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BVI Readies 'Regulation Lite' Fund Manager Regime

by Amanda Banks,, London

09 November 2012

The BVI has moved a step closer to launching a new 'regulation lite' fund manager regime with the publication on November 1 of the final form of the Investment Business (Approved Manager) Regulations, 2012.

Developed as an alternative to the existing regime in which fund managers wishing to do business in the BVI must hold a full licence under Part 1 of the Securities and Investment Business Act (SIBA), the new regime provides for eligible fund managers and advisors to submit a simple application to the Financial Services Commission and start business seven days later. A Part 1 licence will typically take the Commission at least four weeks to process.

Ross Munro, global head of investment funds at Harneys and chairman of the Securities, Investment Business and Mutual Funds Advisory Committee, which has worked closely with the Financial Services Commission in the development of the new regime, commented: "The Approved Manager regime seeks to strike the right balance of flexibility and effective regulation taking into account the relative risk profile of the business carried on. I believe that the regime achieves this and will prove to be an attractive option for fund managers seeking to commence business quickly and in a cost effective manner."

Under the Regulations, an Approved Manager can act as the investment manager or investment advisor to any number of private or professional funds recognized under SIBA as well as any number of closed-ended funds domiciled in the BVI which have the key characteristics of a private or professional fund. The Approved Manager can also act for non-BVI feeder funds into BVI master funds.

The main restriction is that aggregate assets under management of all of the open ended funds cannot exceed USD400m and the capital commitments of all of the closed ended funds cannot exceed an as yet undisclosed amount to be specified in the Guidelines. It is expected that since closed ended funds are thought to expose the jurisdiction to a lower level of regulatory risk, the capital commitment restriction will be significantly higher than USD400m.

Although Approved Managers will not be restricted to any material extent in the way they carry out business, the regime has been intentionally crafted to be a "licensing regime" rather than an entirely exempted activity. The Commission will have powers at its disposal to take action against the Approved Manager should it become necessary for it to do so in its role as regulator.

Approved Managers will be subject to certain obligations:

  • They must have at least two directors at all times, one of whom shall be an individual.
  • They are required to have an authorized representative regulated in the BVI.
  • They are required to notify the Commission of any change to any of the information provided by them pursuant to their application for approval within 14 days.
  • They shall notify the Commission of any matter in relation to them or their conduct, which has or is likely to have a material impact or significant regulatory impact with respect to them or their business.
  • They are required to prepare and submit financial statements to the Commission. However, there is no audit requirement.
  • They will be required to submit an Annual Return to the Commission by 31 January of each year containing summary details of the business they are carrying on.

Following some amendments to SIBA and the Approved Manager Guidelines and the publication of a template Application Form by the Financial Services Commission, the new regulations are expected to come into force in a few weeks.

TAGS: investment | business | investment funds | audit | licensing | regulation

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