The Bahamas: A Complete and Compelling Choice by ClearView Financial Media

The Bahamas: A Complete and Compelling Choice A WealthBriefing Report On The Bahamas Financial Services Industry

2023

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INTRODUCTION

The Bahamas Where Innovation Is The Watchword The Bahamas continues to be a place where innovative solutions and high-net-worth investors converge. In this comprehensive report about the jurisdiction’s ever-evolving sectors and services, we hear from regulators, entrepreneurs and professionals who all have one aim in mind – to present the HNW individual and his family office with a panoply of well-managed, well-regulated and world-beating investment options.

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As international financial centres continue to rebound from the effects of the pandemic and its consequent economic shocks, The Bahamas finds itself at the forefront of many types of modern financial developments and methods of exchange that are of immense interest to high-net-worth individuals and family offices. It leads the world in the field of payment systems, having created the world’s first nationwide central-bank digital currency, the Sand Dollar, in 2020. In implementing this digital coin of the realm, The Bahamas beat China’s ‘digital renminbi’ to the market by six months. It is, moreover, one of the very first jurisdictions in the world to regulate digital assets through a comprehensive body of law. The Government has coupled the introduction of the Sand Dollar with plans to eliminate the use of cheques in The Bahamas in favour of digital currencies.

In association with: WHERE VASPS DARE BAHAMAS FINANCIAL SERVICES BOARD Bahamas Financial Services Board Montague Sterling Centre East Bay Street P.O. Box N-1764 Nassau, The Bahamas Telephone: (242) 393-7001 www.bfsb-bahamas.com

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With the benefit of plenty of experience in this fast-paced sector, the Government plans to reform the Digital Assets and Registered Exchanges (DARE) Act 2020 – The Bahamas’ ground-breaking digital-assets law. The DARE Act provides a robust regulatory platform for virtual-assets service providers or VASPs. The pending overhaul will address such matters as the segregation of clients’ assets, decentralised finance or DeFi, yield farming, stablecoins, regulatory accounting, Web 3, non-fungible tokens (NFTs) and the advertising of digital assets. Firms registered under the DARE Act already have to follow the same antimoney-laundering rules as traditional financial institutions, in accordance with the precepts of the Financial Action Task Force and international best practice. In the pages of this comprehensive report, the Securities Commission of The Bahamas, the nation’s primary regulator for digital-asset business, explains this second round of legislation in some detail.

The Bahamas: A Complete And Compelling Choice 2023

Among the innovations to be found in the DARE Bill 2023, which is likely to become law shortly, is a world first: a dedicated disclosure regime for activities to do with staking – the process of locking up digital assets for a certain period of time in return for a reward or for interest. The aim is to regulate the staking of digital assets that belong to clients and the management of staking pools as businesses, but not to bother high-net-worth individuals who stake assets on DLT-based networks on their own accounts.

“The aim is not to bother HNWIs who stake assets on DLT-based networks on their own accounts.” The Bill, which this report discusses in some depth, also seeks to introduce activities-based registration and risk-based supervision, both of which are essential to the integrity of modern markets and the protection of high-net-worth investors from sharp practice and/or the consequences of their own inexperience. Its categorisation of Non-Fungible Tokens (NFTs) is designed to depend on the distinction between financial or consumer assets, resulting in financial NFTs falling within the scope of regulation but consumer NFTs, particularly in the realm of gaming, falling outside.

company to cover the risks of a parent company or its affiliates; many profitable family-owned businesses and the family offices that support them benefit from captives, which offset various risks that traditional commercial insurance may not adequately cover. Legislation on the subject is in the process of being updated, as explained in an article with commentary by Michele Fields, the Superintendent of Insurance in the Bahamas. TOWARDS A FUTURE OF CARBON CREDITS AND SYSTEMATIC INVESTING

Climate change is an existential threat to the islands of The Bahamas. Global warming is going to be a problem for the world in future, both physically in the form of displaced populations and economically in the form of disruptions to commerce. The world stands to lose around 10% of total economic value from climate change by 2050, according to the Swiss Re Institute, if its surface temperature keeps increasing on the current trajectory and if governments fail to conform to the Paris Agreement and to 2050 net-zero-emission targets.

“Some Bahamian firms take inspiration from Amazon’s ‘working backwards’ method.”

CRYPTOGRAPHY AND WEALTH MANAGEMENT

The jurisdiction has also been a forerunner in the world of cryptocurrency regulation. Flexible but thorough regulation applies to digital-token exchanges, payment-service providers that use digital assets, digital-asset service providers and the provision of services relating to the sale of digital assets. HNW investors who are interested in structured ‘crypto’ products are finding this stable environment very attractive. THE SECRET OF GOOD TRADING

The Bahamas also provides a domicile for a number of global retail brokerages that make fully-automated trading a possibility, making it easy for users to submit orders automatically through mobile applications. History abounds with examples of traders who failed to make the most of market movements because their own frailties and insecurities played them false. There are also some noble examples of traders who stuck to their set strategies, no matter how deeply they experienced the usual raging emotions of greed, fear and everything in between. The automatic trading option allows perfectly ordinary HNW investors – who lack the training and self-discipline that traders are supposed to have – to sidestep these emotions to a large degree and to trade in stocks and derivatives according to their pre-arranged policies. INSURANCE AND HNWIS

Our report also explores the ever-evolving world of captive insurance companies – a Bahamian speciality since the old days. Captive insurance involves the creation of a subsidiary insurance

Despite this, global warming can create economic opportunities even as it creates vulnerabilities. This is especially true in The Bahamas, whose natural resources can be put to work to trap carbon safely. The government is planning to monetize its seagrass meadows, salt marshes and mangroves and develop a blue-carbon credit regime. It has passed two laws – the Climate Change and Carbon Initiatives Act 2022 and the Carbon Credit Trading Act 2022 – to allow for well-regulated trading in a new asset class consisting of carbon credits, carbon securities and carbon-linked digital assets. This report looks at the opportunities that this turn of events might generate for The Bahamas. Meanwhile, as the report also attests, more and more international HNW investors are using state-of-the-art trading platforms located in the jurisdiction. They are turning in increasing numbers to systematic investing, an approach that emphasizes data-driven insights, scientific testing and disciplined portfolio-construction techniques. Gone are the days when international private investors – overwhelmed as they are by mountains of data – could navigate volatile markets safely without recourse to brokers’ and platforms’ analytical tools. Diversification remains the key to the construction of more robust portfolios. HNWs with moderate risk appetites are also profiting from today’s erratic markets by allocating some of their investment portfolios to hedge funds, many of them in The Bahamas. Our report also contains a shopping list of tips to help the investor reduce the risk of ending up in the clutches of a dubious broker. There are no prizes for guessing the most important tip of all – the choice of jurisdiction, with an emphasis on good regulation.

The Bahamas: A Complete And Compelling Choice 2023

THE BAHAMAS – A LAND OF INNOVATORS

GREEN INITIATIVES ARE ATTRACTING FINANCE

Innovation is at the heart of The Bahamas’ achievements and our report examines the process on the ground in some detail. The Heilmeier Catechism, the revolutionary checklist that DARPA, the American Government agency that spawned the Internet (originally called Arpanet), has been using throughout its successful career of innovation, poses several questions that forces one to rethink one’s objectives to take transformative action and how they hope to achieve them.

The Bahamas – ever-keen to dominate new trends in financial services – is also promoting a green agenda through financial initiatives designed to reduce greenhouse-gas emissions and pave the way for a low-carbon economy, through blue-carbon initiatives that finance ecosystems that sequester carbon dioxide from the atmosphere, and through carbon trading. The government is, additionally, developing a regime for sovereign carbon credits and the registration of carbon exchanges and related businesses. Near the end of 2022 at COP27, the global climate conference, the Bahamian Prime Minister told world leaders: “Let’s Get Real”. Meanwhile, the islands’ investment industry is paying more and more attention to Environmental, Social and Governance-related (ESG) matters, although its regulators have not yet made ESG reporting a top priority.

What are you trying to do? Can you articulate your objectives using absolutely no jargon? What is new in your approach and why do you think it will be successful? What are the consequences of doing nothing? How much will it cost? How long will it take? Who needs to be involved to ensure success? Financial innovators in The Bahamas are constantly asking themselves these questions and using the answers to cause disruptive and beneficial change in many areas of their business. The rewards of being ‘first to market’ are huge, but they come at a cost – the cost of constant experimentation, failure, recalibration and a humble acceptance of uncertainty throughout the process. This is a cost that many successful Bahamian financial firms gladly pay to maintain their status as trailblazers – and they are right to do so.

“With the Sand Dollar, The Bahamas beat China’s ‘digital renminbi’ to the market by six months.” Top executives at Bahamian wealth-management firms know that when their efforts to impose changes on their systems experience some resistance, it is a sign that innovation is happening. In such instances, innovators are not afraid of offering their concepts up for scrutiny. More often than not, the experience of a challenge or a setback ushers in the next brainwave, or prompts the evolution of an existing concept, leading eventually to success. Some Bahamian firms take inspiration from Amazon’s ‘working backwards’ method, which starts by imagining the first day of a new wealth offering and only then works out the steps that might lead up to it. It is in crucibles such as these that sparks fly and winning strategies are forged. It is against this backdrop that service providers focus on meeting bespoke client needs. There is no one-size-fits-all approach.

WHEN MARKETS CHANGE CONSTANTLY, SO MUST LAWS

The aforementioned DARE Bill is part of a more general effort on the part of the jurisdiction to stay one step ahead of its competitors by reframing the laws that support its most modern financial innovations. By doing so, it hopes to remain at the forefront of world developments in tax, business licensing, payments, crypto-currencies, economic substance and much else besides. For example, the new Commercial Entities (Substance Requirements) Act 2023 has now come into force and, for the first time, registered agents are required to report on behalf of the entities that they manage. The Act has also expanded the list of things that entities must report to the authorities and has changed some classifications for reporting purposes. New guidelines are online as well. Meanwhile, the Central Bank is pursuing many strategies to widen the use of the Bahamian Sand Dollar, the world’s first central-bank digital currency. On top of this, the economy is advancing. In 2022, according to the International Monetary Fund, real GDP growth reached 14.4 per cent in a broad-based expansion that was especially strong in tourism but also impressive in financial services.

“The jurisdiction is reframing the laws that support its most modern financial innovations.”

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Contents The Pillars Of Innovation Deltec Bank & Trust Limited

Key Developments And Latest Trends In Banking And Finance In The Bahamas Higgs & Johnson

Beyond Natural Beauty: The Carbon Credits Market And The Bahamas Genesis Fund Services Limited

How Systematic Trading And Investing Overrides Bad, Emotional Decision-Making Quantfury Trading Limited

The Bahamas Gets Real About Climate Finance Graham Thompson

Why Family Offices Are Better In The Bahamas McKinney, Bancroft & Hughes

Investment Strategies That Use Systemic Research - An Example Of Technology Affecting Business ActivTrades

Navigating The Digital Frontier: The Bahamas’ Approach To Regulating Digital Assets Securities Commission of The Bahamas

Corporate Culture - The Secret Of Success Equity Group of Companies

Leadership And Technology In The Bahamas Maran Global Solutions

Delivering For A Captive Audience Insurance Commission of The Bahamas

The Bahamas: A Complete And Compelling Choice 2023

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The Pillars Of Innovation *By Paul Winder, the Global Head of Wealth Planning at Deltec Bank & Trust Limited

The word “innovation” often calls to mind the technical and the complex. We think of new industrial or biomedical revolutions, perhaps involving re-useable rockets or antibiotics, or ground-breaking consumer products such as smartphones.

owever, more often than not, innovation simply comes in the form of a new process or mode of thought – a more efficient way of doing something, an approach for streamlining business practices or a tool to achieve a goal.

