Introduction

The purpose of this article is to provide an overview of the authorised representative role that was introduced in the BVI by the Securities and Investment Business Act, 2010 ("SIBA").

One of the purposes of SIBA is to extend the ambit of the regulation of the financial services industry in the BVI, in order to also regulate BVI entities conducting "investment business" (such activities being previously unregulated in the BVI). As a consequence of this, in addition to updating the regulatory regime regulating open-ended investment funds, SIBA introduces a regulatory regime regulating entities conducting "investment business". Whilst the regulatory scope of the investment business provisions under SIBA are not dissimilar to the comparable provisions in the Cayman Islands under the Securities Investment Business Law ("SIBL"), there are significantly less exemptions available under SIBA than there currently available under SIBL, such that it is anticipated that more BVI entities will be caught by the regulatory scope of SIBA.

On addition to regulating "investment business", one of the new concepts introduced by SIBA is the statutory role of an "Authorised Representative" ("AR"). AR's are required to be resident in the BVI.

All BVI entities holding a license under SIBA are required by 31 December 2010 to have appointed an AR unless they have a significant management presence in the BVI and providers of authorised representative services under SIBA are required to hold a license from the British Virgin Islands Financial Services Commission ("FSC") to provide this service.

The Role The Role of the AR

The role of the AR is defined by SIBA and its associated regulations, which can be summarized as follows:

  • To act as the main intermediary between the licensee/fund and the FSC and to accept service of notice in the BVI.
  • To keep all such records on behalf of the fund/licensee as prescribed under the legislation and associated regulations.
  • To submit documents and returns to the FSC on behalf of the fund/licensee (there are a significant number of new continuing obligations that the fund/licensee must comply with).
  • To pay all government and licensee fees on behalf of the fund/licensee.

I will now take each of these functions in turn:

Act as main intermediary

This role was previously performed by many registered agents and law firms in the BVI under the role of providing a statutory business address. Therefore, the AR will assume this responsibility going forward.

Record keeping

For private and professional funds, Section 20 of the Mutual Funds Regulations ("MF Regs") identifies the records which should be kept for these types of funds. These requirements are not particularly onerous and most respectable service providers would already be keeping such records.

For public funds, in addition to Section 20 of the MF Regs, Section 21 of the (draft) Public Funds Code attempts to ensure proper record keeping is kept by the AR in the BVI (or is easily attainable) which would be sufficient to allow the FSC to inspect and monitor the public fund's compliance with SIBA and the Public Funds Code, and ensure a full audit trail is in place showing changes to the records.

It would appear that this provision has been purposely kept vague. However, it is expected that the FSC will in due course provide guidance on what they expect.

For investment business licensees, record keeping requirements would be set out in the Regulatory Code (to be amended) ("Reg Code") and possibly the Investment Business Regulations if and when they come into force. In the consultation draft Reg Code, Sections 38 and 39 are worded similar to the draft Public Funds Code in that proper record keeping needs to be maintained (or easily attainable) to be able to demonstrate to the FSC compliance with the Reg Code, and changes to the records are properly updated. Again, the provision has been purposely kept vague, and guidance from the FSC on what they expect will be required.

Submit Documents and Fees

Each investment business licensee/fund has to submit FSC renewal fees each year, which are separate to the annual government fees payable to the BVI Registrar of Companies. Usually the registered agent or law firm would have performed this role, but going forward the AR will assume this responsibility.

It should be noted that the FSC have also increased their submission, filing and renewal fees for SIBA affected entities. These new fees can be found on the FSC website http://www.bvifsc.vg

SIBA has also introduced a number of additional continuing obligations and reporting requirements than were previously the case for funds and licence holders under the now repealed Mutual Funds Act, 1996. These can be broken into Annual Filings and Notifications.

Annual Filings

Now each licencee/fund has to submit audited accounts to the FSC annually within a specified timeframe, and funds also have to also submit an annual return.

Notifications

Whilst SIBA has introduced a number of ongoing notification requirements for funds which were not previously provided for under the Mutual Funds Act, 1996, these requirements have only formalised the FSC's policies in this respect. Consequently, the important thing for AR's and their clients is to ensure they are up to speed with the now statutory obligations and have a robust system in place to carry out this reporting function. If you have any doubts or queries on these requirements, please contact Ogier BVI who have produced a number of checklists for clients setting out what these formal ongoing obligations now are.

Onus of Compliance

It is important to note that the onus of complying with the obligations is on the licensee/fund, and not the AR, and therefore the AR can only report to the FSC what it has been made aware of. It is also clear that the AR is not is the local or resident compliance officer of the licencee/fund.

The key for those who are fortunate enough to be granted an AR licence is to keep in regular contact with their clients and make every effort to ensure that they comply with their ongoing obligations.

Not all service providers are made equal

It is understood that one of the drivers for introducing the AR role was to effectively improve the service levels required by BVI fiduciary service providers to BVI regulated entities and so, in effect create a two tier system for the provision of fiduciary services in the BVI. With this in mind, the FSC has gone on record by indicating that not all existing registered agents will be granted a license to provide authorised representative services.

Further, it is no secret that the FSC has for many years been actively encouraging the "low quality high volume" fiduciary service providers to "get closer" to their clients, and the FSC have become increasingly uncomfortable with these providers being only interested in collecting annual fees.

To conclude, to effectively perform the role of an AR, a higher standard of care, expertise and professionalism is required. This is timely because the BVI as a jurisdiction has seen a demand from clients over recent years for more value added services. If the BVI is to remain competitive globally, particularly if the incorporation business is maturing, we need to prove we can compete with the other offshore jurisdictions in terms of the provision of first rate fiduciary services.

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.