The British Virgin Islands Financial Services Commission ("FSC") announced on 9 September 2008 the creation of a new Annual Return regime for BVI investment funds. The new Annual Return replaces the previously administered Mutual Funds survey which funds have been invited to participate in since 2004.
Completion of the Annual Return is voluntary in respect of the year ended 31 December 2007 but the FSC has stated participation will be mandatory in respect of the year ended 31 December 2008.
The requirement to file the Annual Return applies to all funds which are licensed under the Mutual Funds Act, 1996 that is, all private, professional and public funds. Funds which fall outside the scope of the Mutual Funds Act, 1996 such as closed ended vehicles are not required to file an Annual Return.
What information must be disclosed in the Annual Return?
The Annual Return requires each fund to report annually as to its basic prudential and governance information and summary financial information including details of its asset allocation. The Annual Return does not require disclosure of any information regarding the identity of investors or of specific investments held by the fund. The reporting period for the Annual Return is the calendar year regardless of the financial year operated by the fund.
The summary financial information to be disclosed includes opening NAV, total subscriptions and total redemptions, net income / loss, dividends/distributions, summary expenses and closing NAV. Each fund is also required to disclose its asset allocation by product and jurisdiction. The form of the Annual Return along with the FSC's Guidance Notes is available on the FSC's website at www.bvifsc.vg . The FSC has indicated that an electronic reporting system should be in place for the 2008 reporting period which will allow the information to be inputted and submitted online.
The Annual Return includes a declaration that the information represents a true and fair view of the fund's position as at the reporting date. The declaration must be signed by a director, officer or other duly authorized representative of the fund. It is important to note that, although the declaration contains a "true and fair view" representation akin to a traditional audit opinion, the information is not required to be audited.
What is the information in the Annual Return to be used for?
The FSC has stated that the information gathered will be used for statistical and compliance purposes only and will not be shared outside the FSC other than on an aggregated basis or as required by law. Importantly, completed Annual Returns will not be available to the public.
The Annual Return is intended to allow the BVI to appropriately benchmark its funds industry, to conform to international reporting standards and to enable the FSC to gather financial information which will assist with the strategic development of the BVI funds industry.
What does a fund need to do?
The FSC "strongly urges and recommends" completion of the Annual Return in respect of the year ending on 31 December 2007 "in order to become familiar with the new reporting requirements". The FSC is grateful to those funds that have already completed the Annual Mutual Funds Survey in respect of the 2007 reporting period but has pointed out that the Annual Return applies to all funds. However, as stated at the outset, completion of the Annual Return for the 2007 reporting period is voluntary.
While the enacting legislation is not yet in place, we do urge funds to work on the basis that completion of the Annual Return will be mandatory in respect of the 2008 reporting period and thereafter. The first Annual Returns will need to be filed no later than 30 June 2009 in respect of the reporting period ended on 31 December 2008. We recommend that fund managers take the opportunity now to ensure that their own systems and those of the fund's administrator are able to generate the information required to be disclosed in respect of the 2008 reporting period.
Subject to the enacting legislation coming into force, failure to complete the Annual Return for the 2008 Reporting Period may lead to enforcement action being taken by the FSC including the application of administrative penalties. We also remind our clients that any licensee is subject to enforcement action by the FSC if it provides the FSC with any false, inaccurate or misleading information.
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.