“It is a bad idea for a leader to quash ideas that do not appear outstanding at first glance.” Innovation stems from the world around us. Many global citizens innovate by drawing upon their lived experiences, surroundings and networks. At its core, innovation can be broken down into five foundational elements: passion, leadership, collaboration, mobility and humility. We shall explore each element in turn to uncover its role in driving innovation and to explore its implications for business, today and in the future.

examiners were going to judge their work afterwards, but told another group that they were not. The former group was far less creative than the latter. This feels counter-intuitive but it is in fact logical at its core. Those who anticipate negative feedback – such as bad marks from an examiner – often do not explore the full depths of their creativity and do not innovate. Instead, they try to impress others and feel no passion or concern for the project in hand beyond any immediate, external reward that they might obtain. For these reasons, people who spot the white space, the problems to be fixed, the new frontiers to explore and the opportunities to be had are few and far between. This group of rare individuals is in high demand. PILLAR 2: LEADERSHIP

PILLAR 1: PASSION

Good leadership inspires and nurtures innovation, helps businesses to grow and rewards strategic and creative thinking. Good leadership not only produces a robust culture but also cultivates the leaders of tomorrow. It is imperative for a good leader to encourage his colleagues to have innovative ideas.

Throughout the centuries, the primary cause of innovation has been passion. Also referred to as ‘intrinsic motivation’, this comes into play during those rare times when people work for enjoyment’s sake.

Good ideas come from a Petri dish that contains many other ideas – some incomplete and some already realised. Incomplete ideas tend to contain grains of brilliance but little else.

Passion causes satisfaction and joy, and is responsible for those timeless works of art or engineering masterpieces.

A good leader does his best to create a culture in which everyone at his firm has a chance to innovate by dreaming up new processes or products that help the firm. It is a bad idea for the leader to quash ideas that do not appear outstanding at first glance while worrying excessively about returns on investment.

It is people who feel compelled to follow their passions and who do so persistently – rather than the most talented people – who go on to have bold, innovative thoughts. Their motivation is intrinsic; their drive comes from within. Others slack off because their motivation is extrinsic; in other words it comes from the hope of external rewards bestowed on them by others, such as money or approbation from a judging panel.

“In an innovative company, leading executives support the ideas that best answer the needs of clients.”

Psychologist Teresa Amabile discovered this when she set her students some tasks. She told one group of students that some

A good culture allows people to try out ideas and fail without fearing reprisals from their leaders. More often than not, the experience of a

The Bahamas: A Complete And Compelling Choice 2023

failure ushers in the next idea, or prompts the evolution of an existing concept, leading eventually to success. The corporate culture must allow such a process to take place. Some have hailed Amazon as a model to follow. It uses the ‘PR/FAQ’ format, by which it invites any employee to write a mock-up of a press release (PR) that it might publish in the future to describe a new product or service on its launch day. This explains the vision behind the product and the ways in which it might benefit the customer. It also invites the employee to concoct a series of questions (described as frequently asked questions or FAQs) that some imaginary prospective customers might want to ask Amazon about the offering, written as though Amazon intends to publish them at the same time as the press release. Others at Amazon then evaluate these ideas and circulate them amongst other innovators. This collective process is known as the ‘working backwards’ method because it starts by imagining the first day of a new offering and only then works out the steps that might lead up to it. It involves many people and distributes rewards and recognition to all of them, but always takes care to honour the person who first had the idea. PILLAR 3: COLLABORATION The next step in the innovation ecosystem is collaboration, the act of coming together, connecting and ideating on a joint project. In an innovative company, leading executives support the ideas that best answer the needs of clients, both now and in the future. They avoid stifling or constraining thinking because they know that their role is to create an inspirational environment that nurtures innovative thought. The United States’ Defence Advanced Research Projects Agency follows the so-called ‘Heilmeier Catechism’ by which its staff evaluate ideas that they want to propose. This is a set of questions that a team asks itself about an upcoming project. It allows it to assess risks and define its targets, its immediate and long-term needs, and the costs and overall benefits of the project.

“By focusing on clients first, firms receive ideas that create cost-effective growth.” By focusing on clients first, firms receive ideas that create cost-effective growth. WL Gore, the multibillion materials science company, asks its people explicitly about customers’ needs when proposing new products. Various stakeholders then chime in and judge the merits of the ideas. The firm has a flat, lattice-like organisational structure where there are no chains of command nor any fixed channels of communication. Helped by spontaneous discussion and collaboration, successful ventures circulate across all the company’s departments. This third step towards innovation defines the client-centric structure and, in doing so, requires discipline. Discipline fans the flame of creativity and brings diverse teams together to celebrate their collective enterprise within a culture that explicitly rewards the group while honouring the initial inventor. Effective government agencies or billion-dollar companies follow this model.

PILLAR 4: MOBILITY Companies in all industries oscillate between ideation, the refinement of ideas and the implementation of ideas. When new ideas and potential new revenue streams become essential to operations, companies are in the ideation phase. When ideas surface, whether organically or through strategic acquisitions, the companies must refine them. Finally, they must implement the ideas.

“Intrinsic motivation comes into play during those rare times when people work for enjoyment’s sake.” The overall need and life-cycle of the firm in question dictates the relative importance of each. A heavily saturated market desperately in need of new technology or innovation for further growth prompts ideation. Phones before Apple’s iPhone were an example of an existing technology in need of a refresher. ‘Refinement’ refers to the improvement of an existing idea, product, or both. Similar to the continuous improvements of Apple’s products today, it is a process that looks for areas in which to improve things to increase brand power and customer loyalty. ‘Implementation’ refers not only to the doing, but also to the timing. Effective implementation calls for militaristic thinking. The task here remains to identify the best team members to bring the idea to fruition, and then to scale. This fourth step in the process of innovation involves knowing your team and treating them as individuals with unique passions that probably extend beyond their contractual objectives. You will find that some are highly adept at generating ideas, others at viewing ideas from different angles and others at seeing them come to life. PILLAR 5: HUMILITY Corporate hierarchies often operate in a rigid, top-down fashion; innovation demands almost the complete opposite of this. Therefore, it also demands humility. Top executives at a firm should serve to create a structure and an environment that encourages their employees to generate, refine, and implement ideas. This is the other side of the coin to the generally accepted practice of promoting stock ownership amongst employees and giving them a reason to care about the firm. World-leading companies have shown us that the generation of revolutionary ideas – the ideas that make the other attempts worthwhile – requires constructive feedback from all departments. In addition, it requires a global corporate culture that positively encourages the occasional failure instead of trying to avoid it. It is the sincere trying that matters, in addition to – or perhaps much more than – the result. WL Gore and BMC Software stand out here. They encourage employees to fail, which ironically marks them out as inspiring leaders in the field of innovation. When ideas fail, it is a sign that innovation is happening and that employees do not feel afraid to submit their concepts. It is within crucibles such as these that sparks fly and great suggestions come to life.

The Bahamas: A Complete And Compelling Choice 2023

TURNING IDEAS INTO ACTION Today, innovative ideas are needed more than ever as the world faces unprecedented social and environmental challenges. However, these ideas need to be transformed into concrete action, which requires a leap of faith. The Googles, Amazons and Microsofts of this world could not exist without the commitment, faith and continued passion of their entrepreneurial leaders.

“The collective process always takes care to honour the person who first had the idea.” For more than 75 years, Deltec Bank & Trust Limited has been a champion of innovators, entrepreneurs and nomads. Our commitment

to the global innovation ecosystem is built on a belief that embracing calculated risks and investing in bold thinkers forges a better tomorrow. With tailored financial services that support highly demanding, rapidly scaling and innovative entrepreneurs through global experience and sound risk management, Deltec Bank is dedicated to accelerating the growth of innovation. * Paul Winder can be reached at info@deltecbank.com or on +1 242 302 4100

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The Bahamas: A Complete And Compelling Choice 2023

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Key Developments And Latest Trends In Banking And Finance In The Bahamas

*by Christel Sands-Feaste and Alexandra T Hall, both partners at the law firm of Higgs & Johnson, and Julia Koga da Silva who is Of Counsel at the firm.

On the rebound from the worst pandemic in a century, The Bahamas is not only prospering anew; it is also keeping one step ahead of its competitors by reframing the laws that support its most recent financial innovations. By doing so, it remains at the forefront of world developments in tax, business licensing, payments, crypto-currencies, economic substance and much else besides.

ith the worst of the COVID-19 pandemic and related restrictions firmly in the past, the Bahamian economy has continued to recover over the last 12 months. Most of this is due to the fact that tourists are flocking back to The Bahamas in large numbers, perhaps in order to fight back against their memories of lockdowns and indulge in some “revenge tourism.”

In its Monthly Economic and Financial Developments Report for July 2023, the Central Bank of The Bahamas indicated that “the growth trajectory of the domestic economy persisted, although at a moderated pace...as the recovery from the COVID-19 pandemic neared completion” and expected it to continue growing for the remainder of the year. This is good news, but the cost-of-living crisis, high inflation, record energy costs and climate change remain uppermost in the minds of Bahamian consumers, as they do in the minds of those in other countries.

“31 December 2024 remains the target date for the elimination of cheque usage.” A number of themes have continued to dominate the legal and regulatory landscape in relation to financial services in The Bahamas, including:

• the continued focus of policymakers on strengthening public finances; • the ongoing modernisation of the Bahamian payment system; and • the establishment of a new regulatory framework for digital assets. While not restricted to the financial services sector alone, another important development impacting all Bahamian entities is the recent overhaul of the economic substance legislative framework. THE DRIVE TO RAISE REVENUE In an effort to increase revenue and strengthen public finances, the Government has allocated additional human resources to the revenue-collecting sections of the Department of Inland Revenue. It has also added to the enforcement provisions in various revenue-related statutes, including the Value Added Tax Act 2014. In addition, the new Business Licence Act 2023 came into force on 1 July as a part of the annual budget exercise. The new BLA, among other things, repealed the prior Business Licence Act 2010 and expanded the categories of businesses that have to pay business licence tax. The requirement for financial institutions to pay an annual tax based on turnover remains. TOWARDS A MORE MODERN PAYMENT SYSTEM The Central Bank of The Bahamas’ Payment Systems Modernization Initiative is ongoing. 31 December 2024 remains the target date for

The Bahamas: A Complete And Compelling Choice 2023

the elimination of cheque usage. Local financial institutions continue to encourage customers to use virtual platforms for the delivery of their services. Regarding the “Sand Dollar,” a digital currency denominated in Bahamian dollars, the authorities have redoubled their efforts to raise public awareness of it and promote its use in place of cash. MODERNISATION OF THE DIGITAL ASSETS REGIME The legislation regulating the digital assets space (the DARE Act) was initially implemented in 2020. In 2022, the Government of The Bahamas published its Policy White Paper on The Future of Digital Assets in The Bahamas, outlining its vision and for the next five years. It wanted to encourage the sector to grow, to make The Bahamas more attractive to digital-asset businesses, to establish The Bahamas as a leading digital-assets hub and to encourage innovation in fintech. In order to address the rapid evolution of the sector and to strengthen the robustness of the regime, the Securities Commission of The Bahamas confirmed its intention to review and amend the DARE Act during the first half of 2022. It then circulated a draft of the Digital Assets and Registered Exchanges Bill for industry consultation in April 2023. The new Bill seeks to offer investors better protection while maintaining sufficient flexibility to facilitate innovation. The SCB’s suggestions include: • the subjection of more digital-asset activities to regulation; • the introduction of capital requirements as prescribed by the Commission; • mandatory ongoing financial reporting (including audited financial statements); • the mandatory segregation of client assets; and • more investigation and enforcement powers for the Commission. It is anticipated that the new Bill will be brought into force very soon. OVERHAUL OF THE ECONOMIC SUBSTANCE FRAMEWORK The recent overhaul of the regulatory framework relating to economic substance has impacted all Bahamian entities, not just those in the financial services sector. In 2018, in accordance with international best practices, The Bahamas implemented legislation that required Bahamian entities engaged in certain activities to establish a substantial economic presence in The Bahamas and also required all

Bahamian entities to comply with substance reporting requirements. On 1 September 2023, the 2018 legislation was repealed and the Commercial Entities (Substance Requirements) Act 2023 (the new CESRA) was brought into force.

