its registration with the Commission. As demonstration of its financial resources requirement, a DAB should satisfy the Commission that the company, at a Board of Directors’ meeting, has reviewed and discussed the appropriate financial resources commitment, having regard to the nature, size and complexity of the business.
7. Are digital asset businesses and digital token exchanges required to maintain a physical presence
in The Bahamas?
The DARE Act does not explicitly address this issue. The Commission’s policy, however, requires digital token exchanges to establish a physical presence. For such approved digital asset businesses, the Commission expects that registrants adhere to the Commission’s Securities Industry (Physical Presence) Rules, 2012, inclusive of ensuring that the CEO and the Compliance Officer/Money Laundering Reporting Officer are domiciled in The Bahamas.
8. What are the ongoing requirements for digital asset businesses?
The annual update form and applicable fees. Moreover, the Commission is in the process of drafting policy documents that will outline the necessary requirements.
9. What are the AML/CFT requirements for digital asset businesses?
In accordance with Section 26, DARE Act, and Section 23, FCSPA, all registrants must conduct periodic self-risk assessments, and to implement and maintain policies and procedures to ensure compliance with provisions of The Proceeds of Crime Act, 2018, Anti-Terrorism Act, 2018 and the Financial Transactions Reporting Act, 2018. Further, the Commission has adopted and published the Digital Assets and Registered Exchanges (Anti-Money Laundering and Countering The Financing of Terrorism) Rules, 2022, which outline the AML/CFT requirements for registrants under DARE. 236

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 26 Licensees under the Financial and Corporate Service Providers Act, 2020, who engage in either custody of digital assets or wallet service providers, are required to comply with the Financial and Corporate Service Providers (Anti-Money Laundering and Countering the Financing of Terrorism) Rules, 2019.
10. Does the Commission maintain a register of all beneficial owners of digital assets?
No, the Commission does not maintain a register of all beneficial owners of digital assets. As a
part of its risk management systems and controls, however, DARE registrants must demonstrate
to the Commission the ability to identify the ultimate beneficial owners of clients’ transactions and client accounts.
11. Does the Commission accept digital submissions of documents to satisfy Know Your Client
(“KYC”)/due diligence requirements?
The Commission allows the initial digital submission of KYC documents, however, it is expected that the originals will be submitted shortly after such a submission.
12. Does the Commission allow digital asset businesses to maintain records via cloud service
providers?
Yes. The books, records and data must be maintained in compliance with the provisions of Section 15, Financial Transactions Reporting Act, 2018.
13. What is the Travel Rule and are Digital Asset Businesses (DABs) required to comply?
The Travel Rule refers to FATF’s Recommendation 16 and its application to Virtual Asset Service Providers (VASPs). Yes, DABs are required to comply, please review the Commission’s upcoming Guidance Note on the Travel Rule.
14. Can DABs conduct business with persons in jurisdictions that have not enacted the Travel Rule?
Yes, however, they must comply with the Financial Transactions Reporting (Wire Transfers) Regulations, 2018 and the Financial Transactions Reporting (WIRE TRANSFERS) (Amendment) Regulations, 2022. Regulation 3A of the Amendment Regulations specifically addresses this issue.
III. Activities not explicitly covered under the DARE Act.
15. If a firm wants to provide digital asset business that are not explicitly outlined in the DARE Act, is
registration required?
It depends on the type of activity or business that will be performed. The DARE Act expressly exempts certain assets or businesses from its purview and, accordingly, such assets or businesses are not required to register with the Commission. Please see Section 3(2), DARE Act, for the complete list of activities, tokens and transactions that are exempt from the Commission’s legislative framework. 237

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 27 Under Section 6, DARE Act, the Commission reserves the right, however, to prescribe other activities as “digital asset businesses.” In such instances, registration with the Commission will be required. Current registrants should seek the Commission’s permission prior to conducting additional digital asset business. Questions can be directed to the Commission’s Supervision Department at supervisiondare@scb.gov.bs.
16. Which license would be required for a legal entity to engage in custody of digital assets or provide
wallet services?
A legal entity, who as a means of business, only provides either custody of digital assets or wallet service providers (together, “providers”), must apply for a license under the Financial and Corporate Service Providers Act, 2020. The Commission intends to amend the definition of ‘digital asset business’, however, to include both custody of digital assets and wallet service providers. Because of this amendment, both activities will require registration under DARE. Existing FCSPA licensees will be granted a ‘grandfather’ provision under DARE.
17. If a digital asset business wants to include custody/wallet services in their business model, will
they require a separate license or registration with the Commission?
Generally, yes. The exception is digital asset businesses registered with the Commission, under the DARE Act, as a digital token exchange, who provide either custody of digital assets or wallet services as an ancillary part of their digital token exchange business. If you have any questions regarding digital asset business registration requirements, please reach out to the Commission’s financial technology hub, SCB FITLink, at either (242) 397-4100 or FITLink@scb.gov.bs or the Supervision Department at supervisondare@scb.gov.bs.
18. Does a firm need to be registered with the Commission to buy and sell non-fungible tokens
(NFTs)?
No. Currently, the DARE Act excludes non-fungible tokens from the Commission’s regulatory purview. Please note, however, that the Commission is reviewing the regulatory treatment of NFTs and, if necessary, will issue a new policy statement regarding NFTs.
19. Should a firm be licensed under the DARE Act or the Securities Industry Act (SIA), 2011 to trade
derivatives of digital assets?
Firms are required to be registered under the appropriate legislation depending on the underlying asset of the derivative. For example, a derivative that has a digital asset as the underlying asset is required to be registered under the DARE Act. Alternatively, if the derivative comprises securities as the underlying asset, then the firm should be registered under the SIA.
20. Are mining services providers required to register under the DARE Act?
No. Currently persons that engage exclusively in mining, or related, services are not required to either register with or obtain a license from the Commission. If, however, a person is engaged in 238

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 28 a digital asset business, in addition to their mining activities, then that person is required to register under the DARE Act.
21. Which legislation covers digital asset investment funds?
Investment funds that comprise digital assets as a part of its overall portfolio are required to be licensed under the Investment Funds Act, 2020.
IV. Registration
22. What is the timeline for the entire registration process?
The Supervision Department (“SUD”) aims to complete the registration process within 30 days of receiving a completed application. This timeline may be affected, however, if SUD requires additional information that has not been provided in the initial application. The applicant may receive an ‘In Principle Approval’ if, at a minimum, the detailed business plan outlining the organizational structure and explaining how the operations will work in depth has been submitted.
23. What constitutes as a completed application?
A completed application refers to an application in which all aspects of the application and supporting documents have been submitted.
24. Who can register as a digital asset business?
Any legal entity formed/established in accordance with the Companies Act (Ch. 308), International Business Companies Act (Ch. 309), the Partnership Act (Ch. 310), the Partnership Limited Liability Act (Ch. 311), and the Exempted Limited Partnership Act (Ch. 312). The above-mentioned entities must apply for registration (the DARE Act) by way of a formal application to SUD. Completed applications should be submitted to supervisiondare@scb.gov.bs.
25. Is obtaining prior approval from The Bahamas Investment Authority (BIA) a requirement for a nonresident business that is considering registering under the DARE act?
No. Approval from BIA is not a requirement for a non-resident business to set up a digital asset business in The Bahamas. However, the digital asset business may need government approvals for other aspects of the business (e.g. work permits, etc.).
26. Can a legal entity formed/established in a foreign jurisdiction apply for registration under the
DARE Act?
Yes. Such entities, however, may be required to incorporate/establish a legal entity in accordance with Bahamian laws. 239

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 29
27. Can existing registrants of the Commission (i.e. registered or licensed under the Securities
Industry Act, 2011, Investment Funds Act, 2019 and Financial Corporate Service Providers Act,
2020) register as a digital asset business?
Yes, existing registrants and licensees can register under the DARE Act. Section 9, DARE Act outlines the registration requirements for all existing registrants and licensees.
28. If a person is registered under the DARE Act and would like to expand their existing business model
to include other digital asset businesses activities, are they required apply to the Commission to receive a separate registration? Depending on the type of additional digital asset businesses, a separate registration may not be required, though at all times the digital asset business must notify the Commission of the additional business activity. Please note that in accordance with Section 13 of the DARE Act, existing DARE registrants cannot undertake new digital asset business without prior written approval of the Commission. If a separate registration is required, the digital asset business must comply with Section 9 of the DARE Act.
29. Is there an example available for the DARE application?
At this time, there is no DARE application template; however, the following Forms are available as a guideline for application completion:

Part A – Form 1 – Application for Registration as Digital Asset Business;
Part A – Form 3 – Application for Registration as CEO or Compliance Officer;
Part B – Form 1 – Application by Registered Digital Asset Business, Registered Firm, or
Financial and Corporate Service Provider to Carry on Digital Asset Business Services;
Part C – Form 1 – Application for Registration of Digital Token Exchange; and
Part D – Form 1 – Application for Registration of Initial Token Offering.
The above Forms are located in the First Schedule of the DARE Act.

