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Following the enactments of the Securities and Investment Business Act, 2010 (SIBA) and Mutual Funds Regulations, 2010, the BVI Financial Services Commission (BVI FSC) has now released the Public Funds Code, 2010.

The code, which will come into force on 31 March 2011 and will from that point apply to all BVI funds registered as public funds, is designed to implement the standards set by the International Organisation of Securities Commissions (IOSCO) for the regulation of retail funds, as far as is relevant and applicable to public funds. In addition to considering ISOCO's Objectives and Principles, the FSC has also had regard to IOSCO's Principles for the Valuation of Hedge Fund Portfolios and AIMA's Guide to Sound Practices for Hedge Fund Valuation while drafting the Code, so ensuring that the it meets with international best practice. It is intended that the Code be interpreted purposively, in accordance with the purposes or objectives of the legislation.

Whilst coming into force on 31 March 2011, the transitional period for existing public funds to come into compliance with the prospectus and advertising content requirements of Sections 46 and 50 (3) of SIBA has been extended to 30 June 2011. This should provide existing public funds with enough time to come fully into compliance with the new regulatory regime.

The code provides for four principles for business which public funds are required at all times to comply with, being: Integrity; Management and Control; Investors' Interests; and Relationship with Commission. The application of these principles can be seen throughout the Code.

The main components of the code are provisions relating to prospectus content requirements (as detailed in Schedule 1); corporate governance, including the establishment, maintenance and implementation of policies and procedures for, inter alia, risk management, management of conflicts of interest, arrangements for the segregation and safe keeping of fund assets, issue and redemption of shares and valuations; and record keeping.

In addition to this, the code imposes a number of reporting obligations upon public funds, by providing for various events which trigger notificational obligations to the FSC (as detailed in Schedule 2). These obligations are over and above those provided for within the Regulations and require public funds to disclose to the FSC anything which might reasonably be expected to have a "significant regulatory impact". For these purposes, a suspension of redemptions or any event which could impact upon the fund's solvency are included amongst matters which might reasonably be expected to have a "significant regulatory impact". The overriding principle therefore is one of enhanced levels of transparency between public funds and the FSC.

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