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Enhancements to BVI investment funds offering

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By Simon Schilder – The BVI has recently introduced two regulatory changes which will enhance the appeal of the jurisdiction to investment managers, through the introduction of the Investment Business (Approved Managers) Regulations, 2012 (the Approved Managers Regulations) and also from amendments to the provisions in the BVI Business Companies Act, 2004, dealing with segregated portfolio companies.

The Approved Managers Regulations will appeal to non-institutional investment managers and investment advisors and represents an alternative regulatory regime to complement the more regulated regime available under Part I of the Securities and Investment Business Act, 2010 (SIBA).

Salient features of the new regime:

  • Available to investment managers structured as either a BVI company or limited partnership;
  • Investment managers approved under the Approved Managers Regulations (known as Approved Managers), can act for any number of BVI private or professional funds and any number of BVI domiciled closed-ended funds that have equivalent characteristics to a BVI private or professional fund, as well as other associated and connected vehicles;
  • Eligibility subject to caps on aggregate assets under management of USD400million for open- ended funds and aggregate capital commitments of USD1billion for closed-ended funds. Exceeding these thresholds triggers a notification obligation which can lead to the requirement to apply for a SIBA license if this continues for a three month period;
  • Eligible investment managers can commence business seven days after filing an application for approval with the Financial Services Commission (FSC);
  • Application provides for self-certification of “fit and proper” status of an applicant;
  • No capital adequacy or professional indemnity insurance requirements and no requirement to appoint a compliance officer;
  • Having been approved by the FSC, the investment manager will hold a license as an Approved Manager;
  • Once approved as an Approved Manager, the ongoing obligations are to:
    • have at least two directors, one of whom shall be an individual;
    • have an FSC approved authorised representative resident in the BVI;
    • notify the FSC of any change to any of the information provided at the time of the application for approval within 14 days;
    • notify the FSC immediately if aggregate AUM exceeds US400million or aggregate capital commitments exceeds USD1billion;
    • file an annual return each year with the FSC confirming continued eligibility as an Approved Manager, which is also linked to the annual renewal of the Approved Manager status; and
    • file unaudited financial statements each year with the FSC.

BVI Business Companies Act

Amongst the amendments recently introduced to the BVI Business Companies Act, 2004 are enhancements to the segregated portfolio company regime. The principal amendment being the introduction of provisions to enable directors of segregated portfolio companies to correct matters which might otherwise prejudice the segregation of assets and liabilities, through provisions enabling them to reassign assets and liabilities between segregated portfolios that had initially been wrongly assigned. This amendment will enhance the attraction of the use of such vehicles for investment managers wishing to pursue multiple strategies within the same fund vehicle, as it enables directors of such funds to fix matters which would otherwise prejudice the legal segregation created by the segregated portfolio company structure. 

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