What are the necessary supporting documents for applying for digital asset business registration?
Please refer to the First Schedule, Part A, Form 1 for a list of the necessary supporting documents.
Is there a record of all pending applications for digital asset businesses that is publicly available?
No, due to the Commission’s confidentiality provisions, pending application information is not available to the public.
Is there a record of all registered digital asset businesses that is publicly available?
Yes, in accordance with Section 12, DARE Act, the Commission has established and currently maintains a public register of all approved digital asset businesses. 240

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 30 The register is available at https://www.scb.gov.bs/registrant-licensee-search/.
33. When and how often must a DARE registrant renew their registration?
In accordance with Section 8, DARE Act, on or before 31 January, all registrants are required to annually renew their registration with the Commission. The registrant must submit the Annual Update and Declaration Form and, if applicable, a current copy of the registrant’s insurance policy. The Annual Update and Declaration Form is available at https://www.scb.gov.bs/wp-content/uploads/2022/01/Annual-Information-Update-FormDARE.pdf. The annual renewal fee, of $15,000 for digital token exchanges or $10,000 for all other digital asset businesses, must be remitted.
34. Can a registered digital asset business make changes to its business model post-registration?
Yes. Certain material changes, however, require the Commission’s written approval prior to effecting the change (Section 13, DARE Act). The registrant may also be required to include the changes in the Annual Update and Declaration Form and/or apply for additional registration under the DARE Act.
V. Initial Token Offerings (ITO)
35. Are organizers of an ITO required to register with the Commission?
Yes, in accordance with Section 3, DARE Act, any person who as an organiser participates in the formation, promotion, maintenance, sale or redemption of an ITO is required to register with the Commission. In accordance with section 31(2), at a minimum, the following must be submitted:
i) Completed Form 1 – Part D, First Schedule; ii) A written legal opinion concerning the classifications of the tokens; iii) A copy of the Offering Memorandum; and iv) Requisite application fee, as set out in the Third Schedule.
36. What is the application process for an ITO?
See Part IV, DARE Act, which outlines the requirements and application process to issue a digital token in or from within The Bahamas.
37. How many token offerings can take place in one year?
The DARE Act does not prescribe a maximum number of token offerings that can be conducted in one year.
38. What information must be included in an Offering Memorandum?
241

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 31 Sections 28 and 34, DARE Act, and the Second Schedule, outline what information must be included in an Offering Memorandum.
39. If an offering is over-subscribed, can we issue additional tokens under the same offering
memorandum?
No. The issuer must close the offering or obtain written permission from the Commission to amend the terms and conditions of the offering.
VI. Other
40. To whom can applicants and prospective applicants submit questions related to the DARE Act?
Questions or comments can be submitted to either the Supervision Department or the Commission’s financial technology hub, SCB FITLink, via the below methods:
Telephone: (242) 397-4100
Email Addresses:

Supervision Department SupervisionDare@scb.gov.bs.
SCB FITLink: FITLink@scb.gov.bs.
For more information, you can learn more about FITLink, here: https://www.scb.gov.bs/wpcontent/uploads/2019/07/Securities-Commission-Launches-FinTech-Hub-Press-Release.pdf.

Does the Commission allow applicants to provide a demo of the business model prior to making
an application?
The Commission encourages applicants to set up an initial meeting in order to review their business proposal, and the application to be submitted. Once the application has been submitted, the Commission may request additional meetings to provide further explanation.
Does the Commission provide either banking or law firm recommendations?
The Commission does not provide law firm recommendations. Please see a list of attorneys in good standing with The Bahamas Bar Association, here:
https://bahamasbarassociation.com/service/members-directory/ .
The Commission also does not provide commercial bank recommendations. Please see a list of banks in good standing with the Central Bank of The Bahamas, here: https://www.centralbankbahamas.com/faq-s. Please note that the Commission provides these link for information purposes only and neither endorses nor assumes responsibility for the professional ability or integrity of the persons or firms whose names appear on the websites. 242

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 32
Annex II: DARE Application Process for a Digital Asset Business Figure 1: Flowchart of DARE Application Process
Step 1: Submission of Application Form
Prospective DARE registrants may begin the application process by submitting their application forms and other supporting documents to the Supervision Department. For applicants, the necessary application forms and supporting documents are outlined in Sections 8, 9, and 15 of the DARE Act, and include:

The completed requisite application form13 for either:
A digital token exchange;
Other types of DABs; and
Existing registrants of the Commission wishing to register as a DAB.
A copy of a detailed and current business plan with projections for the next three years;
A certified copy of the Certificate of Incorporation, Memorandum and Articles of Association,
Register of Directors and Officers, Register of shareholders or equivalent documents;
A schedule of proposed fees;
Rules of the exchange, if applicable;
Information of the beneficial owners of the DAB; and
Information on the DAB’s Chief Executive Officer and Compliance Officer.
The Commission reserves the right to request additional information to aid in the decision making process during the application process. All applicants may submit the application and supporting documents to the Supervision Department either via email or physically at the Commission’s premises. Once the application form and supporting documents are submitted, the Supervision Department sends an acknowledgement email and assigns a Supervision Officer to begin the application review process. Applicants that may have questions about the application process, including questions regarding the type of application they are to submit, are free to contact the Supervision Department to set up a meeting prior to submitting an application. Step 2: Revision of the Application The application review timeline officially commences once a completed application form is submitted. This means that the application and all supporting documents are complete and void of critical errors.

13 Application forms are found in the Schedules to the DARE Act.
Submission of
Application
Revision of
Application Approval/Rejection
243

Securities Commission of The Bahamas
The Bahamas’ Approach to the Regulation of Digital Asset Businesses 33 Once the review process begins, the Supervision Department may identify concerns with the application and/or supporting documents, and reserves the right to contact the applicant for clarification of the concerns/issues identified. Once the Supervision Department is satisfied with submitted documents, the internal review process continues, which includes various checks, reviews, and internal approvals. The Supervision Department follows internal standard operating procedures and checklists to determine whether an application should be approved or denied. Some elements taken into consideration during the application process includes:

Whether the DAB has appropriate and sufficient systems and controls to perform its functions
and manage its risks;
Whether the DAB has the ability to meet solvency standards and levels of capital; and
Whether the DAB has designed a digital asset framework that addresses, but is not limited to:
Technology and security;
Governance;
Scalability;
Identified risk framework;
Data protection and storage.
Step 3: Approval/Rejection
Once the review process is complete, the applicant is sent a letter of approval or rejection. There are three types of approval that an applicant may receive:

Absolute Approval – The DAB may start business operations.
Conditional Approval – The DAB may start business operations, but all deficiencies must be
rectified in the timeframe stipulated in the approval letter.
In Principle Approval – The DAB may not start business operations until all deficiencies have been
rectified as stipulated in the approval letter, or they receive a Conditional Approval at a minimum. Process in case of a Rejection If an application has been denied by the Commission, the Supervision Department will contact the applicant to express concerns and allow them to make additional submissions. If the additional submissions are insufficient, the applicant will receive a letter of denial. Upon receipt of the letter, the applicant has two courses to appeal:
The applicant may appeal to the Board of the Commission in the first instance; and
The applicant may apply for judicial review in the second instance. The judicial review will not
overturn the Commission’s decision, but it may ask the Commission to review its process in making the decision. 244

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REGISTER OF DIGITAL ASSET BUSINESSES
The Register of digital asset businesses is published in accordance with the Digital Assets and Registered Exchanges Act, 2020, S12. Queries regarding the registration status of persons may be directed to the Supervision Department at 397-4100 or info@scb.gov.bs. Registration information provided as at: 30 September 2022 Digital Asset Business:
FTX DIGITAL MARKETS LTD.
Address
Building 27
Veridian Corporate Centre
West Bay Street
P.O. Box N 7525
Nassau, The Bahamas
Phone (242) 603-1336
Website www.ftx.com
Principals Samuel Bankman-Fried
Chairman Samuel Bankman-Fried
Secretary Daniel Friedberg
Directors/Members Ryan Salame, Samuel Bankman-Fried Chief Executive Officer Ryan Salame Compliance Officer Jessica Murray Money Laundering Reporting Officer Jessica Murray SCB Registration Details Pursuant to Section 6 of the Digital Assets and Registered Exchanges Act, 2021  Provision of an exchange between digital assets and fiat currency; and,  Provision of an exchange between one or more forms of digital assets. Registration Type Digital Asset Business Registration Conditions None Sanctions None Other Registrations/ Licenses held outside of The Bahamas (i) License: Australian Financial Services License Entity Name: IFS Markets Party Limited Jurisdiction : Australia (ii) License: Digital Ledger Technology Provider Entity Name: Zubr Exchange Limited Jurisdiction: Gibraltar 322

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10/11/2022, 14:36 FTX Exchange Halts All Crypto Withdrawals https://finance.yahoo.com/news/ftx-exchange-halts-crypto-withdrawals-215125509.html 1/5 U.S. markets close in 1 hour 24 minutes S&P 500 3,923.10 +174.53 (+4.66%) Dow 30 33,544.28 +1,030.34 (+3.17%) Nasdaq 10,993.55 +640.37 (+6.19%) Russell 2000 1,857.74 +97.34 (+5.53%) Crude Oil 86.64 +0.81 (+0.94%) Gold 1,754.50 +40.80 (+2.38%) FTX Exchange Halts All Crypto Withdrawals Tue, November 8, 2022 at 4:51 PM · 1 min read Alex Wong Tracy Wang Crypto exchange FTX has halted all non-fiat customer withdrawals, an FTX support employee confirmed in the company's official Telegram group Tuesday afternoon. "Any transfers besides fiat are halted," wrote the FTX Support employee. The halt highlights the deteriorating condition of the exchange, which was previously still processing withdrawals, albeit at a slower pace. Many FTX customers in Telegram posted that they had been waiting hours to withdraw their funds. "It's been a full 11 hours since I've requested my withdrawal," one user wrote. Just hours earlier, FTX co-founder Sam Bankman-Fried tweeted that FTX had reached a non-binding agreement to be acquired by crypto exchange rival, Binance. Bankman-Fried tweeted that "all assets will be covered 1:1." TRENDING Quote Lookup

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10/11/2022, 14:36 FTX Exchange Halts All Crypto Withdrawals https://finance.yahoo.com/news/ftx-exchange-halts-crypto-withdrawals-215125509.html 2/5 "It may take a bit to settle etc. -- we apologize for that," added BankmanFried. SBF · Nov 8, 2022 @SBF_FTX · Follow

Hey all: I have a few announcements to make.
Things have come full circle, and FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc.). ftx.com FTX Cryptocurrency Derivatives Exchange SBF @SBF_FTX · Follow
Our teams are working on clearing out the
withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. -- we apologize for that. 11:03 AM · Nov 8, 2022 4.9K Reply Copy link Read 269 replies It appears customers can still withdraw their assets to fiat, although opting for the fiat option could see the funds take up to five business days for settlement. Reuters reported FTX saw withdrawals totaling $6 billion in the past several days, citing an internal message to company employees sent by BankmanFried. An FTX employee in the Telegram Support chat told panicked customers: "no eta for now, sorry." Advertisement Advertisement HOME MAIL NEWS FINANCE SPORTS ENTERTAINMENT LIFE SEARCH SHOPPING YAHOO PLUS MORE... Search for news, symbols or companies Sign in Mail Finance Watchlists My Portfolio Crypto Yahoo Finance Plus News Screeners Markets Videos Personal Finance Industries Contact U 326

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3
Jessica
—
Jessica Murray
On November 8, 2022 at 11:37 AM EST crolle@scb.gov.bs wrote:
Good morning Sam / Jessica,
Please advise your availability to meet with the Securities Commission of The Bahamas to discuss recent press regarding liquidity issues as well as the potential acquisition of FTX by Binance. We would appreciate to meet as soon as today, if possible. Let us know and we will set up a Zoom/Teams link for a call. With kind regards, Christina Rolle . Executive Director e-mail: crolle@scb.gov.bs telephone: (242) 397-4100 fax: (242) 356-7530 web: www.scb.gov.bs Poinciana House | North Building, 2nd Floor | 31A East Bay St | P. O. Box N-8347 | Nassau, The Bahamas Please consider the environment before printing this email message. The information in this e-mail (including attachments) is confidential and may be legally privileged. It is intended solely for the addressee. Access to this e-mail by anyone else is unauthorized. If you are not the intended recipient, any review, disclosure, reproduction, distribution or any action taken or omitted to be taken in reliance on the e-mail message, is prohibited. If you have received this e-mail in error, please notify the sender by return e-mail and delete all parts of this e from your computer(s) and eventual service provider computer(s). The Securities Commission of The Bahamas (the Commission) is neither liable for the proper and complete transmission of the information contained in this communication nor for any delay in its receipt. While the Commission has taken every reasonable precaution to ensure that any attachment to this e-mail has been scanned for viruses, the Commission does not accept any liability for the presence of any viruses and/or any loss or damage suffered as a result. Any opinions expressed are those of the author and are not necessarily endorsed by the Commission. 330

Christina Rolle . Executive Director e-mail: crolle@scb.gov.bs telephone: (242) 397-4100 fax: (242) 356-7530 web: www.scb.gov.bs Poinciana House | North Building, 2nd Floor | 31A East Bay St | P. O. Box N-8347 | Nassau, The Bahamas Please consider the environment before printing this email message. The information in this e-mail (including attachments) is confidential and may be legally privileged. It is intended solely for the addressee. Access to this e-mail by anyone else is unauthorized. If you are not the intended recipient, any review, disclosure, reproduction, distribution or any action taken or omitted to be taken in reliance on the e-mail message, is prohibited. If you have received this e-mail in error, please notify the sender by return e-mail and delete all parts of this e-mail from your computer(s) and eventual service provider computer(s). The Securities Commission of The Bahamas (the Commission) is neither liable for the proper and complete transmission of the information contained in this communication nor for any delay in its receipt. While the Commission has taken every reasonable precaution to ensure that any attachment to this e-mail has been scanned for viruses, the Commission does not accept any liability for the presence of any viruses and/or any loss or damage suffered as a result. Any opinions expressed are those of the author and are not necessarily endorsed by the Commission.

331

2
Sent from my Galaxy
-------- Original message --------
From: Sam Bankman-Fried sam@ftx.com
Date: 11/8/22 2:48 PM (GMT-05:00)
To: Christina Rolle crolle@scb.gov.bs, jmurray@ftxdigitalmarkets.com Cc: Ashley Poitier apoitier@scb.gov.bs, Renaldo Harding rharding@scb.gov.bs Subject: Re: FTX Liquidity / Sale Rumours Hey! I’m pretty pressed for time but will make sure that we talk to you ASAP; I’ll briefly say that, as of now, no sale has happened or been finalized although there are active talks. We’ll keep you updated about those. — Sam Bankman-Fried On November 8, 2022 at 8:43 PM GMT+3 crolle@scb.gov.bs wrote:
Thanks for the acknowledgement, Jessica.
I will be tied up from 13:00 to 15:00… it would be good it that call can take place today. With kind regards, From: Jessica Murray [mailto:jmurray@ftxdigitalmarkets.com] Sent: 08 November 2022 12:08 PM To: Christina Rolle crolle@scb.gov.bs; sam@ftx.com Cc: Ashley Poitier apoitier@scb.gov.bs; Renaldo Harding rharding@scb.gov.bs Subject: Re: FTX Liquidity / Sale Rumours Hello Ms. Rolle, Your email is well received. Let me confirm a day and time and revert. Kind Regards, 332

1
From: Christina Rolle
Sent: 09 November 2022 10:17 AM
To: sam@ftx.com; jmurray@ftxdigitalmarkets.com Cc: 'ryan@ftxdigitalmarkets.com' ryan@ftxdigitalmarkets.com; Mechelle Martinborough mmartinborough@scb.gov.bs; Gawaine Ward gward@scb.gov.bs; Renaldo Harding rharding@scb.gov.bs; Ashley Poitier apoitier@scb.gov.bs Subject: RE: FTX Liquidity / Sale Rumours Good morning Sam, Further to my note below, please see some initial queries from the Securities Commission of The Bahamas with respect to ongoing issues. Please advise as follows:

Number of clients registered on the FDM platform, total value of assets held for all FDM clients and whether
those assets are held in a segregated account;
Total value of client withdrawals from FDM platform over the past week. Have there been any withdrawal
requests that were unsatisfied or that remain outstanding?
The extent to which FDM clients’ assets may have been invested, loaned, used as collateral or otherwise
hypothecated or encumbered on behalf of FDM, Alameda, other related parties and/or third parties; Please also provide an explanation with respect to the following:
Which FTX Group entity is party to the non-binding LOI with Binance? What are the terms of the LOI and what is
the potential impact for clients of FDM;
Details of the connection between FDM and Alameda. Were there any services provided by Alameda to FDM or
vice versa? Were there any related party or counterparty transactions between the entities. Please also provide a sample of FDM’s client agreement (including general terms and conditions). Your urgent attention and response by end of day is needed. If you wish to discuss, please feel free to reach out to us. With kind regards, From: Christina Rolle Sent: 08 November 2022 3:11 PM To: sam@ftx.com; jmurray@ftxdigitalmarkets.com Cc: Ashley Poitier apoitier@scb.gov.bs; Renaldo Harding rharding@scb.gov.bs Subject: RE: FTX Liquidity / Sale Rumours Thank you for your note, Sam We are keen to understand the issues as they specifically relate to the regulated entity including potential impact for clients. Please get in touch soonest. Due to the Tropical Storm alert, we will be working from home until the all clear is given but I will be reachable by email and by phone (422-4058). Take care and kind regards, 333

Number of clients registered on the FDM platform, total value of assets held for all FDM clients and whether
those assets are held in a segregated account;
Total value of client withdrawals from FDM platform over the past week. Have there been any withdrawal
requests that were unsatisfied or that remain outstanding?
The extent to which FDM clients’ assets may have been invested, loaned, used as collateral or otherwise
hypothecated or encumbered on behalf of FDM, Alameda, other related parties and/or third parties; Please also provide an explanation with respect to the following:
Which FTX Group entity is party to the non-binding LOI with Binance? What are the terms of the LOI and what is
the potential impact for clients of FDM;
Details of the connection between FDM and Alameda. Were there any services provided by Alameda to FDM or
vice versa? Were there any related party or counterparty transactions between the entities. Please also provide a sample of FDM’s client agreement (including general terms and conditions). Your urgent attention and response by end of day is needed. If you wish to discuss, please feel free to reach out to us. With kind regards, From: Christina Rolle Sent: 08 November 2022 3:11 PM To: sam@ftx.com; jmurray@ftxdigitalmarkets.com Cc: Ashley Poitier apoitier@scb.gov.bs; Renaldo Harding rharding@scb.gov.bs Subject: RE: FTX Liquidity / Sale Rumours Thank you for your note, Sam We are keen to understand the issues as they specifically relate to the regulated entity including potential impact for clients. Please get in touch soonest. Due to the Tropical Storm alert, we will be working from home until the all clear is given but I will be reachable by email and by phone (422-4058). Take care and kind regards, 334

