British Virgin Islands: A Strengthening Act - Securities and Investment Business Act, 2010

Following the completion of an industry consultation, the Securities and Investment Business Act, 2010 ("SIBA") came into force in the British Virgin Islands ("BVI") on 17 May 2010. The enactment of SIBA represents an important step for the continued development and growing sophistication of the financial services sector within the BVI and this new statute will, going forward, represent the cornerstone for the regulation of much of the BVI's financial services industry.

Importantly on a global stage, SIBA ensures that the regulation of the BVI's financial services industry remains in tune with the evolving global regulatory standards, demonstrating the BVI's continued commitment to implement international best practice for financial services regulation. In addition, with SIBA, the BVI has a further modern and user friendly statute to complement the universally popular BVI Business Companies Act, 2004, Insolvency Act, 2003 and Virgin Islands Special Trusts Act, 2003. Taken together, this suit of popular statutes should ensure the continued popularity and growth of the BVI as a venue for the structuring of products for the private client industry for years to come.

Objectives of SIBA

SIBA has four principal objectives, being to:

  • introduce an investment business licensing regime to regulate entities conducting "investment business" in or from within the BVI;
  • adopt restrictions on and regulations for the making of "public issues of securities" into the BVI;
  • update and modernise the regulation of the BVI investment funds industry, by repealing the Mutual Funds Act, 1996 and replacing it by SIBA, the Mutual Funds Regulations and the Public Funds Code; and
  • introduce a market abuse regime.

Dealing with each of these objectives in turn, the key features are as follows:

Investment Business

Any person carrying on activities constituting "investment business" in or from within the BVI involving "investments" will, under SIBA, be required to hold an investment business license specifically authorising that kind of investment business.

Importantly, the investment business provisions within SIBA are not intended to capture all BVI entities used for investment purposes and many structures utilised by family offices for facilitating the management of private wealth will not be caught by the new regulatory regime, since such entities' activities will likely fall outside the definition of activities constituting "investment business". Broadly speaking the intention is that entities whose business purposes effectively make them the "shopkeepers of investments" are caught by these new regulations and so required to be licensed under SIBA.

It should also be noted that where an entity's activities do constitute "investment business", certain investment activities are expressly excluded from constituting investment business ("excluded activities") and certain types of persons conducting investment business are expressly excluded from the requirement to hold an investment business license under SIBA ("excluded persons").

Significantly, the scope of SIBA will cover any BVI company carrying on investment business anywhere in the world and any person soliciting a person (including a BVI entity) in the BVI in order to offer a service constituting investment business. Therefore, the investment business provisions under SIBA will have application to both BVI entities conducting investment business outside the BVI and also BVI and non-BVI entities conducting investment business within the BVI, unless in either case, those activities constitute an "excluded activity" or the entity conducting the investment business qualifies as an "excluded person".

For BVI entities currently conducting business activities which are now caught by the investment business regime under SIBA, transitional provisions exist, which are due to expire on 31 December 2010, during which such entities are required to come into compliance with and become licensed by the Financial Services Commission under SIBA.

Public Issues of Securities

SIBA introduces provisions regulating the offering of securities into the BVI.

Under the public issues provisions, subject to limited exceptions, no security may be offered to the "public" in the BVI unless the offer is contained within a "registered prospectus"; and the offer complies with the Public Issuers Code. For these purposes, an offer of securities to any person in the BVI or an offer received by a person in the BVI is an offer of securities to the public. Importantly, the mere receipt by a BVI company at its registered office of an offer of securities will not, in itself, be sufficient to make that offer constitute a public offer.

Where an offer is deemed to be a public offer and so requiring the prospectus to be registered with the FSC, SIBA and the Public Issuers Code provide for prospectus content requirements and for public issues by BVI companies, certain provisions of the BVI Business Companies Act, 2004 are disapplied by Schedule 6 of SIBA.

However, it should be noted that the provisions in SIBA relating to public issues are not yet in force.

Mutual Funds

SIBA repeals the Mutual Funds Act, 1996 and introduces an updated and modernised statutory regime for the regulation of the BVI funds industry, through SIBA and its secondary legislation, the Mutual Funds Regulations and the Public Funds Code. The framework for the regulation of BVI funds is not materially altered by SIBA and most of the popular concepts remain.

Significantly, the regulatory regime applicable to private and professional funds (the two categories of BVI funds applicable to approximately 2,700 of the 3,000 licensed BVI funds) is not substantially changed as a consequence of SIBA, with many of the "changes" merely representing the codification of existing regulatory policies operated by the Financial Services Commission, which have evolved over time in line with evolving international standards. The regulatory changes for such funds are therefore positive, as it provides certainty and enables greater regulatory transparency.

The regulatory regime applicable to public funds, which is a category of fund utilised for retail offerings by BVI funds (the category of BVI funds applicable to approximately 300 of the 3,000 licensed BVI funds) will be changing under SIBA, with most of the regulatory changes introduced by the proposed Public Funds Code (which whilst in draft, has just completed an industry consultation). Underpinning the Public Funds Code is the need for the regulation of BVI funds aimed at the retail market to be on a par with IOSCO Principles.

As with the investment business provisions, to facilitate the smooth transitioning of existing BVI funds into the new regulatory regime, transitional provisions exist under SIBA, which are due to expire on 31 December 2010, during which various of the changes brought about by the new regulatory regime are required to have been implemented.

Market Abuse

SIBA provides for a market abuse regime which introduces prohibitions against insider dealing in the BVI. The market abuse regime introduced under SIBA is very much in line with and similar to accepted international standards and is therefore not worthy of further comment in this respect.

Overall, the regulatory changes brought about by the enactment of SIBA have been very much welcomed by the BVI financial services industry, as they are perceived to further strengthen the BVI's financial services platform, which should ensure the continued competitiveness of the BVI for the years to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions