First there was the Mutual Funds Act . . .

The regulation of mutual funds (collective investment schemes) and fund managers and administrators in the BVI commenced with the Mutual Funds Act, 1996 (as amended; the "Mutual Funds Act") which came into force on January 2 1998.

The Mutual Funds Act and its associated regulations and guidelines was mainly concerned with defining what constitutes a mutual fund, classifying funds into one of three categories (private, professional or public), and setting out the different requirements applicable to each.

But it also required all mutual fund managers or administrators operating in or from the BVI to be licensed by the Financial Services Commission (FSC). The usual requirements (including "fit and proper person" and "adequate knowledge, expertise, resources and facilities") were prescribed in general terms in the Act; a detailed exposition was left to the FSC's guidelines.

The Mutual Funds Actwas much criticisedat the time. It was felt that the degree of regulation that it introduced in relation to mutual funds, although relatively light, would have a deleterious effect on the industry in the BVI. Now, 15 years on, this can be seen not to have been the case, as evidenced by the number of mutual funds domiciled in the jurisdiction.

And then SIBA . . .

The Securities and Investment Business Act, 2010 (SIBA) came into effect on May 17 2010. It was amended by the Securities and Investment Business (Amendment) Act, 2012.

SIBA extends regulation to a number of previously unregulated financial activities. Part II provides for the regulation of public issues of securities to persons located in the BVI; and Part IV introduces a new market abuse regime covering insider dealing and market manipulation.

In relation to mutual funds, Part III replaces the Mutual Funds Act, which it repealed.

Finally, Part I deals with the licensing of persons carrying on investment business in or from within the BVI. Section 5 provides for the FSC, on application, to issue various categories of investment business licence, as specified in Schedule 3, namely:-

  • Category 1: Dealing in Investments.

Sub-category A: Dealing as Agent.

Sub-category B: Dealing as Principal.

  • Category 2: Arranging Deals in Investments.
  • Category 3: Investment Management.

Sub-category A: Managing Segregated Portfolios (Excluding Mutual Funds).

Sub-category B: Managing Mutual Funds.

Sub-category C: Managing Pension Schemes.

Sub-category D: Managing Insurance Products.

Sub-category E: Managing Other Types of Investment.

  • Category 4: Investment Advice.

Sub-category A: Investment Advice (Excluding Mutual Funds).

Sub-category B: Investment Advice (Mutual Funds).

  • Category 5: Custody of Investments.

Sub-category A: Custody of Investments (Excluding Mutual Funds).

Sub-category B: Custody of Investments (Mutual Funds).

  • Category 6: Administration of Investments.

Sub-category A: Administration of Investments (Excluding Mutual Funds).

Sub-category B: Administration of Investments (Mutual Funds).

  • Category 7: Operating an Investment Exchange.

And now the Approved Managers Regulations . . .

The Investment Business (Approved Managers) Regulations, 2012 (the "Approved Managers Regulations") came into effect on 10 December 2012. They create a new category of regulated person: the approved investment manager ("Approved Manager").

The Approved Managers Regulations were made under SIBA as amended in 2012.

In many respects, the Approved Managers Regulations and SIBA overlap. But the advantage of becoming an Approved Manager is that the application procedure is simpler and the continuing obligations are less onerous.

The Approved Managers Regulations


The Approved Managers Regulations apply to BVI business companies and to limited partnerships registered under the Partnership Act, 1996.

An Approved Manager:-

  • Must not carry on any other business except "Approved Manager" business.
  • Must have at least two directors, one of whom must be an individual, and an authorised representative.
  • Is exempt from the requirement to appoint a compliance officer and establish and maintain a compliance procedures manual.

An Approved Manager may act as an investment adviser or investment manager to:-

  • A private fund or professional fund.
  • A BVI closed ended fund (whether a company, a partnership or a trust) which has the characteristics of a private or professional fund.
  • A person who is affiliated to a fund structure as above.
  • Other persons approved by the FSC on a case by case basis.
  • A non-BVI person (whether a company, a partnership or a trust) which has equivalent characteristics to a private fund, professional fund or a closed-ended fund and invests all or a substantial part of its assets in a private fund, a professional fund or a BVI closed ended fund which has the characteristics of a private or professional fund.

An Approved Manager is not, unless otherwise required by the FSC, restricted as to the number of persons it may act for.

However, where an Approved Manager has assets under management exceeding:

  • in relation to mutual funds, US$400 - million; or
  • in relation to closed-ended funds, US$1 - billion,

or its equivalent in each case in any other currency, it will cease to qualify as an Approved Manager.

An Approved Manager may carry out any of the above investment business functions; and the requirement which would otherwise apply to hold an investment business licence under SIBA in respect of Category 3 B: Investment Management (Mutual Funds), Category 3 E: Managing Other Types of Investment or Category 4 B: Investment Advice (Mutual Funds) is superseded. Furthermore, the Regulatory Code, 2009 does not apply to its activities.