URGENT
VIA EMAIL: CLAYTON.FERNANDER@OUTLOOK.COM
9 th November 2022
Clayton Fernander
Commissioner of Police
Royal Bahamas Police Force
East Street,
Nassau, Bahamas
Dear Commissioner Fernander,
RE: Request for Police Investigation - FTX Digital Markets Ltd The Securities Commission of The Bahamas (“the Commission”) hereby writes to request that the Royal Bahamas Police Force (“RBPF”) Financial Crimes Investigation Branch conducts an investigation relative to FTX Digital Markets Ltd (“FTX Digital”). FTX Digital is a company duly incorporated under the laws of The Bahamas and is registered as a digital asset business under the Digital Assets and Registered Exchanges Act, 2020 (“the DARE Act”). The Commission is the regulator of FTX Digital. The RBPF may be aware of the reports in both the international and local media, which directly relates to and impacts FTX Digital, including the possible mishandling of clients’ assets. Regrettably, the Commission was informed today by Mr. Ryan Salame (“Mr. Salame”) who is the Chairman of FTX Digital that clients’ assets which may have been held with FTX Digital were transferred to Alameda Research (“Alameda”). Alameda and FTX Digital are related companies, specifically, Mr. Samuel Bankman-Fried is a founder of both FTX Digital and Alameda. The Commission understood Mr. Salame as advising that the transfer of clients’ assets in this manner was contrary to the normal corporate governance and operations of FTX Digital. Put simply, that such transfers were not allowed and therefore may constitute misappropriation, theft, fraud or some other crime. Mr. Salame further advised the Commission that there were only three (3) persons who had the necessary codes (or passwords) to transfer clients’ assets to Alameda in this manner, that is, the founders of FTX Digital who are: (i) Mr. Samuel Bankman-Fried; (ii) Mr. Nishad Singh and (iii) Mr. Zixiao (Gary) Wang. Given this possible unlawful activity and the ramifications associated with same, we wish for the RBPF to investigate this matter on an urgent basis 335

Clayton Fernander
Commission of Police
Re: Request for Police Investigation – FTX Digital Markets 9 November 2022 2 Based on the Commission’s knowledge, Mr. Bankman-Fried, Mr. Nishad Singh and Mr. Zixiao (Gary) Wang are presently on the Island of New Providence and all normally reside at Albany. Mr. Salame is not in the jurisdiction and is reportedly in Washington, DC at present. Please do not hesitate to contact me if you require further information from the Commission at this stage. Yours sincerely, Christina Rolle Executive Director 336

1
From: Sam Bankman-Fried [mailto:sam@ftx.com]
Sent: 09 November 2022 9:27 PM
To: RYAN PINDER ryanpinder@bahamas.gov.bs
Cc: Joe Bankman joebankman@gmail.com; Can Sun can@ftx.com; rsalame@ftx.com; constance@ftx.com; Christina Rolle crolle@scb.gov.bs; allyson@clementmaynard.com Subject: Re: FTX / Binance Hi all, I'm really sorry about the delayed responses here -- it's been a hectic week but that's on me. Myself, and Joe (cc'ed), will be responsive going forward. And I'm also deeply sorry for ending up in this position in the first place. I'll give the answers I can give right now and try to get to the others ASAP.

Right now we are focused on one thing: making customers whole. We are focusing exclusively on doing
that this week. We are ceasing all nonessential operations beyond that. I am doing everything I can to try to do right by our customers.
I have not briefed the securities commission. I would be more than happy to have a phone call with you, the
PM, and the SCB in the next few days to give a thorough overview of the situation.
I am cautiously optimistic that we will be able to survive the turmoil and have enough liquidity for all
customer withdrawals, and that is my sole focus this week. I will keep you guys updated.
We are investigating a more thorough answer to this question; we did not intend to, but are concerned that
poor risk management lead to a liquidity issue.
As you saw, Binance did not end up following through on their transaction. However, we are in the middle of
a separate process to make users whole; we will know within a week if that comes through. So far, we have strong indications of interest that would be more than enough to cover all liquidity needs; we are working on confirming those. I am cautiously optimistic that we will be able to.
We are deeply grateful for what The Bahamas has done for us, and deeply committed to it. We are also
deeply sorry about this mess.
As part of this: we have segregated funds for all Bahamian customers on FTX. And we would be more than happy to open up withdrawals for all Bahamian customers on FTX, so that they can, tomorrow, fully withdraw all of their assets, making them fully whole. It's your call whether you want us to do this--but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to. If we don't hear back from you, we are going to go ahead and do it tomorrow. — Sam Bankman-Fried 337

BY MAIL AND EMAIL: sam@ftx.com;
10th November 2022
Samuel Bankman-Fried
CEO
FTX Digital Markets
Veridian Corporate Centre
Building 27
Nassau, Bahamas
Dear Mr. Bankman-Fried,
Re: Suspension of Registration for FTX Digital Markets Limited.
We refer to our letter to you dated 10 November 2022, and related communications, all concerning recent events surrounding the demise of FTX Digital Markets Ltd. (“FTX Digital”). The Securities Commission of the Bahamas (“the Commission”) in the circumstances finds it necessary to, in the public interest, suspend the registration of FTX Digital, effective immediately, pursuant to
section 19i of the Digital Assets and Registered Exchanges Act, 2020ii (“the Act”).
Further note that in the given circumstances, the Commission willseek a court supervised provisional liquidation of FTX Digital to preserve the assets and ensure the protection of clients, investors and/or creditors in the process. We look forward to your cooperation. Yours sincerely, Christina Rolle Executive Director cc: Ryan Salame, Chairman, FTX Digital Allyson Maynard-Gibson, K.C. – Clement T. Maynard & Co. Brian Simms, K.C. – Lennox Paton i
19. Suspension or revocation of registration.

338

(1) The Commission may suspend or revoke the registration of a digital asset business where - (a) the digital asset business is unable to meet the requirements for continued operation or has failed to comply with the provisions of this Act or any regulations, rules or guidelines made and issued hereunder; (b) suspension or revocation would be in the public interest; … (3) Notwithstanding subsection (2), the Commission may - (a) suspend the registration of the digital asset business without prior notice where the Commission deems that an immediate suspension of the registration of the digital asset business is necessary to protect the public; (4) Where the Commission has suspended the registration of a digital asset business, the Commission may impose such conditions upon or give such directions to the registrant, including the timeline for compliance, with which conditions or directions the registrant must comply. ii As amended by the Digital Assets and Registered Exchanges (Amendment) Act, 2022. 339

URGENT
VIA EMAIL: gowon.bowe@fidelitybahamas.com
10 November 2022
Gowon Bowe
CEO
Fidelity Bank (Bahamas) Limited
51 Frederick Street
Nassau, Bahamas
Dear Mr. Bowe,
Re: Freeze of Accounts for and/or in the name of FTX Digital Markets Limited and Related Parties. We refer to the captioned entity, specifically, FTX Digital Markets Ltd. (“FTX Digital”), which is a digital asset business registered under the Digital Assets and Registered Exchanges Act, 2020i (“the DARE Act”). The Securities Commission of The Bahamas (“the Commission”) is the regulator for persons registered under the DARE Act. Be advised that pursuant to section 46Aii of the DARE Act, the Commission is authorised to issue an order to freeze for five (5) days, accounts belonging to any person having on deposit, under control or for safekeeping any funds, digital assets or other property, for persons named in the order. The Commission is reliably informed that Fidelity Bank (Bahamas) Limited (“Fidelity”), whether as custodian or otherwise, holds, has on deposit, controls or has for safekeeping, funds, digital assets or other property, held for and on behalf of FTX Digital. Accordingly, the Commission here orders Fidelity to freeze any and all accounts for FTX Digital and related parties, to begin immediately and to last no more than five (5) days. Should you have any questions or concerns please contact the undersigned or Mr. Gawaine Ward, Senior Manager, Enforcement Department. Your cooperation in this matter is appreciated, particularly given the urgency associated with this matter. Yours sincerely, Christina Rolle Executive Director cc: Samuel Bank-Fried – CEO, FTX Digital Markets Ryan Salame – Chairman, FTX Digital Markets 340

i As amended by the Digital Assets and Registered Exchanges (Amendment) Act, 2022. ii 46A Freeze Orders (1) If the Commission considers it in the public interest to do so, the Commission may for the administration of digital asset laws or to assist in the administration of the digital assets legislation of another jurisdiction, by order for a period not to exceed five days, direct – (a) a person having on deposit, under control or for safekeeping any funds. digital assets or other property of the person named in the order to hold them; or (b) a person - (i) not to withdraw any funds, digital assets or other property from any person having them on deposit, under control or for safekeeping; or (ii) to hold all funds, digital assets or other property of a client of that person, or of others, in the person's possession or control in trust for a receiver, receiver-manager, trustee or liquidator appointed under an enactment of The Bahamas. (2) An aggrieved person may apply to a judge in chambers to discharge the order of the Commission under this section and shall serve notice on the Commission to join in the proceedings, but the order of the Commission shall remain in effect until the judge determines otherwise. (3) Unless expressly stated, an order made under subsection (1) does not apply to funds, digital assets or other property in the process of transfer. 341