“CESRA has shifted the reporting obligation from the entity itself to its registered agent.” The new CESRA, among other things, has: • shifted the reporting obligation from the entity itself to its registered agent or, if the entity does not have a registered agent, to the Compliance Commission, i.e. the regulatory body; • expanded the list of facts which entities must report to the competent authority; • mandated that either registered agents or the Compliance Commission should obtain this information from each Bahamian entity; and • made some modifications to the classifications for reporting purposes. The accompanying guidelines for the new CESRA were circulated on 8 September 2023. REGULATION FOR A GROWING ECONOMY The recent legislative changes reflect The Bahamas’ commitment to complying with international best practices and maintaining a sound regulatory framework while still encouraging innovation. With the help of such careful governance, the economy of The Bahamas continues to prosper. * Christel Sands-Feaste can be reached at csands-feaste@higgsjohnson.com; Alexandra T Hall can be reached at ahall@higgsjohnson.com; Julia Koga da Silva can be reached at jkoga@higgsjohnson.com

The Bahamas: A Complete And Compelling Choice 2023

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Beyond Natural Beauty: The Carbon Credits Market And The Bahamas * Antoine Bastian, CEO of Genesis Fund Services Limited

The Bahamas, whose surrounding waters are a natural carbon sink, intends to be the first country in the world to trade blue-carbon credits.

t has been a privilege for me to grow up in The Bahamas and enjoy the crystal-clear, aquamarine waters as a child and now I continue to marvel at its beauty on my daily drive to work. The idyllic, pristine, white, sandy beaches at Cape Santa Maria in Long Island and the Tropic of Cancer Beach in Exuma have often filled me with wonder at The Bahamas’ natural assets and resources. The value proposition of The Bahamas has never truly envisaged the oceans, seas, mangroves and marsh lands contributing directly to the nation’s GDP by themselves and creating a blue economy. Rather, the perspective has always been that the true value of The Bahamas’ natural beauty, embodied in its white sandy beaches and its balmy breezes, is hitched inextricably to the tourism sector. Today, however, with the climate crisis top of mind, the seagrass meadows, mangroves and salt marshes of The Bahamas may well be the cause of a considerable uptick in the Bahamian economy, with global implications for challenges posed by carbon emissions.

conferences of parties on the subject of climate change, forms the foundation of the Paris Agreement, which attendees at COP 21 struck in 2015. Nearly 200 countries have now signed it. Article 6.4 of the agreement provides for a global platform for the trading of emission reductions by all states and the United Nations’ Carbon Offset Platform is in line with it. Its aim is the avoidance and removal of greenhouse emissions from the atmosphere through projects in the developing world. With this in mind, The Bahamas’ Climate Change and Carbon Initiatives Act, 2022 now provides a regulatory framework for the accreditation of – and transactions in – blue-carbon credits. The Bahamas has also enacted the Carbon Credit Trading Act, 2022; this legislation now enables the Securities Commission of The Bahamas to regulate the trading of the carbon credits, carbon securities and carbon-linked digital assets that make up this new asset class. While the current legislation allows entities or individuals to manage the monetization of blue-carbon sales or trading, the seagrasses, saltmarshes and mangroves remain the property of the Government. In its current arrangement, 92.5% of all proceeds after operational costs will go to the Government of the Bahamas. OPPORTUNITY KNOCKS!

SUN, SAND, SEA AND SCIENCE Recent scientific research suggests that there are up to 92,000 square kilometres of seagrass meadows in Bahamian waters, storing billions of tons of greenhouse gases (CO2e). In fact, by some estimates, The Bahamas is believed to have at least 30% of the world’s seagrass-meadow habitat. Although it is not a helpful thought for sea bathers and sea waders, much of this came to light through surveys that used cameras on the backs of tiger sharks. As a result, some further ground truthing has convinced the Government of the Bahamas that a new, revolutionary, economic, social and environmental model can be brought to fruition through the monetization of its blue natural assets and the development of a blue-carbon-credit regime.

“The Bahamas is believed to have at least 30% of the world’s seagrass-meadow habitat” The UN Framework Convention on Climate Change (UNFCCC) of 1992, which obliges signatory countries to attend regular COPs or

The economic opportunity for The Bahamas with regards to the carbon credit market is not only promising; the sale of blue-carbon credits could have a revolutionary impact. As the world heads towards a carbon-dioxide reduction of 1.5 degrees, The Bahamas’ nature-based global, institutional offering of blue-carbon credits can potentially mean a “carbon wealth”, all owned by the Sovereign, with a value in excess of $50 billion, and generating revenues in the hundreds of millions per annum.

“The sale of blue-carbon credits could have a revolutionary impact” According to the preliminary maps and core samples already produced by Beneath the Wave (the group of marine scientist overseeing the project), the current seagrass meadows of The Bahamas, having regard to the trajectory of their decline (i.e. net of degradation) and additionality (i.e. possibility of expansion) could, at the outset, make at least 2.5 million carbon credits available in The Bahamas for the market as early as 2024 and up to 10 million carbon credits may be available on the voluntary market by 2030. Most analysts think

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The Bahamas: A Complete And Compelling Choice 2023

that the estimated price for carbon credits will be around US$90, or greater, per credit by 2030. Admittedly, the prices of carbon credits in the voluntary market, which have varied from a few dollars to over US$100 per ton, have also been volatile and they are predicated on many other difficult factors, including the nature of the project, the verification factors of additionality, the transparency of the project and, more importantly, the actual impact in the communities of the project. AN ENVIRONMENTALLY-CENTRED AND INTERNATIONALLY-FOCUSED JURISDICTION Although it has an economic upside of enormous potential, the Paris Agreement is keenly focused on the impact on society (including the ways in which countries adapt to and mitigate climate change) of the overall reduction of greenhouse gases and the sale of any carbon credit in the voluntary market. The process is wrapped around each country’s National Determined Contribution. NDCs are at the heart of the Paris Agreement and are vital to the achievement of its long-term goals. An NDC represents policy and/or legislation submitted to the United Nations by each country to reduce national emissions and adjust to the impacts of climate change. In this regard, The Bahamas has taken steps to meet these objectives by submitting to the UN its Updated Intended Nationally Determined Contribution (NDC) and The Bahamas’ First Biennial Update Report to the United Nations Framework Convention on Climate Change (BUR). Together, they form the basis for The Bahamas beginning to install two railway tracks – a rail for economic success but also a rail to impact the environment. The Paris Agreement stipulates that each party must prepare, communicate and maintain the NDCs that it intends to achieve. The Bahamas NDC provides a fundamental framework that will evolve and develop. It clearly articulates the commitment of The Bahamas to achieving the UN’s published sustainable development goals. Carbon credits in the voluntary markets will not be successful if some of these goals are not included in the overall monetization plan; work has begun in The Bahamas to realise this objective. GOALS FOR THE FUTURE In 2015 the UN also published 17 sustainable development goals (SDGs) to transform our world, which are as follows. GOAL 1: No Poverty. GOAL 2: Zero Hunger. GOAL 3: Good Health and Well-being. GOAL 4: Quality Education. GOAL 5: Gender Equality. GOAL 6: Clean Water and Sanitation. GOAL 7: Affordable and Clean Energy. GOAL 8: Decent Work and Economic Growth. GOAL 9: Industry, Innovation and Infrastructure. GOAL 10: Reduced Inequality. GOAL 11: Sustainable Cities and Communities. GOAL 12: Responsible Consumption and Production. GOAL 13: Climate Action. GOAL 14: Life Below Water.

GOAL 15: Life on Land. GOAL 16: Peace and Justice Strong Institutions. GOAL 17: Partnerships to achieve the Goal. POTENTIAL IMPACT ON THE BAHAMAS Although this article cannot predict with any certainty how proceeds from the sale of carbon credits, if sold, will be spent, Goal 2 – which addresses the need for food security and the improvement of nutrition and sustainable agriculture – should be a priority. The Bahamas National Pathway for Food Systems Transformations, prepared by the Ministry of Agriculture and Marine Resources, sets out some bleak and worrisome facts about the nature of the Bahamas’ food imports. The islands import 90% of all food items. Capital injections for the development of efficient farms or for the purchase of very costly farm machinery and highly-efficient farm solutions are a priority for The Bahamas. The successful sale of blue-carbon credits in the global market can transform the very nature of agriculture and aquaculture by adding capital inflows generated by the sales. This might automatically reduce the islands’ need to import food and to use foreign currency to do so. Innovations, cleaner methods and greater efficiency on farms can eliminate the old methods of slash and burn, thus reducing emissions of greenhouse gases. The development of modern agricultural practices is paramount for the building of a sustainable and self-sufficient country, but this requires large capital funding.

“Innovations, cleaner methods and greater efficiency on farms can eliminate the old methods” Goals 14 and 15 are also important. They are a critical way of ensuring that the prices in the voluntary carbon market of The Bahamas’ carbon credits are hitched to substantive adaptation and mitigation programmes. The BUR and the NDC reports suggest that there is a lack of financial and technical support for the continuation of ongoing mitigation and adaption policies; these are essential for the Bahamas’ efforts to help improve the global climate. While legislation exists to improve the natural assets of the Bahamas, like the law that bans commercial shark fishing and the selling and trading of shark, or the law that bans long-line fishing and fishing for turtles or stingrays, it is difficult to fulfil the aims of the NDC without major funding. Furthermore, the commitment to monitor, enhance and add more nationally-protected areas like The Exuma Cays Land and Sea Park (established in 1958) requires large funding. The ideology of conservation is a critical and a meaningful precondition for the monetization of carbon credits in The Bahamas. Again, some ongoing funding for a generational endeavour in this area may be made possible through the proceeds and the sale of the Bahamas’ blue-carbon credits. The Bahamas’ plan to help the world to mitigate climate change and reduce greenhouse gases is an expensive venture for a nation of approximately 400,000 people. The World Bank’s designation of The Bahamas as a “high-income, developed country” eliminates the country from certain environmental funding for climate adaption and mitigation. During the period between 2010 and 2020, The Government of the Bahamas had financial inflows to use towards the adaption and mitigation of climate change of approximately $154 million. Of this, approximately $50 million was earmarked from

The Bahamas: A Complete And Compelling Choice 2023

domestic taxes and other government sources of funding. This statistic is sobering and shockingly small. A TRANSFORMATION IN THE MAKING The Bahamas is keen to persuade many of its citizens to leave their jobs in tourism, which accounts for more than 50% of GDP, for careers as stewards of the seagrass meadows, mangroves and pine forests (which are regenerating gradually), or simply as custodians of the country’s plethora of natural assets and its environmental biodiversity. The destiny of The Bahamas is bound to change if the programme to monetize blue-carbon credits is successful. The image of pleasure boats or majestic cruise ships laden with excited tourists sailing through Bahamian waters is likely to be joined by another image – one of ships full of environmentalists taking part in the global endeavour to lower greenhouse gas emissions, slow down the process of global warming and save the planet from a climate catastrophe.

