Wed, 05/02/2014 - 19:57
By Michael Doyle (pictured), senior associate, Harneys – Investment Business (Approved Manager) Regulations, 2012 (Old Regulations) came into force on 10 December 2012 and introduced a regulatory light investment management regime for investment managers incorporated or formed as BVI companies or partnerships (Approved Managers). The Approved Manager regime has been remarkably successful and popular with start-ups, family office and closed ended investment managers by striking the right balance between regulation, cost and flexibility, however it has not been available to investment managers who manage non-BVI funds.
The Investment Business (Approved Managers) (Amendment) Regulations, 2013 (New Regulations), which came into force on 2nd January 2014, open up the Approved Managers regime to investment managers of non-BVI funds.
Approved Managers under the Old Regulations could only provide services to BVI open ended private or professional funds and BVI closed ended funds with equivalent characteristics to private or professional funds provided they had no more than USD400million assets under management (in the former case) and capital commitments of less than USD1billion (in the latter).
The New Regulations permit Approved Managers to manage funds from any recognised jurisdiction that have equivalent characteristics to BVI private or professional funds subject to the USD400million and USD1billion asset caps. Recognised jurisdictions for these purposes means:
Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom, United States of America.
The New Regulations also provide that an Approved Manager may provide services to a fund that is not from a recognised jurisdiction where it invests all or a substantial part of its assets in a qualifying BVI or a recognised jurisdiction fund.
If the Approved Manager exceeds or is likely to exceed the relevant asset cap it can apply for a full Category 3 Investment Management licence under the Securities and Investment Business Act, 2010 (SIBA).
BVI approved managers and managed accounts
Under the regime the BVI Financial Services Commission (Commission) also has authority to licence Approved Managers to manage “such other person as the Commission may approve on a case by case basis”. This category is open to expansion but to date the Commission has been prepared to accept applications from managers of “managed accounts” subject to a USD400million cap on assets under management and provided the Approved Manager can demonstrate “appropriate segregation” of client assets and that its clients are high net worth individuals or sophisticated investors. Interestingly, the Commission has not necessarily required there to be any nexus between the BVI and the location of the managed accounts or the ultimate beneficial owners of the assets in the managed accounts. It will be interesting to see how this develops in 2014.
The amendments brought in by the New Regulations make the BVI Approved Manager regime even more attractive to a wider range of investment managers and solidify its current competitive advantage over regimes in other jurisdictions.
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