URGENT
VIA EMAIL: giancarlo@tether.to; michael@tether.to 10 November 2022 Jean-Louis Van der Velde CEO Tether International Limited c/o SHRM Trustees (BVI) Limited Trinity Chambers, P. O. Box 4301 Road Town, Tortola British Virgin Islands Attention: Giancarlo Devasini Dear Sir/Madam, Re: Freeze of Accounts for and/or in the name of FTX Digital Markets Limited and Related Parties. We refer to the captioned entity, specifically, FTX Digital Markets Ltd. (“FTX Digital”), which is a digital asset business registered under the Digital Assets and Registered Exchanges Act, 2020i (“the DARE Act”). The Securities Commission of The Bahamas (“the Commission”) is the regulator for persons registered under the DARE Act. Be advised that pursuant to section 46Aii of the DARE Act, the Commission is authorised to issue an order to freeze for five (5) days, accounts belonging to any person having on deposit, under control or for safekeeping any funds, digital assets or other property, for persons named in the order. The Commission is reliably informed that Tether International Limited (“Tether”), whether as custodian or otherwise, holds, has on deposit, controls or has for safekeeping, funds, digital assets or other property, held for and on behalf of FTX Digital. Accordingly, the Commission here orders Tether to freeze and/or block, any and all accounts for FTX Digital and any transactions in Tether tokens across the FTX exchange being conducted directly by FTX Digital or any related parties, to begin immediately and to last no more than five (5) days. 342

Should you have any questions or concerns please contact the undersigned or Mr. Gawaine Ward, Senior Manager, Enforcement Department. Your cooperation in this matter is appreciated, particularly given the urgency associated with this matter. Yours sincerely, Christina Rolle Executive Director cc: Samuel Bank-Fried – CEO, FTX Digital Markets Ryan Salame – Chairman, FTX Digital Markets i As amended by the Digital Assets and Registered Exchanges (Amendment) Act, 2022. ii 46A Freeze Orders (1) If the Commission considers it in the public interest to do so, the Commission may for the administration of digital asset laws or to assist in the administration of the digital assets legislation of another jurisdiction, by order for a period not to exceed five days, direct – (a) a person having on deposit, under control or for safekeeping any funds. digital assets or other property of the person named in the order to hold them; or (b) a person - (i) not to withdraw any funds, digital assets or other property from any person having them on deposit, under control or for safekeeping; or (ii) to hold all funds, digital assets or other property of a client of that person, or of others, in the person's possession or control in trust for a receiver, receiver-manager, trustee or liquidator appointed under an enactment of The Bahamas. (2) An aggrieved person may apply to a judge in chambers to discharge the order of the Commission under this section and shall serve notice on the Commission to join in the proceedings, but the order of the Commission shall remain in effect until the judge determines otherwise. (3) Unless expressly stated, an order made under subsection (1) does not apply to funds, digital assets or other property in the process of transfer. 343

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URGENT
VIA EMAIL: sam@ftx.com;
12 November 2022
Samuel Bankman-Fried
CEO
FTX Digital Markets
Veridian Corporate Centre
Building 27
Western Road
Nassau, Bahamas
Re: Notice of Order – FTX Digital Markets Ltd (“FTXDM”)

Reference is made to our earlier email message sent on 9 November 2022 to Mr. Sam BankmanFried and Ms. Jessica Murray of FTXDM at 10:17 a.m. in which The Securities Commission of The
Bahamas (“the Commission”) made a request for certain information respecting the assets and business operations of FTXDM to be provided to the Commission by on urgent basis, but no later than the end of the day on 9 November, 2022. Copies of the email message is enclosed for ease of reference. Specifically, the Commission made a request for the following information; namely - (i) the number of clients registered on the FTXDM platform; (ii) the total number of assets held for all FTXDM clients and whether those assets are held in a segregated account; (iii) the total value of client withdrawal requests that were unsatisfied between 2 November 2022 and 9 November 2022 and how many, if any, of those withdrawal requests remain outstanding; (iv) the extent to which FTXDM client assets may have been invested, loaned, used as collateral or otherwise hypothecated or encumbered by or on behalf of FTXDM, Alameda Capital, other related parties and/or third parties; (v) which FTX Group entity is a party to the non-binding Letter of Intent with Binance, its terms and the potential impact on clients of FTXDM; (vi) details of the connection, if any, between FTXDM and Alameda Capital and, in particular, whether any services where provided by Alameda Capital to FTXDM or vice versa and/or whether there were any related party or counterparty transactions between Alameda Capital to FTXDM (vii) a sample of the client agreements, including General Terms and Conditions for the Commissions review.
FTXDM failed to provide the information requested by the Commission.
352

Samuel Bankman-Fried
CEO – FTX Digital Markets
Re: Notice of Order
12 November 2022
2
3. By virtue of section 25 (1) of the Digital Assets and Registered Exchanges Act, 2020 (“DARE Act or
the Act”), every digital asset business and issuer must comply with the requirements of the Act and (a) deal openly, honestly and co-operatively with the Commission; (b) duly provide information relevant to the operations of the digital asset business as the Commission may require; and (c) submit to on-site or off-site examinations of the digital asset business as required by the Commission in the exercise of its functions.
4. Under section 46 (1) of the Act, where a digital asset business has failed to comply with their
obligations under the Act, the Commission may impose an administrative sanction for such failure, including but not limited, imposing conditions on a registrant, applying to the court for an order to take such action as the Commission considers necessary to protect the interest of clients or creditors and imposing any other remedies as the circumstances of the case may require.
5. In light of recent information within the public domain regarding the illiquidity of FTXDM, the
Commission considers the failure of FTXDM to provide the information requested above, constitutes a serious failure by FTXDM to deal co-operatively with the Commission and a failure to provide information relevant to the business operations of FTXDM as required by the Commission in breach of their duty under section 25 (1) of the DARE Act.
6. In the circumstances, the Commission also considers it necessary to issue an order that FTXDM
transfer to an account and/or digital wallet(s) established and maintained by the Commission all of the digital assets on the FTX.com platform within the possession, custody and/or under the control of FTXDM, its officers, directors, employees and/or agents, including any digital assets held upon trust, in order to protect the interests of clients and creditors of FTXDM.
7. Accordingly, the Commission HEREBY ISSUES THE FOLLOWING DIRECTIVE AND ORDER:
FTX Digital Markets Ltd. is to transfer to an account and/or digital wallet(s) established and maintained by the Commission all of the digital assets on the FTX.com platform within the possession, custody and/or under the control of FTXDM, its officers, directors, employees and/or agents, including any digital assets held upon trust, in order to protect the interests of clients and creditors of FTXDM. Yours sincerely, Christina Rolle Executive Director 353

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REGISTER OF DIGITAL ASSET BUSINESSES
The Register of digital asset businesses is published in accordance with the Digital Assets and Registered Exchanges Act, 2020, S12. Queries regarding the registration status of persons may be directed to the Supervision Department at 397-4100 or info@scb.gov.bs. Registration information provided as at: 12 November 2022 Digital Asset Business:
FTX DIGITAL MARKETS LTD.
Address
Building 27
Veridian Corporate Centre
West Bay Street
P.O. Box N 7525
Nassau, Bahamas
Phone (242) 603-1336
Website www.ftx.com
Principals Samuel Bankman-Fried
Chairman Ryan Salame
Secretary Daniel Friedberg
Directors/Members Ryan Salame, Samuel Bankman-Fried Chief Executive Officer Samuel Bankman-Fried Compliance Officer Vacant Money Laundering Reporting Officer Vacant SCB Registration Details Pursuant to Section 6 of the Digital Assets and Registered Exchanges Act, 2021  Provision of an exchange between digital assets and fiat currency; and,  Provision of an exchange between one or more forms of digital assets. Registration Type Digital Asset Business Registration Conditions License Suspended Sanctions None Other Registrations/ Licenses held outside of The Bahamas (i) License: Australian Financial Services License Entity Name: IFS Markets Party Limited Jurisdiction : Australia (ii) License: Digital Ledger Technology Provider Entity Name: Zubr Exchange Limited Jurisdiction: Gibraltar 357

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1
Sherika Sands
Subject: FW: AWS lockout
-------- Original message --------
From: Sam Bankman-Fried sam@ftx.com
Date: 11/13/22 4:56 PM (GMT-05:00)
To: Christina Rolle crolle@scb.gov.bs, bsimms@lennoxpaton.com Cc: gary@ftx.com, "'zx.gary@gmail.com'" zx.gary@gmail.com, Sam Bankman-Fried 11235813sam@gmail.com Subject: AWS lockout Hey all, I understand you guys moved almost all of the assets last night! As of now, it looks like Gary has been locked out of AWS by the Delaware Chapter 11 team--we're looking into details but it looks like he isn't able to transfer any of the remaining assets out because of that unless/until that was reversed. Sam — Sam Bankman-Fried 362