The success of the blue-carbon project in The Bahamas could be part of a global success story. We must wait and see whether The Bahamas transcends its natural beauty to become a forerunner in the blue-carbon market and a leader in the global crusade to reduce greenhouse gases. * Antoine Bastian can be reached on +(242) 502 7020 or at info@genesisfundservices.com

The Bahamas: A Complete And Compelling Choice 2023

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How Systematic Trading And Investing Overrides Bad, Emotional Decision-Making * By Dr Iyandra Smith Bryan, the Chief Operating Officer at Quantfury Trading Limited

In this article we see how sophisticated trading software is saving traders in The Bahamas and elsewhere from falling victim to their own dark urges and human frailties. The results are often spectacular.

o many of us often find it difficult to manage our investments without emotions of panic or anxiety leading us to make unsound financial decisions. This even applies to those of us who consider ourselves knowledgeable about the markets. Think about the time when you had to decide whether to buy or sell a position, when sentiments of fear or notions of greed began to obscure your ability to make a decision in a rational and logical manner. We are all driven by irrational factors; “being human” can, unsurprisingly yet regrettably, get in the way of us making the best financial decisions for ourselves and for our lives. THE PROBLEM: HOW CAN WE PROTECT OURSELVES FROM OUR OWN FRAILTIES? Writing in 1923 about the famous discretionary speculator Jesse Livermore, the American author Edwin Lefèvre described the fallibility of human psychology when it comes to trading or investing in financial markets. “It is inseparable from human nature to hope and to fear. In speculation, when the market goes against you – you hope that every day will be the last day – and you lose more than you should have had you not listened to hope...And when the market goes your way you become fearful that the next day will take away your profit, and you get out – too soon. Fear keeps you from making as much money as you ought to.”

“Fear keeps you from making as much money as you ought to” Edwin so eloquently captures one of the weaknesses associated with being human: our inability to remain calm in the midst of panic. What do so many of us do when the market is collapsing? We panic, we run, we exit. Robert Carver, a portfolio manager at one of the world’s largest hedge funds, wrote that his team was terrified during the financial crisis of 2008 and thought of liquidating all its positions in financial institutions all over the world.

He wrote in his book Systematic Trading: “After yet another crisis meeting, where we decided to take no action for now, I left the meeting room and returned to my desk. As I sat down, a colleague came over and started typing on my keyboard...He pressed return and a live estimate of today’s profitability appeared on my screen. For the first time in our firm’s history it showed a ten-digit number. We had made over a billion dollars in a single day. Our computer system had stuck to its pre-programmed set of trading rules and mechanically exploited the market moves almost to perfection, whilst terrified humans had discussed closing it down.” Another human frailty is overconfidence. We often believe that we are smarter than we are and that we know more about the trading system than we do. Very often, however, this could not be further from the truth. Significant personal ‘life events’ such as divorce and separation have also been shown to affect a trader’s performance. In an article entitled Limited attention, marital events and hedge funds in the Journal of Financial Economics, the authors’ research concluded that fund managers generated lower realised returns in the years before and after their divorces. Their stock-selection skills were poorer and their risk-adjusted returns deteriorated and were weaker than those of control samples. This is evidence that human frailties make discretionary trading and investing so much more arduous over an extended period of time. THE SOLUTION: SYSTEMATIC TRADING AND INVESTING We humans are vastly superior to IT systems when we perform tasks that require fundamental analysis and critical thinking, but our emotions often hinder us from using the intelligence that we need to make sound trading decisions. The solution to this problem lies in systematic trading and investing. When we put a trading system in place, it eliminates impulsive reactions and cuts out the human behavioural biases to which so many of us are prone. It also makes it easier for us to pursue a steady and logical trading strategy. System trading and investing also institutes an omnipotent ‘commitment mechanism,’ backed by objective data, that prohibits the interference that may result from the cognitive biases that we humans have. It draws a line in the sand, delineates the rules, causes just enough friction to disincentivise meddling, and produces sounder results.

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The Bahamas: A Complete And Compelling Choice 2023

A modern example of a commitment mechanism is to be found in Victor Niederhoffer’s book, Education of a Speculator, where Victor, a hedge fund manager, has a large long position in silver futures. In the book, the Hunt brothers, who have been manipulating the market upwards, are about to succumb to market events that will cause the price to drop. “I decided to set my loss limit at 50% of my winnings...The model story on this point is Odysseus...I locked myself inside a racquetball court instead of tying myself to a ship’s mast. I issued instructions to my assistant and future wife, Susan. ‘Do not listen to my entreaties if I wish to double further. If the losses reach 50% of the winnings, reduce my positions by one-half. If I beg to be released, sell everything out’...Some rumours about liquidation by the Hunts had hit the fan...I immediately placed a call to Susan: ‘Untie me, disregard everything I said before’... My faithful companion followed my original directions.” Susan, Victor’s partner, was the commitment mechanism. She closed the entire position and Victor went on to continue his journey. Not all of us have a Susan, so a we need a trading system to help us remain committed to the goal at hand. Systematic trading, in other words, provides traders with a transposable groundwork for trading that can help them manage risks far better. A systematic trading approach permits a trader to be more disciplined in managing risks because he can construct an appropriate risk-management regime inside the trading strategy itself, rather than treating it as a side-note. The trader can apply or operate within a stated level of risk or permit a variation of risk within a specified range.

“Divorce and separation have been shown to affect a trader’s performance” The price of almost every derivative security is affected by swings in volatility. Statistical techniques permit traders to forecast volatility with a reasonable measure of accuracy, both in the short and medium term. This helps them to keep risks within limits. The trader, in other words, can use conscientious statistical methods to set up a sound risk-management regime. Systematic trading also allows the trader to set and observe limits in order to control risks and exposures. When the system reaches these limits, it can cap or minimize position sizes automatically.

SYSTEMATIC INVESTING HAS PRODUCED BETTER PERFORMANCE Countless research papers have been written about the performance of systematic investing as opposed to discretionary investing; they prove that systematic investing often leads to far higher performance and is more consistent than discretionary investment. In the Journal of Alternative Investments, researchers concluded that systematic trend-following fund managers performed better and achieved higher returns than those in other categories. Similarly, researchers from the Man Group analysed the performance of systematic and discretionary managers and concluded that systematic macro-funds outperformed discretionary macro-funds.

“Systematic investing often generates far higher performance than discretionary investment” SYSTEMATIC TRADING AND INVESTING IS ACCESSIBLE For those beginning their journeys into the capital markets, it is easier than ever to trade or invest in a systematic way. A host of global retail brokerages, such as Quantfury, make it easy for users to submit orders automatically through mobile applications and make fully-automated trading a possibility. Moreover, users can download data such as historical prices, company research and news reports from various websites easily and at no cost. Systematic trading and investing allows them to make decisions about investment and trading in a methodical way and with a high degree of ease. * Dr. Iyandra Smith Bryan, SVP, Chief Operating Officer Quantfury Trading Ltd., Bahamas. Linkedin: https://www.linkedin.com/in/dr-iyandra-s-6396a3136/

The Bahamas: A Complete And Compelling Choice 2023

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The Bahamas Gets Real About Climate Finance * By Aliya Allen, a Partner at the law firm of Graham Thompson

The Bahamas is a low-lying archipelagic nation situated in Hurricane Alley, the area of warm water in the Atlantic Ocean that stretches from the west coast of north Africa to the Caribbean and the eastern seaboard of the United States.

urricanes in this zone are increasing in force as the years pass and Bahamians of all ages are becoming climate refugees and leaving the country. Last November, the Bahamian Prime Minister spoke at the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) and made a simple request of world leaders: “Let’s Get Real”. In this article, we explore how the Bahamas is promoting a green agenda through green initiatives, blue-carbon initiatives and carbon trading. CLIMATE FINANCE The term ‘climate finance’ refers to the financing needed to tackle climate change and to support a country’s transition to a low-carbon and climate-resilient economy. Climate change is now a pressing problem that affects economies, societies and ecosystems worldwide. Banks, capital markets, fintech firms, insurance carriers and investment firms will have to provide green and sustainable financial services on a greater scale in future.

The National Investment Funds Act 2023, which provides the legal architecture for the creation of one or more National Investment Funds (NIFs) owned by the Government of The Bahamas, provides that a NIF may be established for a project related to the blue, green or orange economy. The Bahamas has also been participating in blue-carbon initiatives. The term ‘blue carbon’ refers to the carbon stored in coastal and marine ecosystems such as mangroves, seagrasses and salt marshes. These ecosystems sequester carbon dioxide from the atmosphere and store it in their biomass and sediments. The protection and restoration of these ecosystems can therefore help to mitigate climate change. An article published in the National Geographic notes that The Bahamas is home to 25,000 square miles of lush seagrass meadows that lie on the floor of the ocean and host an abundance of sea life. According to the World Wildlife Federation, seagrass captures carbon up to 35 times faster than tropical rainforests and absorbs 10% of the ocean’s carbon annually. The United Nations has recognized the importance of blue carbon as a way of addressing climate change, stating that “Protecting and restoring coastal and marine ecosystems can provide significant climate benefits, including through the sequestration and storage of carbon.”

Financial centres, where the demand for and supply of finance come together, must play an active role in green and sustainable finance. The Bahamas, with its strong financial centre, has recognized the importance of green and sustainable finance and has been participating actively in climate-finance initiatives.

The Bahamas is also participating in climate finance by developing a framework for both sovereign carbon credits and the registration of carbon exchanges and other carbon businesses. The term ‘carbon trading’ refers to the buying and selling of carbon credits, which represent reductions in greenhouse-gas emissions. Carbon trading can provide a financial incentive for countries and companies to reduce their greenhouse-gas emissions and to invest in low-carbon technologies. The United Nations has recognized the importance of carbon trading in the fight against climate change, stating that “Carbon-pricing mechanisms, such as carbon taxes and emissions-trading schemes, can provide a powerful incentive for emissions reductions and can help to mobilize climate finance.”

GREEN AND BLUE ECONOMIES

LAWS TO HELP CLIMATE FINANCE

Green initiatives are activities that reduce greenhouse gas emissions and pave the way for a low-carbon economy. The Bahamas has been working to promote these initiatives in various sectors such as renewable energy, energy efficiency and sustainable transportation.

The Climate Change and Carbon Market Initiatives Act 2022 (CMIA) facilitates the Bahamas’ national carbon-credit programme. The Bahamas’ unique topography consists of thousands of miles of mangroves which are more efficient at capturing carbon than just

“The Bahamas is promoting green initiatives, blue carbon initiatives and carbon trading”

The Bahamas: A Complete And Compelling Choice 2023

about any other environment. The Prime Minister believes that The Bahamas possesses carbon credits that are worth roughly $300 million which the Government can sell on carbon markets in aid of global sovereign and commercial carbon-offsetting initiatives. The CMIA facilitates the mapping, verification and eventual sale of such carbon credits, noting that they are sovereign assets which accrue to the Government of The Bahamas.

growing body of research suggests that companies with strong ESG practices can outperform their peers in the long run.

