In early December 2012 the BVI introduced a new ‘light touch’ regulatory regime following the publication in November of the Investment Business (Approved Manager) Regulations 2012 (the ‘Regulations’) and the publication in December of the Approved Investment Managers Guidelines (the ’Guidelines’). Together the Regulations and the Guidelines introduce a simplified and streamlined process for those eligible managers and advisors who fall within its scope, making it now particularly attractive to new or small funds, especially family funds.
Prior to the introduction of these changes fund managers and advisors who were either domiciled or doing business in the BVI were required to hold a full license under Part 1 of SIBA (Securities and Investment Act 2010). The process to obtain such a license could be expected to take at least four weeks. Once licensed, there are significant continuing obligations under the 2009 Regulatory Code.
The provisions contained in the new Regulations apply to an Approved Manager. Such an Approved Manager is permitted to act as the investment manager or investment advisor to:
- private or professional funds that are registered under SIBA;
- closed ended funds domiciled in the BVI subject to the proviso that those fund are private or professional funds; and
- non-BVI domiciled feeder funds that feed into BVI master funds.
This is subject to the overriding restriction that the total funds under management of the open ended funds is not permitted to exceed US$400 million and the capital commitment of the closed ended funds is not permitted to exceed US$1,000 million. The Financial Services Commission (the ‘Commission’) Commission has permitted a higher limit for closed ended funds as it considers that such funds are a lower regulatory risk.
An applicant under the Regulations is required to satisfy that the applicant and its senior officers and those who have a significant holding in it are fit and proper persons in accordance with the requirements of the Code and those individual are required to submit a declaration to that effect. The applicant must also demonstrate to the Commission’s satisfaction that if approval is granted it would not be against the public interest.
The application must be filed with the Commission not less than seven days before the proposed start date of the applicant’s business, though the Commission might agree to a shorter period. On the expiry of the seven day period the applicant is permitted to commence the proposed activity for a period of up to thirty days from the date of filing the application. This thirty day period can be extended, on written request from the applicant, to an additional thirty days.
When approval is granted the Approved Manager, the applicant will be registered by the Commission in the Register of Approved Investment Managers. The Manager is then free to conduct business largely without restriction; however, the Commission has the power to take enforcement action as necessary to fulfil its role as the financial regulator.
The Manager is subject to a continuing obligation to:
- notify the Commission of any change to the information submitted with the application;
- notify the Commission of any matter or conduct which is likely to have a material effect or significant regulatory effect to the Manager or its business;
- prepare and file with the Commission an annual return, with the details as required by the Regulations, and annual financial statements, though the financial statements are not required to be audited;
- have at least two directors of which one must be an individual; and
- pay an annual renewal fee of US$1,500, at present, and maintain an authorised representative in the BVI.
We consider that together the Regulations and the Code enhance the attractiveness of the BVI with a simple system and efficient regulatory system in which to do business and particularly attractive to new or small funds, especially family funds. The regime appears to strike the right balance between the more closely regulated regime under the SIMBA regulations with the ‘light touch’ regulation of a licensing regime.