1
Sherika Sands
Subject: FW: AWS lockout

On Sun, Nov 13, 2022 at 5:09 PM Christina Rolle crolle@scb.gov.bs wrote:
Thanks for letting us know, Sam,
Please provide details of the assets (type and number of tokens) that were remaining. With kind regards,

Sent from my Galaxy

The information in this e-mail (including attachments) is confidential and may be legally privileged. It is intended solely for the addressee. Access to this e-mail by anyone else is unauthorized. If you are not the intended recipient, any review, disclosure, reproduction, distribution or any action taken or omitted to be taken in reliance on the e-mail message, is prohibited. If you have received this e-mail in error, please notify the sender by return e-mail and delete all parts of this e-mail from your computer(s) and eventual service provider computer(s). The Securities Commission of The Bahamas (the Commission) is neither liable for the proper and complete transmission of the information contained in this communication nor for any delay in its receipt. While the Commission has taken every reasonable precaution to ensure that any attachment to this e-mail has been scanned for viruses, the Commission does not accept any liability for the presence of any viruses and/or any loss or damage suffered as a result. Any opinions expressed are those of the author and are not necessarily endorsed by the Commission.

-------- Original message --------
From: Sam Bankman-Fried sam@ftx.com
Date: 11/13/22 4:56 PM (GMT-05:00)
To: Christina Rolle crolle@scb.gov.bs, bsimms@lennoxpaton.com Cc: gary@ftx.com, "'zx.gary@gmail.com'" zx.gary@gmail.com, Sam Bankman-Fried 11235813sam@gmail.com Subject: AWS lockout

Hey all,

I understand you guys moved almost all of the assets last night!
363

As of now, it looks like Gary has been locked out of AWS by the Delaware Chapter 11 team--we're looking into details but it looks like he isn't able to transfer any of the remaining assets out because of that unless/until that was reversed.

Sam

—
Sam Bankman-Fried

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4892-0827-0654 v.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
FTX TRADING LTD., et al.,
1
Debtors.
Chapter 11
Case No. 22-11068 (JTD)
(Joint Administration Pending)
DECLARATION OF JOHN J. RAY III IN SUPPORT OF
CHAPTER 11 PETITIONS AND FIRST DAY PLEADINGS
I, John J. Ray III, hereby declare under penalty of perjury as follows:

I am the Chief Executive Officer of the above-captioned debtors and
debtors-in-possession (collectively, the “Debtors”), having accepted this position in the early morning hours of November 11, 2022. I am administering the interests and affairs of the Debtors from my offices in the United States.
My first official act in these roles was to authorize the chapter 11 filings of
the Debtors and the commencement of the above-captioned chapter 11 cases (the “Chapter 11 Cases”).
Since my appointment, I have worked around the clock with teams of
professionals at Alvarez & Marsal, Sullivan & Cromwell, Nardello & Co., Chainalysis, Kroll and a confidential cybersecurity firm, to secure the assets of the Debtors wherever located, to identify reliable books and records, to assemble the information necessary to provide to this Court, and to respond to numerous inquiries from multiple regulators and government authorities including the

1 The last four digits of FTX Trading Ltd.’s tax identification number are 3288. Due to the large number of debtor entities in these Chapter 11 Cases, a complete list of the Debtors and the last four digits of their federal tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors’ proposed claims and noticing agent at https://cases.ra.kroll.com/FTX. Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 1 of 30 375

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4892-0827-0654 v.2
U.S. Commodity Futures Trading Commission (“CFTC”), the U.S. Attorney’s Office for the Southern District of New York, the U.S. Securities and Exchange Commission (“SEC”), and the U.S. Congress, among others.
4. I have over 40 years of legal and restructuring experience. I have been the
Chief Restructuring Officer or Chief Executive Officer in several of the largest corporate failures in history. I have supervised situations involving allegations of criminal activity and malfeasance (Enron). I have supervised situations involving novel financial structures (Enron and Residential Capital) and cross-border asset recovery and maximization (Nortel and Overseas Shipholding). Nearly every situation in which I have been involved has been characterized by defects of some sort in internal controls, regulatory compliance, human resources and systems integrity.
5. Never in my career have I seen such a complete failure of corporate
controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.
6. These Chapter 11 Cases have five core objectives:
(a) Implementation of Controls: the implementation of accounting, audit, cash management, cybersecurity, human resources, risk management, data protection and other systems that did not exist, or did not exist to an appropriate degree, prior to my appointment; (b) Asset Protection & Recovery: the location and security of property of the estate, a substantial portion of which may be missing or stolen; (c) Transparency and Investigation: the pending, comprehensive, transparent and deliberate investigation into claims against Mr. Samuel Bankman-Fried, the other co-founders of the Debtors and third parties, in Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 2 of 30 376

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4892-0827-0654 v.2 coordination with regulatory stakeholders in the United States and around the world; (d) Efficiency and Coordination: cooperation and coordination with insolvency proceedings of subsidiary companies in other jurisdictions; and (e) Maximization of Value: the maximization of value for all stakeholders through the eventual reorganization or sale of the Debtors’ complex array of businesses, investments and digital and physical property. These proceedings in the District of Delaware are the appropriate means to accomplish each of these objectives.
7. Except as otherwise indicated herein, all facts set forth in this declaration
(the “Declaration”) are based on my personal knowledge, my review of relevant materials in the Debtors’ files or my opinion based on my experience, knowledge and information concerning the Debtors’ operations and financial affairs. I am over the age of 18 and authorized to submit this Declaration on behalf of each of the Debtors.
8. For the reasons explained below, the Debtors expect to provide
supplemental declarations as to the subject matter of this Declaration in connection with future motions as more information becomes available to the Debtors, stakeholders and the Court.
I. THE PREPETITION DEBTORS
A. Corporate Organization and Identification of Four Silos
9. For purposes of managing the Debtors’ affairs, I have identified four
groups of businesses, which I refer to as “Silos.” These Silos include: (a) a group composed of Debtor West Realm Shires Inc. and its Debtor and non-Debtor subsidiaries (the “WRS Silo”), which includes the businesses known as “FTX US,” “LedgerX,” “FTX US Derivatives,” “FTX US Capital Markets,” and “Embed Clearing,” among other businesses; (b) a group composed of Debtor Alameda Research LLC and its Debtor subsidiaries (the “Alameda Silo”); (c) a group composed of Debtor Clifton Bay Investments LLC, Debtor Clifton Bay Investments Ltd., Debtor Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 3 of 30 377

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4892-0827-0654 v.2
Island Bay Ventures Inc. and Debtor FTX Ventures Ltd. (the “Ventures Silo”); and (d) a group composed of Debtor FTX Trading Ltd. and its Debtor and non-Debtor subsidiaries (the “Dotcom Silo”), including the exchanges doing business as “FTX.com” and similar exchanges in non-U.S. jurisdictions. These Silos together are referred to by me as the “FTX Group.”
10. Each of the Silos was controlled by Mr. Bankman-Fried.2
Minority equity interests in the Silos were held by Zixiao “Gary” Wang and Nishad Singh, the co-founders of the business along with Mr. Bankman-Fried. The WRS Silo and Dotcom Silo also have third party equity investors, including investment funds, endowments, sovereign wealth funds and families. To my knowledge, no single investor other than the co-founders owns more than 2% of the equity of any Silo.3
11. The diagram attached as Exhibit A provides a visual summary of the Silos
and the indicative assets in each Silo. Exhibit B contains a preliminary corporate structure chart. These materials were prepared at my direction based on information available at this time and are subject to revision as our investigation into the affairs of the FTX Group continues. B. The WRS Silo
12. The WRS Silo includes FTX US, an exchange for spot trading in digital
assets and tokens. FTX US was founded in January 2020. FTX US is available to U.S. users

2 To my knowledge, Mr. Bankman-Fried owns (a) directly, approximately 53% of the equity in Debtor West Realm Shires Inc.; (b) indirectly, approximately 75% of the equity in Debtor FTX Trading Ltd.; (c) directly, approximately 90% of the equity in Debtor Alameda Research LLC; and (d) directly, approximately 67% of the equity in Clifton Bay Investments LLC. 3 Based on the information provided to me, the only Debtors that have received third party equity investments are Debtor FTX Trading Ltd. (Dotcom Silo) and Debtor West Realm Shires Inc. (WRS Silo). To my knowledge, (a) approximately 25% of the equity in Debtor FTX Trading Ltd. is owned by a dispersed group of approximately 600 third party equity investors and (b) approximately 22.25% of the equity in Debtor West Realm Shires Inc. is owned by a dispersed group of approximately 570 third party equity investors. FTX Trading Ltd also acquired 51% of Blockfolio, Inc. in 2020, with the remaining 49% of Blockfolio, Inc. owned by the original shareholders. Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 4 of 30 378