“The Bahamas is home to 25,000 square miles of lush seagrass meadows”

Although ESG investing has many benefits, there are also challenges associated with it. One is the lack of standardization in ESG reporting. There are no universally-accepted standards for ESG reporting, which can make it difficult for investors to compare companies’ ESG performance. Another challenge is the potential for “greenwashing,” which happens when companies make misleading claims about their ESG practices to attract investors.

The Carbon Credit Trading Act 2022 (CCTA) provides for the registration of carbon-trading businesses in The Bahamas. These include carbon-trading exchanges, carbon registries and “carbon-credit verification bodies.” Such exchanges may facilitate the trading of “carbon-trading products” – a term which, in the words of the Act, covers (a) tradeable carbon credits, (b) carbon-linked digital assets, (c) carbon securities and (d) carbon derivatives. Any entity that wants to be registered as a carbon-trading registry must verify such products in accordance with the carbon-trading principles set forth in the CMIA, which references the Paris Agreement, the international climate-change treaty. Verification must also be done in line with the standards of the International Accreditation Forum, or other accredited bodies of which the Securities Commission of The Bahamas approves. The CCTA does not address other environmental assets such as water rights and rights to emit pollutants other than carbon dioxide.

As ESG investing becomes more mainstream, investors are demanding more information about companies’ ESG practices. Companies that can provide them with transparent and accurate data on their ESG performance are more attractive to them.

“Companies with strong ESG practices can outperform their peers in the long run” ESG investing is likely to continue to grow in importance in the coming years as investors become more aware of the importance of non-financial factors in their decision-making. It does, however, pose some problems and it will be important for the industry to continue to develop standards and best practices to ensure that investors are able to make informed decisions.

ESG TRENDS IN THE BAHAMAS

THE NEXT STEP?

The investment industry is paying more and more attention to Environmental, Social, and Governance-related (ESG) matters. The idea of ‘ESG’ is to incorporate non-financial factors such as climate change, labour practices, human rights and corporate governance into decisions about investments.

Although many regulators all over the world have indicated that they intend to make ESG reporting a top priority, The Bahamas still needs to take this step. In the interim, its regulators will probably want to ensure that investment funds that follow ESG strategies and guidelines make material disclosures to investors about those strategies, along with their allocations and ESG-evaluation methods.

According to the Global Sustainable Investment Alliance, sustainable investments accounted for $35.3 trillion of assets under management in 2020 – an increase of 15% on 2018’s figure. This growth reflects an increase in demand for ESG investing, with more investors looking to allocate their capital to companies that are making positive social and environmental impacts.

Because The Bahamas is a financial centre in possession of thousands of miles of carbon sinks, it is well-placed to facilitate environmental impact investing in a sound and compliant regulatory environment. Its commitment to resolving the earth’s climate crisis is real – let us hope that other nations heed its clarion call.

The growth of ESG investing can be attributed to a few key factors. Firstly, more and more people are aware of the negative impacts of climate change and environmental degradation on both society and the economy. Investors think it important to consider these issues when making decisions. Secondly, there is a growing demand for corporate accountability, particularly on issues such as executive compensation, diversity, inclusion and human rights. Lastly, a

* Aliya Allen can be reached on +1 242 322 4130 or at aga@gtclaw.com

The Bahamas: A Complete And Compelling Choice 2023

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Why Family Offices Are Better In The Bahamas * By Alexander MB Christie, a partner at the international law firm of McKinney, Bancroft & Hughes, and Erin M Hill, TEP, a senior associate at the firm.

In this article we find out why more and more high-net-worth individuals and families are establishing family offices to help them manage their affairs, having chosen The Bahamas as their domicile of choice.

If a HNWI has specific goals in mind for his family and/or business, a family office can make itself invaluable by reviewing his operations and spotting new opportunities for him.

WHAT IS A FAMILY OFFICE AND WHY SHOULD A HNWI ESTABLISH ONE?

A HNWI often deals with many different professionals (such as his lawyer, his accountant and his investment manager) and keeps track of various deliverables. If he were to employ a family office, however, it could supervise the various moving parts, manage his budgeting for these professionals, oversee all service providers and centralise all information. It could provide him with information and updates and might be able to perform in-house wealth and investment services for him, as many family offices do.

amily offices provide HNWIs and their families with sophisticated, organized vehicles through which they can manage their affairs. The Bahamas is the ideal venue for a family office for many reasons – its location and climate, its financial infrastructure, its helpful legislation and regulation and its political and economic stability. As the famous slogan says, it really is Better in The Bahamas.

A family office is most commonly described as a vehicle that performs an array of functions and services for the family that it represents. It can provide HNWs with staff and travel-management services, or it can supervise trusts and personal investments that fall outside the core operating business interests of the family in question.

“If a HNWI’s family and businesses are growing, his needs are bound to become ever-more complex.” If a HNWI’s family and businesses are growing, his needs are bound to become ever-more complex. A family office can provide him with a single trustworthy structure that handles the details of his personal and professional lives. A modern family office operates like a sophisticated business with clearly-defined roles and responsibilities, leadership and oversight, and proper accounts and audits. Dedicated professionals manage the minutiae associated with running a home and managing personal staff while also being capable of handling – and being qualified to handle – more complex matters such as business, tax, trusts and estate planning. In fact, the supervision of trusts and the management of personal and business investments are some of the main functions of a family office.

Family offices are known for their focus on ‘white-glove service,’ i.e. specialized expertise that helps them to service their clients’ – or their businesses’ – needs. They are also known for being very discreet, thereby keeping their HNWIs’ personal and business affairs private. SUCCESSION PLANNING Family offices are also beneficial in succession planning. When a patriarch or matriarch has established a successful business, a family office can keep it functioning in the manner that he or she has envisioned after his or her retirement. It can: (i) make the business conform to the family’s overarching goals and values; (ii) manage its executives, assessing and evaluating them regularly to ensure that they are working in line with the family’s vision; (iii) set up policies, procedures and processes for the conduct of the business – especially for the resolution of any disputes which might arise; (iv) develop formal succession plans and training platforms to ensure continuity between positions; and (v) implement charitable initiatives which are in line with the family’s core values. A family office can also help to ensure that a family business has good corporate governance by mandating that the individuals in various

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The Bahamas: A Complete And Compelling Choice 2023

positions have the right skills and expertise to do their jobs – and do them properly.

“Family offices are known for their focus on ‘white-glove service’.” A HNWI’s business and personal reputation are often intertwined. When this is the case, a family office can scour the media to spot anything negative and help to preserve his family’s reputation for the future. FAMILY OFFICES IN THE BAHAMAS The Bahamas is the best domicile for a family office for many reasons. Firstly, it is approximately 100 miles from Florida, which is located in the Eastern Standard Time Zone of the USA, and has 20 international airports that welcome direct flights from major cities such as New York, Miami, Atlanta, Toronto and London. In fact, direct flights between Los Angeles in California and Nassau in The Bahamas are about to begin. This makes The Bahamas easily accessible for American HNWIs and their families. Additionally, The Bahamas’ legislative and regulatory regimes allow family offices to create unique and efficient structures for HNWIs’ legal arrangements. For example, the Trustee Act is often regarded as one of the leading pieces of legislation in the region as it provides for reserved powers for settlors (these are prohibited in many jurisdictions) and allows for a variety of trusts that can fulfil different objectives. Bahamian law also provides for the establishment and good governance of Private Trust Companies or PTCs, i.e. companies formed for the express purpose of acting as trustees of specific trusts or groups of trusts. Innovative legislation in the shape of the Executive Entities Act has also created the Bahamas Executive Entity or BEE. This legal entity is designed to facilitate wealth management. A BEE is empowered to perform executive and administrative functions, perhaps acting as a protector, settlor or trustee of a trust, or as a shareholder or owner of a PTC, or as a director of – or investment advisor to – a PTC. Bahamian legislation is constantly evolving with the aim of making the financial dealings of HNWIs easier. Parliament enacted a suite of

new financial laws in 2020 which included the Banks and Trust Companies Regulation Act, the Central Bank Act and the Protection of Depositors (Amendment) Act. These statutes modernized the law that regulated banks and trust companies and overhauled the crisis-management rules that applied to troubled banks, thereby increasing confidence in the financial services industry. With the Securities Commission of The Bahamas in place, HNWIs can rest assured that their family offices are being supervised properly. The regulator requires a typical practitioner (depending on his function) to seek and hold a Financial and Corporate Service Provider’s Licence, or perhaps a Securities Advisor and Management Licence, or perhaps a Bank and/or Trust Company Licence, or perhaps a combination. Adherence to internationally-accepted regulatory principles and the Rule of Law is a paramount consideration at all times.

“The Trustee Act is one of the leading pieces of legislation in the region.” Other attractions make The Bahamas a superb venue for family offices. The jurisdiction has been an independent nation for 50 years and has enjoyed decades of political and economic stability, with more to come. Some believe that its islands are the most beautiful in the world. Its climate and lifestyle lure many HNWIs to relocate to it permanently, taking their family offices with them. Others have set up second homes, attracted by its white and pink sandy beaches, international schools, world-class hotels and restaurants and burgeoning nightlife. Family office activity will continue to grow in The Bahamas for many years to come. * Alexander Christie can be reached on 1-242-502-9750 or at ambchristie@mbhbahamas.com; Erin Hill can be reached on 1-242-502-9750 or at emhill@mbhbahamas.com

The Bahamas: A Complete And Compelling Choice 2023

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Investment Strategies That Use Systemic Research - An Example Of Technology Affecting Business *By Chris Illing - Honorary Consul of the Federal Republic of Germany in The Bahamas at ActivTrades, Promoters of Market Democracy

To take advantage of today’s volatile markets, HNWs can rely on state-of-the-art trading platforms. In these, The Bahamas excels.

ho would h a v e thought that when the Corona pandemic subsided, we would fall into the next crisis mode? The Ukraine conflict has shaken the global community to its core and has brought the most violent atrocities of war back onto the map of Europe. The associated increase in energy prices is partly responsible for the return of inflation, which we thought was dead, and which is still on our minds to this day. Systemic research is one answer to the problem. It involves an analysis of the interconnected relationships between different factors such as economic trends, industry performance, market conditions and government policies. By looking at the larger picture, the educated investor can gain a deeper understanding of the risks and opportunities that the different markets and industries face and develop his or her investment strategy. Investment strategies that are formed through systemic research can help the HNW retail investor make better-informed decisions by considering the broader economic and social context in which companies operate.

“Systemic research can help the HNW investor make better-informed decisions” Technology is one major factor that affects businesses. The ways in which companies communicate, operate and compete in the different markets is changing. One example of this is the rise of digital payment systems and E-commerce platforms. With their introduction, companies can now reach new clients and new areas worldwide. At the same time, advances in Artificial Intelligence (AI) and machine learning are allowing companies to gain new insights into customers’ preferences and behaviours. This leads to targeted and more personalized marketing strategies.

