Much anticipated and welcomed change is being introduced to the regulatory regime that applies to British Virgin Islands (BVI) domiciled fund managers and advisors in the form of the Investment Business (Approved Managers) Regulations, 2012 (the "Regulations"). Under current law, a BVI manager or advisor carrying on any investment business must obtain a license under the Securities and Investment Business Act, 2010 ("SIBA"). Once licensed, a manager/advisor is subject to substantial ongoing obligations under SIBA and the Regulatory Code 2009 (the "Code"). While the Regulations will not create an outright exemption from regulation for approved managers, they will enable an eligible manager or advisor to apply for approval as an approved investment manager through a simplified process. The Regulations are intended to strike a balance by providing managers with an attractive, time and cost effective alternative to the full licensing regime under SIBA while still providing an appropriate level of regulatory supervision by the Financial Services Commission (the "Commission").
To be eligible for approval under the Regulations, a manager or advisor must be established as a business company or a limited partnership in the BVI and not have, in aggregate assets under management of more than US$400,000,000 or equivalent in any other currency. The cap on assets under management for closed ended funds is to be prescribed within guidelines issued under the Regulations but is expected to be significantly higher than US$400,000,000. The Commission will need to be satisfied that the applicant and each director, general partner or senior officer and each person who holds or owns a significant interest in the applicant is fit and proper in accordance with the Code and a declaration to that effect will need to be provided by the applicant. The Commission will also need to be satisfied that the approval of the applicant is not against the public interest.
An application must be submitted to the Commission at least seven days prior to the intended date for commencing the applicant's business unless the Commission has agreed to a shorter period. When the seven days expires the applicant may commence and carry on business for a period of up to thirty days from the date of submission of the application. This thirty day period may be extended for an additional thirty days by the Commission or upon the written request of the applicant.
If an applicant is approved, the Commission will register the applicant in a register of approved investment managers and issue the manager with a certificate of approval.
An approved manager can act as the investment manager or investment advisor to any number of private or professional funds recognized under SIBA and any number of BVI domiciled closed-ended funds that have the characteristics of a private or professional fund. An approved manager can also act as investment manager or advisor of non-BVI feeder funds into BVI master funds.
In terms of ongoing obligations, an approved manager will be required to:
- pay an annual renewal fee;
- have a minimum of two directors, one of whom must be an individual;
- have an authorised representative in the BVI;
- notify the Commission of any change to any of the information submitted to the Commission in its application for approval within 14 days of the change;
- notify the Commission of any matter in relation to it or its conduct which has or is likely to have a material impact or significant regulatory impact with respect to the approved manager or its business;
- prepare and file annual financial statements to the Commission. However, there is no audit requirement; and
- prepare and file an annual return with the Commission containing the details as set forth in the Regulations by 31 January of each year.
Amendments to SIBA to take account of the pending Regulations are being effected and it is expected that the Regulations will come into force upon the passing of the amendments to SIBA and the publishing of the relevant application form and related Approved Managers Guidelines.