New Mutual Funds Legislation for the British Virgin Islands

Funds incorporated in the British Virgin Islands (“BVI”) will now have further legal and regulatory support following the enactment of the Securities & Investment Business Act (SIBA).

The Act which became law yesterday codifies some of the practices already undertaken by funds domiciled in the BVI and introduces laws to regulate investment business, public issues of securities and market abuse. Fund managers already find the legal and regulatory system in the BVI familiar and easy to use as the Mutual Funds Act, 1996 has been in place for well over ten years. The BVI also derives its laws and regulations from English law.

SIBA introduces four new regulatory areas:

• It updates and modernises the regulation of the BVI investment funds industry, by repealing the current Mutual Funds Act, 1996 and replaces it with SIBA and the Mutual Funds Regulations, 2010;
• It introduces an investment business licensing regime to regulate entities conducting “investment business” in or from within the BVI;
• It adopts restrictions on, and regulations for, the making of “public issues of securities” into the BVI; and
• It introduces a market abuse regime.

The framework for the regulation of BVI funds is not materially altered by the enactment of SIBA and most of the popular concepts remain: many of the legislative changes made under SIBA and the Mutual Funds Regulations, 2010 merely codify existing BVI FSC policies which have developed over recent years in line with evolving international standards.

Changes introduced by SIBA include:

• A requirement of BVI funds to have at least two directors
• A requirement for BVI funds, licensed managers and licensed administrators to appoint a BVI resident authorised representative
• A change in the minimum initial investment by investors investing in professional funds to US$100,000
• A requirement for professional and private funds intending not to appoint an investment manager, administrator or custodian (functionaries) to apply to the FSC for an exemption;
• A requirement for seven days prior notification of a proposed appointment to a functionary of a private or professional fund, unless the Commission agrees to accept a shorter notice period; and
• A change in the timeframe in which professional funds are able to commence business before receiving recognition from the FSC, enabling professional funds to commence business for up to 21 days before receiving FSC recognition provided the application for recognition is submitted to the FSC for consideration within 14 days of the launch date (previously under the Mutual Funds Act, 1996 a professional fund could commence business for up to 14 days before receiving FSC recognition).

The BVI Financial Services Commission has welcomed the new law with the Managing Director and CEO, Robert Mathavious commenting: “This Act emphasises the quality of the legislation in the BVI and underlines the importance of the jurisdiction as a fund domicile. The BVI has a significant presence in the mutual fund industry with around 3000 active funds* and it continues to attract new fund managers encouraged by its robust but fair legislation.”

Sherri Ortiz, Executive Director BVI International Finance Centre, added:

“The BVI continues to strive towards recognition as an innovative, efficient and respected financial centre as reflected in the enactment of today’s SIBA Act. We have been working closely with the private sector prior to this act coming into force. New fund managers are attracted here, encouraged by the high regulatory standards and expansion of legal, accounting and fund administration services.

"The BVI continues to work as a globally integrated financial centre playing an important role in the global economy by facilitating the flow of international capital and investment.”