Every investor in the financial markets – whether private or institutional – is confronted with an unmanageable amount of information. With a realistic self-assessment, he quickly realizes that he cannot process and condense this wealth of information to make successful investments on his own. If he wishes to understand what is driving the performance of a portfolio, it makes sense to look at the factors and their application. IF THE INVESTOR ASSESSES HIMSELF The investor can use a wide variety of factors as filters to screen available company and price data to look for markets in which to invest. Systematic investing is an approach that emphasizes data-driven insights, scientific testing and disciplined portfolio construction techniques on the hunt for varied portfolio outcomes. The mid-cycle environment in which we find ourselves still offers a positive environment for riskier investments and HNWIs with moderate risk appetites remain invested. The exact rate of inflation and growth is unknown and probably will remain a controversial topic in the coming months; volatility can be expected to persist. Diversification remains the key to the construction of more robust portfolios. For this purpose, investors might also consider the partial allocation of their investment portfolios into hedge funds. WHAT DOES THE IMMEDIATE FUTURE HOLD? Aside from macroeconomic trends, a variety of factors is driving general asset allocation. The fiscal priorities of individual states are likely to centre around investments in infrastructure. Investors should keep the fields of biotechnology, artificial intelligence and equipment under careful observation.

“Diversification remains the key to the construction of more robust portfolios” However, in 2023 and beyond, the topic of environmental sustainability will probably dominate some investment strategies. The earth

The Bahamas: A Complete And Compelling Choice 2023

needs help. The most recent natural disasters around the world show that climate change is top of mind and the urgency of addressing it, on a scale of 1 to 10, sits at 9.9. It is a real problem and everyone must do their part to avert what scientists have dubbed “the sixth mass-extinction event.”

Convergence Divergence) and the Stochastic Oscillator. Traders often use a combination of technical indicators in their analyses.

Investment ideas that could drive today’s markets include the comeback of mega-cap stocks, breakthroughs in carbon-capture technology and the upswing in the commodities super-cycle. The savvy investor should diversify his portfolio by investing in a range of companies in different industries. This will reduce his exposure to the risks associated with a disruption in any one sector. He should also keep a close eye on regulatory developments. By staying informed about regulatory changes, he can spot risks and adjust his investment strategies accordingly.

“The savvy investor should diversify”

IT TO THE RESCUE To take advantage of the volatile markets, traders can rely on state-ofthe-art trading platforms. There are many of these on the Internet on which speculative investors can trade in various financial products. These include stocks, bonds, ETFs, currencies, cryptos and derivatives. Unfortunately, not all operators of such trading platforms are reputable across the board. Traders need to be diligent when making their selections.

“The country in which the broker is regulated should be of the utmost importance to every trader” The best trading platforms should give the investor a wide selection of indicators and trading tools to help him analyze a specific instrument. For example, technical chart indicators can help him to assess the market and provide him with an overview of price developments in graphical form over time. They identify trends, support and resistance levels, thereby enabling investors to find the right times at which to make buying and selling decisions. Indicators that show trends are called trend indicators or trend followers. However, some of the most-used technical indicators are: Moving Averages, Bollinger Bands, the Relative Strength Index (RSI), MACD (Moving Average

Even more important than the user-friendliness of the platform is the seriousness of a trading platform or the corresponding broker.

A trader can recognize a legitimate broker if the company is licensed and regulated by a reputable financial authority (such as the Securities Commission of the Bahamas) or if it offers client fund protection, knowledgeable and reachable customer service and segregated client accounts. The country in which the broker is regulated should be of the utmost importance to every trader. As seen during the fall of a well-known crypto-exchange in late 2022, multiple international liquidators must sort through the chaotic aftermath of such a collapse and work handin-hand with each other. In the case of FTX, the main US liquidator praised the Bahamian Securities Commission for taking swift action to protect the digital assets that the crypto-giant held from being hacked and stolen. If you focus on the points we have mentioned, you will reduce your risk of ending up with a dubious broker, thereby losing part of your capital or bearing excessive costs related to your investment decisions and/or strategies. Systemic research is essential for all investors who want to capitalize on the opportunities in the various market segments. By analyzing the broader economic and social context in which companies and clients operate, the investor can develop more effective strategies that are better aligned with the changing realities of the business world. * ActivTrades can be reached on +1 242 603 5200 or at englishdesk@activtrades.bs

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Navigating The Digital Frontier: The Bahamas’ Approach To Regulating Digital Assets * By Christina Rolle, Executive Director, Securities Commission of The Bahamas

The rapid emergence of digital assets and cryptocurrencies has presented many challenges for regulators in the global financial sector. Recognising the need for a robust regulatory framework to bring legal clarity to this dynamic, evolving space, The Bahamas has taken a progressive approach to the regulation of digital assets. This article explores the rationale behind The Bahamas’ decision to regulate digital assets, the development of the Digital Assets and Registered Exchanges (DARE) Act, 2020, and the key provisions shaping the regulatory landscape that influenced the new DARE Bill, 2023, which we anticipate will become law very shortly.

THE PATH TOWARD REGULATION The Securities Commission of The Bahamas, (the Commission), the statutory regulator for the nation’s capital markets, began developing legislation for digital assets in 2018 after monitoring the industry’s rapid growth over several years. The Commission took a thoughtful, deliberate approach to determining what threats, if any, the space represented. The Commission was faced with several considerations including the lack of legal definition and a globally agreed taxonomy for digital assets, as well as what its overarching approach to digital assets in or from within the jurisdiction would be.

The Commission also fielded significant interest from international and domestic digital asset businesses and related industry stakeholders who thought digital asset businesses could thrive in The Bahamas’ financial services ecosystem. Consistent with the Commission’s mandate to protect investors, facilitate clear and efficient markets, and reduce systemic risk, we opted not to rely on pre-existing frameworks as these did not clearly define or scope digital asset businesses and activities. Instead, the Commission sought to develop a bespoke regime that provided legal clarity and definitions for the oversight of digital asset operators and related business activities. BENCHMARKING INTERNATIONAL BEST PRACTICES

“From a policy perspective, the Government of The Bahamas determined that it did not want to prohibit digital asset activities.” First and foremost, The Bahamas had to determine whether it wanted to: (1) allow digital asset businesses to operate within the jurisdiction without a specific regulatory framework; (2) develop a specific regulatory framework to ensure that all digital assets and digital asset activities fall within the perimeters of the regulator’s scope; or (3) prohibit digital asset business activities altogether. From a policy perspective, the Government of The Bahamas determined that it did not want to prohibit digital asset activities, so the Commission then set out to ensure that, in the context of a virtually non-existent domestic market for digital assets, any digital asset businesses operating within the jurisdiction would only do so within an appropriate regulatory framework and with proper regulatory oversight.

Crucial to the development of The Bahamas’ regulatory framework was extensive research and evaluation of international regulatory policies, and engagement with policymakers, industry participants, and stakeholders. The DARE Act, 2020 framework was originally benchmarked against legislation from 13 jurisdictions. Careful consideration was given to best practices for activities-based approaches to registration, risk-based regimes for the supervision of digital asset business and related activities, as well as ensuring The Bahamas’ commitment to the global fight against money laundering, terrorism, and proliferation financing.

“The Bahamas is committed to the global fight against money laundering, terrorism and proliferation financing.” As a result of this comprehensive development process, the Commission established two important principles for providing the

The Bahamas: A Complete And Compelling Choice 2023

appropriate levels of oversight. First, we determined the legislation would take an activities-based approach to registration. DARE aims to regulate the stated or intended activity of prospective registrants. Secondly, our goal was to develop a risk-based supervisory approach. Consequently, DARE assesses potential risks based on the nature, scope, and complexity of each individual digital asset business. Activities-based registration and risk-based supervision are fundamental to providing the appropriate levels of oversight, safeguarding market integrity, and protecting investors in this evolving digital asset space. THE DARE ACT, 2020 The DARE Act, 2020, was enacted in The Bahamas in December 2020 as a robust, bespoke regulatory framework that was specifically designed to protect investors and consumers, align with international anti-money laundering, counter-terrorism and proliferation financing provisions (AML/CFT/CPF), and mitigate associated risks. From its inception, the Commission has intended for DARE to remain sufficiently flexible to adapt to the ever-changing digital asset landscape. This entails ongoing legislative reviews and appropriate updates to the legislation from time to time. In 2022, the Act underwent amendments and the DARE (AML/CFT/CPF) Rules were introduced. The DARE framework aligns with the Financial Action Task Force (FATF) Recommendations, and the legislation has received international recognition for its investor protection and globally compliant standards. THE DIGITAL ASSETS AND REGISTERED EXCHANGES BILL, 2023 Significant developments in the digital assets space have continued since the DARE Act, 2020, was enacted. By the time the ‘Crypto Winter’ hit in 2022, the Commission had already begun to see new risks that were not apparent in previous years or even relevant to prior months. Consequently, the Commission identified aspects of DARE that required further consideration. In April 2022, we began consolidating our ongoing review of DARE for the purposes of addressing any legislative gaps, ambiguities, and procedural concerns within the legislation. Our work updating DARE coincided with the International Organization of Securities Commissions’ (IOSCO) development of crypto and digital asset markets recommendations for regulators, to which The Bahamas has significantly contributed.

“Significant developments in the digital assets space have continued since the DARE Act, 2020, was enacted.”

safeguards afforded to digital asset participants. Such protections include increased disclosure and reporting requirements for digital asset businesses; expanded activities-based registration obligations for potential registrants; and enhanced, ongoing supervision of operators. Notably, the framework addresses the safekeeping and accessibility of digital assets, requiring operators to have adequate systems and controls in place.

“The framework addresses the safekeeping and accessibility of digital assets, requiring operators to have adequate systems and controls in place.” OPERATING DIGITAL ASSET EXCHANGES Operators of digital asset exchanges must align their systems and controls with the scale and nature of their businesses. If an entity establishes and operates a digital asset exchange that also provides custody of digital assets or custodial wallet services, it must comply with all requirements applicable to digital asset businesses. Exchanges must segregate customer assets from their own, providing enhanced protection for clients. The Commission has the authority to prescribe additional rules for digital asset exchanges as necessary. CUSTODY OF DIGITAL ASSETS OR CUSTODIAL WALLET SERVICES The DARE Bill, 2023, introduces a single comprehensive framework for custody of digital assets or custodial wallet services, prioritising the protection of client interests. The framework establishes clear procedures for the ongoing safety and accessibility of digital assets, along with transparent client disclosures and several requirements specifically concerning the segregation of client assets from the assets belonging to the operator or other non-client assets. STAKING The DARE Bill, 2023, introduces a first-of-its-kind, dedicated disclosure regime for staking activities that promotes transparency and accountability within the digital asset ecosystem. Authorized registrants must disclose essential information to clients, including details of staking protocols, lockup periods, potential rewards or interest earned, penalties, and participant selection criteria. STABLECOIN ISSUERS

To help address these revisions, the Commission engaged the international law firm Hogan Lovells to draft the amendments to DARE and benchmark the proposed DARE Bill, 2023 regime against legislation from jurisdictions such as Hong Kong, the European Union, and New York, USA.

The Bill includes a new stablecoin regime which requires stablecoins to be backed by reserve assets. Stablecoin issuers must disclose these assets for evaluation by the Commission. Under the Bill, the issuance of algorithmic stablecoins is expressly prohibited in The Bahamas.

EXPANDING DIGITAL ASSET BUSINESS ACTIVITIES

GUARDRAILS AND OTHER PROVISIONS

The DARE Bill, 2023, expands the scope of digital asset activities captured under international standards and best practices. Notably, the Bill encompasses a comprehensive range of digital asset activities and appropriate protection mechanisms for the registration and ongoing supervision of operators. The Bill represents an even greater focus on consumer and investor protection by strengthening the existing

The Bill brings a significant set of guardrails to DARE that provide more clarity and legal definitions to its bespoke regime. For example, the categorisation of Non-Fungible Tokens (NFTs) under the DARE Bill, 2023, now depends on the distinction between financial or consumer assets, resulting in financial NFTs falling within the scope of regulation, whereas consumer NFTs, particularly in the realm of gaming, do not.

