Following the successful launch in December 2012 of the BVI's "regulation light" regime for investment managers, which was well received and spurred a number of new managers being formed, the BVI's Financial Services Commission has decided to extend the scope of this regime to include the management of non-BVI funds from "recognised jurisdictions" such as funds domiciled in the UK, USA, Canada, Bermuda, the Cayman Islands and numerous other well-established financial centres1.
This step is seen as a further confirmation of the dynamic and responsive nature of BVI's financial services industry and the BVI regulatory authorities in seeking balanced and appropriate regulation whilst continuing to enhance the BVI's attractiveness as a jurisdiction for smaller start-up managers as well as bigger players in the market.
The Approved Manager regime was introduced in December 2012 following the enactment of the Investment Business (Approved Manager) Regulations 2012 ("Regulations") and the publication of the Approved Investment Managers Guidelines (the "Guidelines") by the Financial Services Commission (the "Commission"), and offers a lighter touch regulatory option for eligible investment managers who would otherwise be subjected to the more onerous application process and ongoing requirements under the Securities and Investment Business Act, 2010 ("SIBA") and the BVI's Regulatory Code 2009.
The Approved Manager regime has been very popular particularly in relation to family office or start up managers wishing to provide services to BVI open or closed ended funds, as well as to client portfolios or separately managed accounts. Effective 2 January 2014, the extension of the regime to include non-BVI funds will offer a quick and cost-efficient option for clients who have non-BVI open or closed-ended funds and who want a manager or adviser entity that is licensed and not exempt from regulation, particularly in light of increasing investor scrutiny when examining the manager as well as the fund structure.
Key features
Eligible applicants must:
(i) be a BVI company or limited partnership that intends to act as the investment manager or advisor to a private fund, or professional fund domiciled in the BVI or in a recognised jurisdiction, or to a closed-ended fund domiciled in the BVI or in a recognised jurisdiction, or a foreign fund investing substantially all of its assets in a BVI domiciled fund;
(ii) self-certify that they satisfy the Commission's "fit and proper" test;
(iii) be subject to the following caps: no more than US$400 million aggregate assets under management for open-ended funds, and no more than US$1 billion aggregate capital commitments for closed-ended funds; and
(iv) submit a short application form and limited supporting documents to the Commission at least seven business days prior to the intended commencement date.
Following approval, the Approved Manager:
(i) can act as manager or advisor to any number of private or professional funds recognised under SIBA domiciled in the BVI or as well as to any number of private or professional funds domiciled in any recognised jurisdiction, and any number of closed-ended funds domiciled in the BVI or any recognised jurisdiction which have the characteristics of a private or professional fund. The approved manager can also act for non-BVI feeder funds investing substantially all of its assets into BVI-domiciled master funds;
(ii) must, by 31 January of each year, file an annual return containing details of its business activities as well as declaration about compliance with the regime, continued fit and proper status;
(iii) must file financial statements with the Commission within six months of the entity's financial year end (there is no requirement for these to be audited statements);
(iv) must ensure that they have an authorised representative in accordance with SIBA as well as at least two directors (one of which must be an individual); and
(v) notify the Commission of any change in the information provided by the approved manager to the Commission within 14 days of such change occurring or any other matters in relation to its conduct or likely to have a material impact on its business.
Among the many benefits of the new regime, it offers:
(i) a less onerous regulatory regime which means that approved managers would not have capital adequacy or professional indemnity insurance requirements, and would not have to appoint a compliance officer;
(ii) a more cost-effective option for managers or advisers who qualify for lighter regulation (in addition to the cost savings arising out of the points in (i) above, the application fee is US$1,000 and the annual renewal fee is US$1,500, which is substantially lower than government fees in a number of other offshore jurisdictions); and
(iii) a faster time frame for eligible applications (generally 7 days instead of the minimum of 4 weeks for a comprehensive SIBA licence for investment managers / advisors).
Footnote
1 These are currently Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, Netherland Antilles, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom and United States of America.
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