The BVI Financial Services Commission (the "FSC") Approved Investment Manager Guidelines (the "Guidelines") came into effect on 10 December 2012.
The Guidelines set out the FSC's guidance on the BVI approved manager regime (the "Approved Manager Regime") introduced by the BVI Investment Business (Approved Managers) Regulations 2012 (the "Regulations"), aimed at non-institutional investment managers of BVI funds, providing an alternative streamlined regulatory framework for BVI investment managers currently required to be licensed under Part I of the BVI Securities and Investment Business Act, 2010 ("SIBA").
The on-going obligations of the Approved Manager Regime are less onerous than those under the alternative SIBA framework. The approval process is streamlined, with the FSC able to raise objection to the application only during the seven day period following the filing of the application, after which period the manager can commence business pending the FSC approval. The application fee under the new regime is US$1,000, with an annual renewal fee of US$1,500, payable for the first year upon the approval being granted. Accordingly, the industry has found that the new regulatory framework is efficient and cost effective while still being in line with international regulatory standards.
BVI investment managers can choose to be licensed under SIBA or to seek approval as an Approved Manager under the Regulations. We have found that the requirements under the Regulations tend to appeal to start-ups or smaller investment managers. Managers currently licensed under SIBA who opt for the Approved Manager Regime, will be required to surrender their existing SIBA licence.
Eligible applicants must:
- 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 or a fund domiciled in a "recognised jurisdiction" (essentially all well-established financial centres);
- self-certify that they satisfy the FSC's "fit and proper" test;
- be subject to the following caps:
- no more than US$400 million aggregate assets under management for open-ended funds;
- no more than US$1 billion aggregate capital commitments for closed-ended funds;
- no more than US$1 billion aggregate assets in respect of managed accounts1 ; and
- submit a short application form and limited supporting documents to the FSC at least seven business days prior to the intended commencement date.
Obligations of Approved Managers
Following approval, the Approved Manager:
- 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 their assets into BVI-domiciled master funds, or master funds domiciled in a recognised jurisdiction;
- 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;
- must file financial statements with the FSC within six months of the entity's financial year end (there is no requirement for these to be audited statements);
- 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
- notify the FSC of any change in the information provided by the approved manager to the FSC within fourteen 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 Approved Manager Regime, it offers:
- a less onerous regulatory regime which means that approved managers do not have capital adequacy or professional indemnity insurance requirements, and do not have to appoint a compliance officer;
- 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 (1) 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
- a faster time frame for eligible applications (generally seven days instead of the minimum of four weeks for a comprehensive SIBA licence for investment managers/advisors).
1 Where an investment manager manages both an open ended fund and a closed ended fund, the aggregate assets under management in relation to the open ended fund and the amount prescribed for the closed-ended fund must be segregated and treated separately.
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.