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4892-0827-0654 v.2 and, according to statements by Mr. Bankman-Fried, had approximately one million users as of August 2022. FTX US’s spot exchange is registered with the Department of the Treasury (via the Financial Crimes Enforcement Network) as a money services business and holds a series of state money transmission licenses in the United States.
13. The WRS Silo also owns 100% of the equity interests in the LedgerX
business, which is operated by non-Debtor LedgerX LLC (d/b/a FTX US Derivatives) (“LedgerX”). LedgerX offers futures, options, and swaps contracts on digital assets and other commodities to both U.S. and non-U.S. persons. LedgerX operates with licenses from the CFTC. Based on the information that I have reviewed at this time, LedgerX is solvent.
14. The WRS Silo also owns 100% of the equity interests in non-Debtor FTX
Capital Markets LLC, which is an SEC-registered broker-dealer. Based on the information that I have reviewed at this time, FTX Capital Markets LLC is solvent.
15. The WRS Silo also owns 100% of the equity interests in non-Debtor
Embed Financial Technologies Inc., as well as its wholly-owned non-Debtor subsidiary Embed Clearing LLC, which operates as a securities clearing firm and is an SEC-registered brokerdealer. Based on the information that I have reviewed at this time, each of these non-Debtor entities is solvent.
16. The WRS Silo also owns 100% of the equity interests in FTX Value Trust
Company, a South Dakota Trust Company, which provides custodial services. Based on the information that I have reviewed at this time, this non-Debtor company is solvent.
17. The WRS Silo also owns 100% of other Debtor and non-Debtor
companies operating miscellaneous businesses, such as video game development and a market place for trading non-fungible tokens. Finally, the WRS Silo has made loans and investments, Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 5 of 30 379

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4892-0827-0654 v.2 including a loan of FTT tokens to BlockFi Inc. in a principal amount of FTT tokens valued at $250 million as of September 30, 2022.
18. I have been provided with an unaudited consolidated balance sheet for the
WRS Silo as of September 30, 2022, which is the latest balance sheet available. The balance sheet shows $1.36 billion in total assets as of that date. However, because this balance sheet was produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it, and the information therein may not be correct as of the date stated.
19. The chart below summarizes certain information regarding the WRS
Silo’s consolidated assets as reflected in the September 30, 2022 balance sheet:
WRS Silo
Consolidated Assets as of September 30, 2022
Current Assets
Cash and Cash Equivalents $144,207
Restricted Cash $267,738
U.S. Dollar Denominated Stablecoins $68,035
Customer Custodial Funds $102,225
Accounts Receivable $2,978
Accounts Receivable, Related Party $71,563
Loans Receivable $250,000
Prepaid Expenses and Other Current Assets $21,448 Crypto Assets Held at Fair Value $1,026 Total Current Assets $929,220 Property and Equipment, Net $2,017 Other Non-Current Assets $429,428 Total Assets $1,360,665 (1) Amounts shown in thousands of U.S. Dollars. (2) In the above table, assets shown reflect the elimination of intercompany entries within and between the WRS Silo and Dotcom Silo. (3) Restricted cash at the WRS Silo is primarily comprised of approximately $250 million in restricted funds at non-Debtor LedgerX. (4) Customer custodial fund assets are comprised of fiat customer deposit balances. Balances of customer crypto assets deposited were not recorded as assets on the balance sheet and are not presented. (5) Loans receivable of $250 million consists of a loan by Debtor West Realm Shires Inc. to BlockFi Inc. of $250 million in FTT tokens. (6) Intangible assets (in the amount of $229 million) are not reflected above. These consist of values attributable to customer relationships and trade names. Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 6 of 30 380

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4892-0827-0654 v.2
(7) Goodwill balance (in the amount of $135 million) is not reflected above.
20. To my knowledge, the WRS Silo Debtors do not have any long-term or
funded debt. The WRS Silo Debtors are expected to have significant liabilities arising from crypto assets deposited by customers through the FTX US platform. However, such liabilities are not reflected in the financial statements prepared while these companies were under the control of Mr. Bankman-Fried. The chart below summarizes certain information regarding the WRS Silo’s consolidated liabilities as reflected in the September 30, 2022 balance sheet:
WRS Silo
Consolidated Liabilities as of September 30, 2022 Current Liabilities Accounts Payable and Accrued Expenses $6,014 Accounts Payable, Related Party $124,221 Custodial Funds Due to Customers $102,225 Purchase Consideration Payable – Loan Payable – Lease Liability, Current $1,672 Crypto Asset Borrowings at Fair Value $1,737 Total Current Liabilities $235,869 Lease Liability, Non-Current $9,399 Deferred Taxes $20,185 Contract Liability $887 SAFE Note, Related Party, Non-Current $50,000 Other Non-Current Liabilities – Total Liabilities $316,014 (1) Amounts shown in thousands of U.S. Dollars. (2) In the above table, liabilities shown reflect the elimination of intercompany entries within and between the WRS Silo and Dotcom Silo. (3) Customer custodial fund liabilities are comprised of fiat customer deposit balances. Balances of customer crypto assets deposited are not presented.
21. All Debtors and non-Debtors in the WRS Silo are organized in the State of
Delaware, other than non-Debtor FTX Vault Trust Company, which is a South Dakota Trust Company. Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 7 of 30 381

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4892-0827-0654 v.2
C. The Alameda Silo
22. The parent company and primary operating company in the Alameda Silo
is Alameda Research LLC, which is organized in the State of Delaware. Before the Petition Date (as defined below), the Alameda Silo operated quantitative trading funds specializing in crypto assets. Strategies included arbitrage, market making, yield farming and trading volatility. The Alameda Silo also offered over-the-counter trading services, and made and managed other debt and equity investments. In short, the Alameda Silo was a “crypto hedge fund” with a diversified business trading and speculating in digital assets and related loans and securities for the account of its owners, Messrs. Bankman-Fried (90%) and Wang (10%).
23. Alameda Research LLC prepared consolidated financial statements on a
quarterly basis. To my knowledge, none of these financial statements have been audited. The September 30, 2022 balance sheet for the Alameda Silo shows $13.46 billion in total assets as of its date. However, because this balance sheet was unaudited and produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it and the information therein may not be correct as of the date stated.
24. The chart below summarizes certain information regarding the Alameda
Silo’s consolidated assets as reflected in the September 30, 2022 balance sheet:
Alameda Silo
Consolidated Assets as of September 30, 2022
Current Assets
Cash and Cash Equivalents $547,964
Restricted Cash -
U.S. Dollar Denominated Stablecoins -
Customer Custodial Funds -
Investments $3,976,632
Accounts Receivable $10,845
Accounts Receivable, Related Party $427,323
Loans Receivable $41,607
Loans Receivable, Related Party $4,102,365
Prepaid Expenses and Other Current Assets $1,083 Crypto Assets Held at Fair Value $4,084,886 Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 8 of 30 382

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4892-0827-0654 v.2
Total Current Assets $13,192,706
Property and Equipment, Net $26,763
Other Non-Current Assets $239,696
Total Assets $13,459,165
(1) Amounts shown in thousands of U.S. Dollars.
(2) In the above table, intercompany accounts receivable, accounts payable, loans payable, and loans receivable are not presented. (3) Related Party Loans Receivable of $4.1 billion at Alameda Research (consolidated) consisted primarily of a loan by Euclid Way Ltd. to Paper Bird Inc. (a Debtor) of $2.3 billion and three loans by Alameda Research Ltd.: one to Mr. Bankman-Fried, of $1 billion; one to Mr. Singh, of $543 million; and one to Ryan Salame, of $55 million.
25. The chart below summarizes certain information regarding the Alameda
Silo’s consolidated liabilities as reflected in the September 30, 2022 balance sheet:
Alameda Silo
Consolidated Liabilities as of September 30, 2022 Current Liabilities Accounts Payable and Accrued Expenses $916,305 Accounts Payable, Related Party $75,900 Custodial Funds Due to Customers $309,634 Purchase Consideration Payable - Loans Payable - Loans Payable, Related Party $13,762 Lease Liability, Current - Crypto Asset Borrowings at Fair Value $3,773,979 Total Current Liabilities $5,089,579 Lease Liability, Non-Current - Deferred Taxes - Contract Liability - SAFE Note, Related Party, Non-Current - Other Non-Current Liabilities - Total Liabilities $5,089,579 (1) Amounts shown in thousands of U.S. Dollars. (2) In the above table, intercompany accounts receivable, accounts payable, loans payable, and loans receivable are not presented.
26. As mentioned above, Alameda Research LLC is organized in the State of
Delaware. The other Debtors in the Alameda Silo are organized in Delaware, Korea, Japan, the British Virgin Islands, Antigua, Hong Kong, Singapore, the Seychelles, the Cayman Islands, the Bahamas, Australia, Panama, Turkey and Nigeria. Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 9 of 30 383