However, an Approved Manager is a regulated person and is subject to FSC enforcement action.

Complements SIBA

It is clear that the effect of the Approved Managers Regulations is to complement rather than to replace in whole or in part the licensing provisions of Part I of SIBA. For example, an Approved Manager may not act as an investment adviser or investment manager to a public fund or a recognised foreign fund. But an Approved Manager may carry out investment business functions which do not relate to mutual funds. For example, it may act as an investment adviser or investment manager to a BVI closed ended fund which has the characteristics of a private or professional fund.

A person may apply to be licensed as an investment manager or investment adviser under Part I of SIBA instead of being approved as an investment manager under the Approved Managers Regulations. Indeed, where the FSC considers it to be in the public interest, it may require an Approved Manager to do so.

Furthermore, where an Approved Manager ceases to qualify as such under the Approved Managers Regulations, it may apply to the FSC to be licensed to carry on investment business under Part I of SIBA. This applies in particular where an Approved Manager has ceased to qualify by virtue of exceeding the prescribed assets under management limitations; in effect, such an Approved Manager can then graduate to the more regulated investment business licensing regime under Part I of SIBA.

Finally, it may be worth noting that the investment business functions which may be carried out by an Approved Manager do not extend to other categories and sub-categories of investment business as set out in Schedule 3 of SIBA. In short, if a particular investment business function is not one which is covered by the Approved Managers Regulations, it may not be undertaken by an Approved Manager. For example, an Approved Manager may not act as custodian of investments for a private fund or a professional fund: this function continues to require a Category 5 A licence under Part I of SIBA.

Application Process and Fees

Applications must be submitted to the FSC in the prescribed form at least seven days prior to commencing business. The applicant may, however, trade for up to thirty days from the date of submission of the application, extendable for a further thirty days by the FSC, either on its own volition or on application by the applicant.

The above provision allows an applicant to commence business without delay. But this advantage has an attendant risk: if the FSC refuses approval, the applicant must cease carrying on business immediately.

The application must include certain prescribed information and documentation, including:-

  • A copy of the applicant's constitutional documents.
  • Details in the prescribed form of each director or general partner and senior officer of the applicant and of each person who owns or holds a significant interest in the applicant.
  • A "fit and proper" declaration in the prescribed form by the applicant relating to each of the persons above.
  • The funds that the applicant intends to act for upon commencement of business - number and prescribed details (name, address and place of incorporation or registration).
  • Copies of investment advisory or investment management agreements.
  • Confirmation in the prescribed form of the individual who will be carrying out the day-to-day investment business functions of the applicant.
  • Whether or not the applicant has delegated or intends to delegate any of its business functions. If so, an outline of the delegated functions and the identity of the delegate must be provided as well as a copy of the delegation agreement.
  • A declaration in the form of a letter addressed to the FSC by the applicant's authorised representative or legal practitioner to the effect that the application is complete and meets the application requirements of the Approved Managers Regulations.

The prescribed application fee must accompany the application. As at May 2013, the fee is US$1,000. The annual renewal fee is US$1,500.

If the FSC is satisfied that the applicant is fit and proper, will be in compliance with the Approved Managers Regulations upon approval, and approval of the application is not against the public interest, it may approve the applicant as an approved investment manager.

Conversely, if the FSC, in dealing with an application, forms the view that the applicant is not fit and proper or, if approved, will not be in compliance with the Approved Managers Regulations or that it is not in the public interest to approve the application, it may deny the application. The FSC must provide the applicant with reasons for its decision.

Notifications, Financial Statements, Annual Return

An Approved Manager must within fourteen days notify any change in the above details to the FSC in the prescribed form.

Furthermore, the FSC must be notified of any matter concerning the Approved Manager or its conduct of a relevant business which has or is likely to have a material impact or a significant regulatory impact with respect to the Approved Manager or the relevant business.

An Approved Manager is generally required to prepare and submit financial statements in accordance with SIBA. However, the financial statements need not be audited and an auditor need not be appointed.

An Approved Manager must by no later than January 31 each year file with the FSC an annual return in the prescribed form, including details of:-

  • Its directors and senior officers and shareholders with a significant interest in it.
  • The persons for which it provides services.
  • The assets under management of each person for which it acts.
  • The number of investors in each person for which it acts.
  • Any significant complaints received by it.

Ceasing to be an Approved Manager

Where an Approved Manager ceases to qualify as such, it must not take on any new business and must submit a notification to the FSC within seven days. It will have three months (which the FSC may extend by a further three months) to cease carrying on relevant business or to submit an application to be licensed to carry on investment business under Part I of SIBA.

Where an Approved Manager exceeds the prescribed assets under management limitations, the FSC may allow it to continue to function as an Approved Manager having regard to any risk that may be associated with it or any of the persons for which it acts.

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.