The Bahamas: A Complete And Compelling Choice 2023

Moreover, the Commission has taken proactive measures to address liquidity events through mandatory reporting requirements, while also granting flexibility to introduce additional safeguards for investor protection. Furthermore, the Bill introduces specific standards to address conflicts of interest and regulate connected third-party relationships. Notably, the Bill also prohibits the issuance of privacy tokens under the legislative framework, although digital asset businesses are not prohibited from conducting business with privacy tokens.

“Significant developments in the digital assets space have continued since the DARE Act, 2020, was enacted.” The DARE Bill, 2023, builds on the foundation of the DARE Act, 2020, with an even stronger, comprehensive regulatory framework for digital assets and digital asset businesses. This pioneering legislation establishes

a new precedent for current, proactive, and internationally compliant standards and best practices. With refined definitions and exclusions, and expanded provisions and requirements, the new Bill demonstrates the commitment by The Bahamas to investor protection while maintaining a regulatory environment that is designed for innovation, development, and responsible growth in the digital asset industry. * Christina Rolle can be reached on 242.397.4100 or at info@scb.gov.bs

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Corporate Culture - The Secret Of Success * By Shari Quant, the assistant vice president of internal, legal and risk at Liongate Bahamas Limited, an affiliated entity of the Equity Group of Companies

In this article, a local financial writer and qualified expert in regulatory compliance takes the experience of the Equity Group of Companies, which together form one of the lynchpins of Bahamian HNW finance, as an example of how a business might evolve a modern corporate culture. The path to good ‘corporate-culture cultivation’ (CCC) is never an effortless one.

hat is most important to a business? What are its ideologies, ethics and mindset? What strategic and financial plans does it have for the future? Where do its senior managers see it going in the next five years? These are all questions that the management of any business should be raising when developing a corporate culture of good quality. The Equity Group of Companies consists of financial service providers and institutions that are fiercely committed to success for all their stakeholders – that is their HNW clients, their shareholders, their directors, their employees and their jurisdiction, The Bahamas. The group believes that hard work, consistency, innovation, creativity, resilience and engagement are valuable keys to the success of any business.

“Corporate culture is often not expressly defined – which is fair enough.” Furthermore, it believes that every organization should examine and make use of various tools that it must use if it is to evolve a successful and compliant-minded corporate culture. The business ought to ask itself two important questions: (i) Who and what impacts compliance and success within the corporate environment? (ii) How can an organization create an environment in which people can use those aforementioned tools? Evan Tarver of Investopedia states that corporate culture refers to the values, beliefs and behaviour that determine the ways in which a company’s employees and managers interact, perform and handle business transactions. Corporate culture is often not expressly defined – which is fair enough, because every organisation should cultivate it rather than define it. It develops organically over time, shaped by the traits of the people that the company hires.

THE KPIs OF CCC If we dive beneath the surface of the traditional components of good corporate culture (work style, ethics, the organization’s vision, etc.) and view the cultivation of a corporate culture from the perspective of quality, we can discover two distinct components that are known as key performance indicators or KPIs. The secret to success is understanding how these key performance indicators impact the business. ‘Corporate culture cultivation’ is a well-known phrase that is often abbreviated as CCC. The two key indications that CCC is successful are good human-capital management and good corporate-governance management. Both things are equally important. Human-capital management establishes and maintains the intellectual capital and ‘mental health capital’ of the organization. Corporate-governance management ensures that those responsible for establishing and maintaining policies and procedures are being ‘cultivated’ themselves. It also implements practices that incite and cultivate ‘change agents’ (i.e. people who promote change at any firm) in the interests of successful operations, compliance with financial regulations and the growth of the business. HUMAN CAPITAL AND HOW TO MANAGE IT Human-capital management is essential for a successful CCC because it involves people. In their behaviour, people at firms exhibit qualities that alter the environment. They either enrich it or diminish it. A firm can manage human capital well by employing the right people, then by investing in them and showing them that they are valuable and that every role that they play is significant and necessary. This makes a business successful and helps to maintain its intellectual and mental-awareness capital. With this in mind, the Equity Group is interested in deepening its pool of talent by employing qualified and/or experienced people who are valuable to the financial

The Bahamas: A Complete And Compelling Choice 2023

services industry. It goes out of its way to express its appreciation for its employees in small ways that have a big impact on its culture.

“As the financial industry changes, employees must adapt and become intellectually relevant.” Kim Thompson, the director of human resources (HR) at the Equity Group of Companies, has stated that “ongoing training and development are key areas of focus for HR. As the [financial] industry changes, the employees [of the Equity Group] must adapt and become intellectually relevant. This is also why an annual budget for each employee’s training needs is set at the end of the year and there are opportunities for cross-training across the group.” WHAT IS INTELLECTUAL CAPITAL AND HOW IS IT MANAGED? The intellectual capital of the business is the collaborative knowledge, skill and resource capacity of the directors and employees and is measured by their competence in dealing with the products, services, operations and relationships of the company and the industry in which it operates. The firm manages it by ensuring that employees (who themselves govern, manage and operate the business) have access to the tools they need to operate successfully and to receive knowledge, skill and the capacity to perform. These tools include: (i) access to ongoing training for applicable skill sets; (ii) access to digitization that helps them to work more efficiently; and (iii) participation in continual professional development (CPD) to help them on their career paths. LinkedIn Learning’s 2023 Workplace Learning Report shows us that career development makes employees agile. Agility is a key component in a resilient and successful business because career-minded people are purpose-driven. Meanwhile, LinkedIn’s 2019 Workplace Learning Report says that 94% of respondents to a survey were prepared to stay for longer at the companies that employed them if they were given more opportunities to learn things. WHAT IS MENTAL-HEALTH CAPITAL AND HOW IS IT MANAGED? Another way in which a firm can manage human capital is by managing mental-health capital through mental-health-awarenessoutreach initiatives that involve HR. Mental-health capital can be defined as the collaborative psychology of a firm, or the social and emotional wellbeing of all employees. It relates to an employee’s ability to cope with stress in the workplace, or to produce work of good quality while overcoming problems and creating a good work-life balance. Kim Thompson, who has studied psychology, explained further. “There is no-one free from issues or problems on the job [working field]. However, you [human-resource managers] must be able to recognize when employees have allowed their personal life to spill over into their work life and it is affecting their quality of performance. As HR managers it is our job to help them [our employees] with establishing balance to perform.”

The Equity Group of Companies understands how vital sound mental health awareness and outreach is to the success and growth of its business and therefore arranges team-building activities to enhance its employees’ relational skills (i.e. skills that people use when trying to deal and relate with one another). These remind each employee that, in John Donne’s words, “no man is an island.” We all need each other and are supposed to support one another. Team-building activities also allow for ‘downtime,’ when employees are given time to celebrate milestones and de-stress. In addition, HR management extends an open-door policy that allows employees to discuss their careers and personal concerns. These activities all create a strong foundation for sound mental health and resilience in the workplace – a key internal mechanism that minimizes human-capital risk. CORPORATE GOVERNANCE Corporate-governance management is critical to the success of the business and its ability to cultivate change agents within its walls. It is widely understood that every firm’s board of directors and senior management sets its cultural tone. Their actions permeate and bolster the business by implementing successful policies, procedures and practices that cultivate and retain valuable employees. These people can help it overcome difficulties and recover from them.

“We all need each other and are supposed to support one another.” The board’s most fundamental responsibility is to create policies, procedures and practices. Senior managers are responsible for the implementation of these. But who is overseeing the overseers? The quality performance of corporate-governance management is measured by the quality of oversight of the board and the senior managers, which is ultimately linked to managing ‘key person’ risk. WHAT IS ‘KEY PERSON’ RISK AND HOW SHOULD WE MANAGE IT? In an article entitled Managing Key Person Risk, Matt Vickers has written that such a risk arises when a business depends too strongly on key individuals who make it viable. Vickers explains: “The most notable examples of ‘key person’ risk occur in some of the world’s largest companies. The late Steve Jobs and Sir Richard Branson are two prominent modern-era key people.” In his article, he also states that one can mitigate such risk by ensuring that the intellectual capital of the business is shared and by empowering and training each managing employee (particularly if he is a senior or middle manager). One must train him on equal terms with all the others while giving him access to the crucial relationships of the business, according to his function and skill set. The idea is to ensure that he is motivating the other employees and that they are complying with financial regulations and acting in tune with the industry and the business as a whole. Another way in which a firm can offset ‘key person’ risk through an internal control is by taking out key-person-risk insurance. The

The Bahamas: A Complete And Compelling Choice 2023

Equity Group’s governance, risk and compliance team is now addressing this ‘elephant in the room.’ Not only does such insurance stabilise the finances of a business after such a loss occurs; it also allocates funds and uses them to deploy resources.

“Successful CCC promises to give a business longevity.” The mission of corporate-governance management is therefore to manage the people who are impacting the change agents of the business. Apart from the maximization of profits, and operational compliance, the ultimate aim is successful CCC. This is what promises to give a business longevity. THE CHALLENGES Businesses that lack the skills to foster – or the discernment to hire – employees with a career-driven mindset and the mental agility for a good work-life balance are at a disadvantage. A business that lacks a strong, consistent and innovative corporate-governance team that can enforce and oversee the principles of good governance through internal controls is faced with the same dilemma. The Equity Group strives to overcome the challenges that lie on the path towards successful CCC in the financial services industry. It does so partly by facilitating a remote environment (i.e. online working), which is necessary for the growth of mental health capital. This is, however, difficult to maintain permanently. The group also strives to ensure that key people set the right tone. THE ANSWER Ms Ivylyn Cassar, the Chair of the Equity Group of Companies, has stated: “Our corporate-governance-management practices have

delivered the resilience required for the ongoing success of Equity Group through its matured and seasoned human capital who recognize the value of work-life balance and developing compliant policies and procedures that cultivate quality culture as industry leaders. We here at Equity will continue to fearlessly bulldoze through the challenges of cultivating a good-quality culture in hopes that the younger generation will overcome such challenges and senior management will become so innovatively engaged that we have no choice but to value them.”

“Key-person-risk insurance stabilises the finances of a business.” In the years 2020 and 2021, COVID-19 dominated the globe. In such conditions it is always vital to create an environment where people can thrive and remain grounded, even though their mental health may not be as sound as usual. A year of recuperation followed in 2022 – a year in which a career-driven, agile mindset was required for the recovery of business. The year 2023 has been the year of value and strategy. Our group appreciates those people who endured the challenges of those days – the people who governed and oversaw things – and has never forgotten that people are important. * Shari Quant can be reached on +1 (242) 676 8188 or at contact@liongatebahamas.com

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Leadership And Technology In The Bahamas * By Antoinette Russell, the CEO of Maran Global Solutions

Maran Global Solutions, a boutique firm in the Bahamas that provides family offices with support services, is a trail-blazer in the field of corporate management. It administers trusts and offers its clients regulatory services, but another of its many offerings is in the field of human capital solutions. In a distinguished career spanning more than 30 years, Antoinette Russell has helped her clients to build up in-house leadership skills and has empowered their staff through mentorship, always with the aim of creating a culture that benefits clients. In this article she offers some sage advice to the next generation of Bahamian financiers and staff at family offices.

ecently, a mentee mentioned to me that he found it hard being available to his team and his ‘internal stakeholders’ all the time. He was honest about the pressure that he was under to be available at all hours. He felt this pressure because he was always online. This raises the following questions: how immediately accessible are you obliged to be to stakeholders of yours who want to engage in digital conversations? How do you stop professional communications and casual business conversations from exceeding any limits that you might have set for them, bearing in mind that digital communications can seem to be informal?