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4892-0827-0654 v.2
D. The Ventures Silo
27. The Debtors in the Ventures Silo make and manage private investments.
The investments are held in Debtors Clifton Bay Investments, LLC, Clifton Bay Investments Ltd., FTX Ventures Ltd., Island Bay Ventures Inc. and, potentially, affiliated companies.
28. To my knowledge, Debtors Clifton Bay Investments, LLC and FTX
Ventures Ltd. prepared financial statements on a quarterly basis. The September 30, 2022 balance sheet for Debtor Clifton Bay Investments LLC shows assets with a total value of $1.52 billion as of its date, and the September 30, 2022 balance sheet for FTX Ventures Ltd. shows assets with a total value of $493 million as of its date. To my knowledge, none of these financial statements have been audited. Because these balance sheets were unaudited and produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in them, and the information therein may not be correct as of the date stated.
29. I have not been able to locate financial statements for Island Bay Ventures
Inc.
30. The chart below summarizes certain information regarding the Ventures
Silo’s assets as reflected in the September 30, 2022 balance sheets, excluding any assets held by Island Bay Ventures Inc. Ventures Silo Consolidated Assets as of September 30, 2022 Clifton Bay Investments LLC (consolidated) FTX Ventures Ltd Current Assets Cash and Cash Equivalents $245 $261 Restricted Cash - - U.S. Dollar Denominated Stablecoins - - Customer Custodial Funds - - Investments $1,492,856 $397,861 Accounts Receivable - - Accounts Receivable, Related Party $10,200 - Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 10 of 30 384

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4892-0827-0654 v.2
Loans Receivable $16,810 -
Loans Receivable, Related Party - -
Prepaid Expenses and Other Current Assets - -
Crypto Assets Held at Fair Value - $95,337
Total Current Assets $1,520,111 $493,459
Property and Equipment, Net - -
Other Non-Current Assets - -
Total Assets $1,520,111 $493,459
(1) Amounts shown in thousands of U.S. Dollars.
(2) In the above table, intercompany accounts receivable, accounts payable, loans payable, and loans receivable are not presented.
31. The chart below summarizes certain information regarding the Ventures
Silo’s liabilities as reflected in the September 30, 2022 balance sheets excluding any liabilities of Island Bay Ventures Inc.:
Ventures Silo
Consolidated Liabilities as of September 30, 2022 Clifton Bay Investments LLC (Consolidated) FTX Ventures Ltd Current Liabilities Accounts Payable and Accrued Expenses $44 - Accounts Payable, Related Party $1,519,283 $129,518 Custodial Funds Due to Customers - - Purchase Consideration Payable - - Loans Payable - - Loans Payable, Related Party - $362,915 Lease Liability, Current - - Crypto Asset Borrowings at Fair Value - - Total Current Liabilities $1,519,326 $492,432 Lease Liability, Non-Current - - Deferred Taxes - - Contract Liability - - SAFE Note, Related Party, Non-Current - - Other Non-Current Liabilities - - Total Liabilities $1,519,326 $492,432 (1) Amounts shown in thousands of U.S. Dollars. (2) In the above table, intercompany accounts receivable, accounts payable, loans payable, and loans receivable are not presented. (3) Related Party Accounts Payable at Clifton Bay Investments LLC consists of four related-party balances:
one with Debtor Alameda Research Ltd, of $1,400 million; one with Debtor Alameda Research LLC, of $68.6 million; one with Alameda Ventures Ltd, of $38.5 million; and one with Debtor West Realm Shires Services Inc. of $2.25 million. Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 11 of 30 385

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(4) Customer custodial fund liabilities are comprised of fiat customer deposit balances. Balances of customer crypto assets deposited are not presented.
32. All Debtors in the Ventures Silo are organized in the State of Delaware or
the British Virgin Islands.
E. The Dotcom Silo
33. The Dotcom Silo includes FTX.com, the trade name for the business
conducted by the parent company in the Dotcom Silo, FTX Trading Ltd., which is organized in Antigua. FTX.com is a digital asset trading platform and exchange. It was founded by Messrs. Bankman-Fried, Wang and Singh and commenced operations in May 2019. The Dotcom Silo also holds certain marketplace licenses and registrations in certain non-U.S. jurisdictions, including the European Union and Japan. The FTX.com platform is not available to U.S. users.
34. In addition to its core digital asset exchange, the Dotcom Silo offered an
off-exchange portal that enabled users to connect and request quotes for spot digital assets and trade directly. The portal enabled users to lend their digital assets to other users for spot trading and matched users wanting to borrow with those willing to lend.
35. The FTX.com platform grew quickly since its launch to become one of the
largest cryptocurrency exchanges in the world. Mr. Bankman-Fried claimed that, by the end of 2021, around $15 billion of assets were on the platform, which according to him handled approximately 10% of global volume for crypto trading at the time. Mr. Bankman-Fried also claimed that FTX.com, as of July 2022, had “millions” of registered users. These figures have not been verified by my team.
36. The Dotcom Silo’s unaudited consolidated balance sheet as of September
30, 2022 is the latest balance sheet that was provided to me with respect to the Dotcom Silo. It shows total assets of $2.25 billion as of September 30, 2022. Because such balance sheet was Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 12 of 30 386

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4892-0827-0654 v.2 produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it, and the information therein may not be correct as of the date stated.
37. The chart below summarizes certain information regarding the Dotcom
Silo’s consolidated assets as reflected in the September 30, 2022 balance sheet:
Dotcom Silo
Consolidated Assets as of September 30, 2022
Current Assets
Cash and Cash Equivalents $483,724
Restricted Cash $10,188
U.S. Dollar Denominated Stablecoins $1,140,795 Customer Custodial Funds – Accounts Receivable $9,459 Accounts Receivable, Related Party $188,155 Loans Receivable $103,949 Prepaid Expenses and Other Current Assets $42,661 Crypto Assets Held at Fair Value $659 Total Current Assets $1,979,590 Property and Equipment, Net $256,996 Other Non-Current Assets $22,148 Total Assets $2,258,734 (1) Amounts shown in thousands of U.S. Dollars. (2) The balance sheet for non-Debtor FTX Digital Markets Ltd. is consolidated to Debtor FTX Trading Ltd.’s balance sheet. The September 30, 2022 Balance Sheet of non-Debtor FTX Digital Markets Ltd. reflects an asset position of $149,336, as follows: Cash and Cash Equivalents ($82,564), Restricted Cash ($10,000), U.S. Dollar Denominated Stablecoins ($63), Related Party Receivables ($45,944), Prepaid Expenses and Other Current Assets ($4,922), Property and Equipment, Net ($5,565) and Other Non-Current Assets ($278) (amounts in thousands of U.S. Dollars). (3) Non-debtor FTX Digital Markets Ltd. has a net intercompany accounts payable of $30 million due to entities controlled by Debtor FTX Trading Ltd. (4) In the above table, assets shown reflect the elimination of intercompany entries within and between the WRS Silo and Dotcom Silo. (5) Customer custodial fund assets are comprised of fiat customer deposit balances. Balances of customer crypto assets deposited are not presented. (6) Loans Receivable of $250 million at FTX US consists of a loan to BlockFi Inc. of $250 million in FTT tokens. (7) Intangible assets (in the amount of $343 million) are not reflected above. These consist of values attributable to customer relationships and trade names. (8) Goodwill balance (in the amount of $359 million) is not reflected above.
38. To my knowledge, the Dotcom Silo Debtors do not have any long-term or
funded debt. The Dotcom Silo Debtors may have significant liabilities to customers through the Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 13 of 30 387

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4892-0827-0654 v.2
FTX.com platform. However, such liabilities are not reflected in the financial statements prepared by these companies while they were under the control of Mr. Bankman-Fried. The chart below summarizes certain information regarding the Dotcom Silo’s consolidated liabilities as reflected in the September 30, 2022 balance sheet:
Dotcom Silo
Consolidated Liabilities as of September 30, 2022 Current Liabilities Accounts Payable and Accrued Expenses $38,970 Accounts Payable, Related Party $125,626 Custodial Funds Due to Customers – Purchase Consideration Payable $26,970 Loan Payable $124,298 Lease Liability, Current $23 Crypto Asset Borrowings at Fair Value $149,723 Total Current Liabilities $465,610 Lease Liability, Non-Current – Deferred Taxes – Contract Liability – SAFE Note, Related Party, Non-Current – Other Non-Current Liabilities $46 Total Liabilities $465,656 (1) Amounts shown in thousands of U.S. Dollars. (2) In the above table, liabilities shown reflect the elimination of intercompany entries within and between the WRS Silo and Dotcom Silo. (3) The balance sheet for non-Debtor FTX Digital Markets Ltd. is consolidated to Debtor FTX Trading Ltd.’s balance sheet. The September 30, 2022 Balance Sheet of non-Debtor FTX Digital Markets Ltd. reflects total liabilities in the amount of $1,278, as follows: Accounts Payable and Accrued Expenses ($1,259), Accounts Payable, Related Party ($19) (amounts in thousands of U.S. Dollars). (4) Customer custodial fund liabilities are comprised of fiat customer deposit balances. Balances of customer crypto assets deposited were not recorded as assets on the balance sheet and are not presented.
39. The Debtors in the Dotcom Silo are organized in jurisdictions around the
world, with the parent company FTX Trading Ltd. organized in Antigua. The Debtors in the Dotcom Silo also own 100% of the equity interests in over a dozen non-Debtor companies.
II. EVENTS LEADING TO CHAPTER 11 FILING
40. The Debtors faced a severe liquidity crisis that necessitated the filing of
these Chapter 11 Cases on an emergency basis on November 11, 2022, and in the case of Debtor Case 22-11068-JTD Doc 24 Filed 11/17/22 Page 14 of 30 388

Securities Industry Act, 2011

Lineage: In force