Prior to the Mutual Funds Ordinance 1998, there was no legislative framework in the Turks and Caicos Islands (TCI) for the regulation of mutual funds. The ordinance has not been brought into force pending finalization of subsidiary regulations. The regulations have now been finalized and the ordinance is expected to be brought into force by October 1 2000. This update provides an overview of the legislation.
The ordinance divides funds into four categories:
- Registered mutual funds, constituted under TCI law, are only authorized to issue equity interests to investors who meet prescribed qualifications or in which equity interests are listed on a stock exchange recognized by the TCI authorities for this purpose. The prescribed qualifications for an investor are (i) that he has investments of $100,000 or more in securities quoted on an approved stock exchange and (ii) that the superintendent of mutual funds is satisfied from the investor's application form that he has sufficient knowledge and experience to understand the funds.
- Recognized mutual funds are constituted outside TCI and their equity interests are listed on an approved exchange.
- Licensed mutual funds are funds that fall outside the registered and recognized categories.
- Exempt mutual funds are funds in which the equity interests are held by not more than 15 investors, a majority of whom can appoint or remove the fund operator. The fund is only authorized to issue equity interests to professional investors. A 'professional investor' is a qualified securities broker acting either on his own account or on behalf of an investor with investments of $5 million or more in securities quoted on an approved exchange. The application must satisfy the superintendent that the investor has sufficient knowledge and experience to understand the fund.
The 'sufficient knowledge and experience' criterion for qualified investors (registered funds) and professional investors (exempt funds) does not require each application form to be submitted to the superintendent for his review. It simply means that (i) evidence of the investor's knowledge and experience must be included in his application to the fund administrator and (ii) that the superintendent, if he later reviews the form in the course of his regulatory functions, is satisfied that the criterion has been met.
A fund can be structured as a company, a partnership, or a unit trust.
Applications
Applications for the registration or recognition of funds must be accompanied by:
- details of the qualifications and experience of each fund promoter;
- the current prospectus; and
- the prescribed application fee.
The application must be made by a mutual funds administrator who (i) carries out business in TCI and (ii) will provide an office in TCI for the fund.
An application for fund licensing not covered by the registered and recognized categories must be accompanied by extensive documentation to satisfy the superintendent that the operators, management structure, business plan, investment policies and internal procedures are acceptable.
Licences
Fund administrators must be licensed. The licence may be either unlimited (for an unlimited number of funds) or restricted (for funds as specified in the licence).
Regulation
The ordinance establishes the office of the superintendenct of mutual funds. This office has the authority and responsibility to ensure that fund administrators obey all the relevant regulations. A fund administrator has a variety of accounting and reporting obligations concerning (i) the affairs of the funds he administers and (ii) his own affairs.
For further information on this topic please contact Owen Foley at Misick & Stanbrook by telephone (+1 649 946 4732) or by fax (+1 649 946 4734) or by e-mail ([email protected]).
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