The new Mutual Funds Act 2004 came into effect on 1st October 2004. It covers the registration of public funds, recognition of private and professional funds and licensing of administrators and managers. Under the Act, a mutual fund refers to a company incorporated, a partnership formed, a unit trust organized or other similar body formed under the laws of Anguilla or any other jurisdiction that collects and pools investor monies for the purpose of investing collectively. The fund must also issue shares, or equivalent title, that entitle the holder of those shares to receive on demand or within a specified period after demand an amount calculated by reference to the value of a proportionate interest in the whole or in a part of the net assets of the company, partnership, the unit trust or similar body.
The definition of a mutual fund includes an umbrella fund whose shares are split into a number of different class funds or sub-funds. The definition also includes a fund that has a single investor which is a mutual fund not registered or recognized under the Act. A unit trust means an arrangement creating a trust under the laws of Anguilla or any other country or jurisdiction in which unit holders participating in the arrangement are the beneficiaries of the trust.
Amongst the innovative features of the Act is its definition of the three types of funds provided. It defines a public fund as a fund that is not a private or professional fund. In practical terms a public fund is one that offers shares in the entity used to the general public through the issuance of a prospectus. A public fund must issue a prospectus. If a registered public fund publishes a prospectus or any amendment to it that contains misrepresentations relating to any disclosures required under the Act, a person who purchased any shares pursuant to the prospectus or amendment to it, is deemed to have relied on the misrepresentation and shall have specific rights. These include rescission for the purchase or damages against the fund. However, no person is liable if he/she proves that the purchaser bought the shares offered by the prospectus or amendment to it with knowledge of the misrepresentation.
The private fund is constituted of no more than 99 investors. The constitutional documents must state this. The fund must not make any invitations to the public to subscribe for or purchase shares issued by it. There is no minimum or maximum investment in a private fund.
A professional fund is a fund, whose shares are made available only to professional investors whose initial investment is not less than US$100,000 or its equivalent in another currency. This minimum initial investment shall not apply in respect of an investment made by the manager, administrator, promoter or underwriter of the professional fund. A professional investor means a person whose ordinary business involves dealing in investments or who has signed a declaration that he, whether individually or jointly with his spouse, has a net worth in excess of US$1 million or its equivalent in any other currency and that he consents to being treated as a professional investor. There is no minimum or maximum number of investors in a professional fund.
A private or professional fund which is a family trust fund is established for the benefit of one or more members of the same family is exempted from regulation under the Act.
In order to be granted a licence as an administrator or manager, the Commission must be satisfied that the applicant is a fit and proper person to be engaged in the business proposed. The applicant must also have available to him or her adequate knowledge, expertise, resources, and facilities necessary for the nature and scope of the business proposed and has appointed an auditor satisfying conditions as may be prescribed by the Commission.
An attractive feature of the Act is that a manager or administrator who provides services to one private mutual fund or one professional mutual fund and whose business is only to appoint other service providers or to receive fees or both, is exempted from the requirement to appoint an auditor. Another feature is the fact that only registered public funds have to provide audited financial statements.
Where the Commission is satisfied that to do so would not be prejudicial to the public interest, it may direct that all or any of the provisions of the Act or the regulations may not apply or may apply subject to such modifications as it may specify in the direction to any person or class of persons.
Protected Cell Companies Act 2004
The Protected Cell Companies Act 2004 came into force on 1st October 2004. A protected cell company is a company which may be formed under the Companies Act 2000. What makes a company a protected cell company is its registration under the Protected Cell Companies Act 2004. Permission to be registered as a protected cell company must be granted by the Financial Services Commission. Where the company is engaged in insurance business, this is specifically provided for under the Act.
A protected cell company may form protected cell accounts. A protected cell company does not form other protected cell companies. The protected cell company must inform any person with whom it enters into a transaction that it is a protected cell company.
A protected cell account refers to a separate and distinct account (comprising or including entries recording data, assets, rights, contributions, liabilities and obligations linked to such account) of a protected cell company. It is not a separate legal entity from the protected cell company. The Act imposes restrictions of what the protected cell company can do in relation to the protected cell account.
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