On 10 December 2012, the British Virgin Islands' ("BVI") "regulation light" regime for the approval of eligible investment business managers came into effect. The new regime is designed to be complementary with the existing licensing regime for managers under the Securities and Investment Business Act 2010 ("SIBA"), offering alternatives that reflect different requirements based on size and complexity of the proposed manager's business. This step is seen as a further confirmation of the dynamic and responsive nature of BVI's financial services industry and the BVI regulatory authorities in seeking balanced and appropriate regulation whilst continuing to enhance the BVI's attractiveness as a jurisdiction for smaller start-up managers as well as bigger players in the market.

This regime was introduced following the enactment of the Investment Business (Approved Manager) Regulations 2012 (the "Regulations") and the publication of the Approved Investment Managers Guidelines (the "Guidelines") by the Financial Services Commission (the "Commission"), and offers a lighter touch regulatory option for eligible investment managers who would otherwise be subjected to the more onerous application process and ongoing requirements under SIBA and the BVI's Regulatory Code 2009.

Key Features

Eligible applicants must:

(i) Be a BVI company or limited partnership that intends to act as the investment manager or advisor to a private fund, professional fund or a closed-ended fund domiciled in the BVI or a foreign fund investing substantially all of its assets in a BVI-domiciled fund;

(ii) Self-certify that they satisfy the Commission's "fit and proper" test;

(iii) Be subject to the following caps: no more than US$400 million aggregate assets under management for open ended funds, and no more than US$1 billion aggregate capital commitments for closed ended funds; and

(iv) Submit a short application form and limited supporting documents to the Commission at least seven business days prior to the intended commencement date.

Following approval, an Approved Manager:

(i) Can act as manager or advisor to any number of private or professional funds recognised under SIBA and any number of BVI-domiciled closed ended funds which have the characteristics of a private or professional fund. The approved manager can also act for non-BVI feeder funds investing substantially all of their assets into BVI-domiciled master funds;

(ii) Must file annual returns and unaudited financial statements with the Commission;

(iii) Must ensure that it has an authorised representative as required by SIBA as well as at least two directors (one of whom must be an individual); and

(iv) Must notify the Commission of any change in the information provided by the approved manager to the Commission within 14 days of such change occurring or any other matters in relation to its conduct or which is likely to have a material impact on its business.

Among the many benefits of the new regime, it offers:

  • a less onerous application process and regulatory regime which means that approved managers would not have capital adequacy or professional indemnity insurance requirements, and would not have to appoint a compliance officer;
  • a more cost-effective option for managers or advisers who qualify for lighter regulation (in addition to the cost savings arising out of the first bullet point above, the application fee is US$1,000 and the annual renewal fee is US$1,500); and
  • a faster time frame for eligible applications (generally 7 days instead of the minimum of 4 weeks for a comprehensive SIBA licence for investment managers/advisors).

Eligible applicants can still choose to apply for the comprehensive investment manager or investment advisor licence if they wish, and can in the future migrate towards the more regulated licence. Similarly, existing SIBA licensees which meet the criteria of an approved manager would be able to migrate to the approved manager licence if they prefer to do so.

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