“We often see young professionals as the torch-bearers of innovation and technological prowess.” Technology has bridged a tremendous gap in communication but also comes with its share of challenges. In an evolving professional landscape, we often see young professionals as the torch-bearers of innovation and technological prowess. Their digital skills give them an edge over the challenges that previous generations of leaders have faced. However, the importance of balancing these technological skills with their capacity for leadership management cannot be overstated. Young professionals must recognize that leadership-management skills are still just as crucial in the modern workplace. As a mentor, I feel that it is important to tell young professionals that they can complement their technological acumen in a major way by cultivating leadership skills. IS TECHNICAL KNOW-HOW A DOUBLE-EDGED SWORD? The advent of the Digital Age has spawned a generation of techsavvy individuals. Having grown up in an era where smartphones,

social media and computers were omnipresent, young professionals are comfortable with ever-changing digital landscapes. Their skills are undeniably valuable – both for personal and professional development – but I want to pause and explore the pitfalls. • Overdependence. Young leaders may rely too heavily on technology, neglecting essential leadership skills such as inter-personal communication and emotional intelligence. • Digital Distractions. Constant connectivity can lead to distractions and a lack of concentration, affecting people’s ability to lead. This can take the form of them being distracted in one-to-one meetings, their attention wandering during presentations, and their being distracted by work communications in personal settings. • Communication challenges. An over-reliance on digital communication may hinder the development of strong interpersonal relationships and trust within teams. There are so many programmes designed to help teams speak and communicate day by day that it is easy to forget the benefits of direct interpersonal or face-to-face conversations. • A generation gap. Young, tech-savvy leaders may face resistance or challenges when leading teams composed of older people who may not be as comfortable as they are with technology. It can be hard to bridge this gap. • Lack of balance. When somebody pays too much attention to technology, he might have a bad work-life balance, with constant connectivity blurring the line between his personal and professional life. • Failure to adapt. If a young leader is too confident about his tech skills, it can make him resistant to feedback or slow to adapt to changing circumstances that require non-technical solutions. • Ethical dilemmas. Tech-savvy leaders may encounter ethical dilemmas related to data privacy, algorithmic bias and other technology-related issues that require careful consideration, especially in the financial and organizational fields.

The Bahamas: A Complete And Compelling Choice 2023

To succeed as a tech-savvy young professional in leadership, it is essential to strike a balance. Leaders should harness their technical skills while also developing essential leadership qualities such as effective communication, empathy, adaptability and a strategic mindset. They should be mindful of the potential drawbacks and try to learn continuously in an effort to stay up-to-date in the twin domains of leadership and technology.

“Technology helps people to enhance, rather than replace, their connections with other humans.” Ultimately, leadership is about people, whereas technology helps people to enhance, rather than replace, their connections with other humans and their ability to lead others. THE ESSENCE OF LEADERSHIP MANAGEMENT Leadership management encompasses a range of competencies that are essential for effective organizational management and personal growth. These skills go beyond technical proficiency and focus on the interpersonal, strategic and holistic aspects of leadership. • Communication. Effective communication is at the heart of leadership. Leaders must convey ideas, motivate teams and foster collaboration. They must listen actively, articulating their vision and provide constructive feedback. • Emotional intelligence. It is crucial for leaders to understand and manage emotions – both their own and those of others – if they want to build strong relationships and resolve conflicts in the workplace. • Decision making. Leaders often face complex decisions. The ability to make swift, informed and ethical choices is vital. This also involves risk assessment and accountability. • Strategic thinking. Leaders must think beyond short-term objectives and chart a course for the future. Strategic thinking involves setting goals, identifying opportunities and adapting to change. • Team building. Effective leaders assemble and lead diverse teams. They recognize various people’s strengths and weaknesses, delegate responsibilities and create a collaborative work environment. • Conflict resolution. Conflicts are inevitable in any organization. Leaders need to address them professionally, finding solutions that are in line with the organization’s goals. • Time management. It is crucial for leaders to prioritize tasks and manage time efficiently because they often juggle multiple responsibilities. • Mentorship. Effective leaders are often mentors, guiding and developing the potential of team members. This fosters a culture of personal growth and learning. THE POWER OF SYNERGY: TECH AND LEADERSHIP SKILLS COMBINED The true potential of young professionals emerges when they merge their technological prowess with their leadership-management skills. This synergy creates a well-rounded skill set that not only boosts their own career prospects but also contributes to the success of their organizations. This balance is imperative for the following reasons.

“Tech-savvy individuals are known for their drive to innovate.” • Effective problem solving. The combination of technological skills and leadership management allows young professionals to address complex issues from multiple angles. They can identify technological solutions to problems while also considering the human and organizational aspects of those problems. • Innovation with a purpose. Although tech-savvy individuals are best known for their drive to innovate, their leadership skills help them ensure that their innovations are in line with their organizations’ strategic goals and are good for that organization and for society. • More collaboration. Leadership skills facilitate effective teamwork and collaboration. When combined with digital tools, they can create seamless and productive partnerships. These are vital in today’s interconnected world. • Adaptation to change. The ability to embrace change and lead others through it is invaluable. Young professionals with leadership skills can guide teams of all ages and backgrounds through technological transitions and disruptions with minimal resistance. • Strategic uses of technology. Leadership management encourages the thoughtful use of technology. Instead of adopting every new tool, young professionals can strategically choose technologies that are in line with their organizations’ objectives. • Effective communication. Communication is a cornerstone of leadership. Young professionals who excel in both technology and communication can bridge the gaps between technical and non-technical team members, ensuring that everyone is on the same page. LEADERSHIP-MANAGEMENT SKILLS AND HOW TO NURTURE THEM To strike the right balance between technological skills and leadership management, young professionals should develop their capacity for leadership. Here are some strategies I have embraced over my career to cultivate these skills. • Mentorship and coaching. Seek mentors or coaches who can provide guidance and feedback about leadership development. • Training and workshops. Attend leadership-development programmes, workshops and seminars to gain practical insights and knowledge. • Learning from one’s peers. Collaborate with colleagues to learn from their experiences and share one’s own. Feedback from one’s peers can be invaluable if one wants to grow as a person. • Reading and research. Explore literature about leadership, case studies and biographies to gain a deeper understanding of the principles and practices of leadership. • Leadership roles. Seek out opportunities to lead people in your current job or through extracurricular activities to gain hands-on experience. • Feedback and self-reflection. Solicit feedback from colleagues and superiors and engage in self-reflection to identify areas for improvement. • Networking. Build a network of professionals who can provide support and insights into leadership challenges and opportunities.

The Bahamas: A Complete And Compelling Choice 2023

• Volunteer and community involvement. Engage in volunteer work and community activities that allow you to exercise leadership skills in diverse contexts.

and society. In this harmonious combination lies the key to unlocking their true potential and having a lasting impact both on their organizations and on the world.

THE PATH TO SUCCESS

* Antoinette Russell can be reached on (242) 698 1033 or at info@maranglobal.com

The journey to success does not stop at technical proficiency. Leadership management skills can be the missing piece of your puzzle as a new leader. They provide the framework for effective communication, strategic thinking and holistic problem-solving.

“The ability to embrace change and lead others through it is invaluable.” By embracing both technological and leadership skills, young professionals can create a balanced skill set that not only advances their careers but also contributes to the betterment of their organizations

The Bahamas: A Complete And Compelling Choice 2023

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Delivering For A Captive Audience * By Michele Fields, the Superintendent of Insurance at the Insurance Commission of The Bahamas

The Bahamas’ participation in the captive insurance industry dates back to the 1960s. Given the islands’ rich history in this niche industry, The Bahamian Government has taken steps in recent years to ensure that this business actively contributes to the overall growth of the financial services sector.

ocal insurance managers and other financial intermediaries are still finding ways to promote both their own services and the jurisdiction in the captive market. The Bahamas Financial Services Board has helped them do so, highlighting the jurisdiction as a competent and competitive international financial centre that promotes synergies between the industries of the financial services sector.

“Amalgamating the legislation appropriately corresponds with our risk-based supervisory framework.” The Insurance Commission of The Bahamas, the insurance industry’s supervisory authority, continues to enhance the captive industry by streamlining the application process and maintaining a robust regulatory and supervisory framework which meets international standards. Over the past 10 years, the number of licensed captive insurance entities registered in The Bahamas has grown – at first very rapidly and, in the last five years, steadily. As a result, growth has occurred in overall net-premium volume along with the expansion in the number of parent-company regions throughout the US and Europe. The growth in The Bahamas’ captive market is largely attributed to small-to-medium sized entities (SMEs) seeking to set up their own segregated accounts. This option has proven to be cost-effective for those SMEs, especially since they can and do outsource administrative and operational oversight to locally registered insurance managers, financial and corporate service providers and other financial service professionals such as lawyers and accountants. In 2021, as part of its strategic plan to amalgamate legislation, the Commission began a review of the jurisdiction’s two principal

insurance laws – the Insurance Act, 2005 and the External Insurance Act, 2009. The purpose of the review, which is still in progress, is to streamline regulatory and supervisory requirements and to enhance legislation to help insurance structures. The Commission’s intent in amalgamating those two pieces of legislation is to introduce categories of licenses that emphasize the type of insurance business that the entity will be conducting and the structure of the entity rather than where the policyholders are located. Currently, the amalgamation is well underway and it is anticipated that the draft legislation will be issued for consultation shortly. Following any feedback and proposed amendments from the consultation period, we would then seek to get the amended bill passed through Parliament. Amalgamating the legislation appropriately corresponds with our risk-based supervisory framework whereby, as a jurisdiction, we eliminate the perception of varying our supervisory oversight based on the current demarcation of international business versus domestic business. We have a very robust domestic insurance market in The Bahamas. External insurers will have a similar level of supervision based on their risk profile. As such, our risk-based supervisory framework considers the size, nature and complexity of the institution which determines the regulatory measures that we take, no matter whether the policyholders are in The Bahamas or abroad. Looking ahead, given the current hard market conditions, entities with a firm understanding of their history of risk and loss may be seeking alternate ways to finance the cost of their insurance coverage. Such conditions act as a catalyst for captive formations. The captive, as an alternative risk-transfer mechanism, is always going to be a consideration for company owners, because they are looking at containing costs.

The Bahamas: A Complete And Compelling Choice 2023

“The captive is an alternative risk-transfer mechanism.” In this regard, The Bahamas is a competitive, cost-effective jurisdiction given the local and international expertise and resources present within the financial services sector. The robust nature of our regulatory framework is such that we can oversee any type of international insurance business. Also, The Bahamas as a jurisdiction can boast of its professionally-trained and highly-skilled service providers who reside here, some of whom are accountants, lawyers and insurance managers. Should the need arise for outsourcing specific services, this can be achieved with relative ease.

Key factors such as fair regulatory costs, highly-skilled and varied professionals and the way that we apply a risk-based approach to our supervisory oversight of the industry, continue to be attractive considerations for international and captive insurance businesses. * Michele Fields can be reached on +1 242 397 4183 or at info@icb.gov.bs

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