Robert Briant and Anton Goldstein, Conyers Dill & Pearman, British Virgin Islands
The Securities and Investment Business Act, 2010 (SIBA) was brought into force in the British Virgin Islands (BVI) on 17 May 2010. While the legislation makes some sweeping changes to the regulatory landscape in the BVI, only limited changes have been introduced which are relevant to hedge funds and their functionaries. SIBA has also been supplemented by the ‘Mutual Fund Regulations’. In due course, a ‘Public Funds Code’ (applicable to public funds) is also expected to be issued.
This article highlights some of the key changes brought about by SIBA and the Mutual Fund Regulations, and the positive steps that need to be taken by hedge funds to ensure compliance. A more general overview of the new legislation is available in a separate publication on our website (www.conyersdill.com) entitled A New Regulatory Regime in BVI: SIBA 2010.
A change of legislation; not regulation
As stated above, SIBA and the Mutual Fund Regulations do not bring about any dramatic changes to the regulation of hedge funds. The new regime largely retains the structure of the current regime — in particular, the definition of ‘mutual fund’ and the categories of public, private and professional funds remain the same. Furthermore, many of the ‘new’ requirements introduced by SIBA and the Mutual Fund Regulations were, in fact, already required by the practice of the Financial Services Commission (the FSC).
The Mutual Funds Act, 1996, which previously regulated all hedge funds, was repealed and replaced with Part III of SIBA. The registration of public funds and the recognition of private and professional funds was automatically continued under SIBA. As such, there is no need for hedge funds which were recognised or registered under the Mutual Funds Act, 1996 to take any action to continue their existing licences.
Key changes for private and professional funds
SIBA and the Mutual Fund Regulations introduce the following key changes for private and professional funds:
• Audit requirement: All private and professional funds are required to have an auditor and to submit audited financial statements to the FSC annually. Such financial statements must be prepared in accordance with IFRS, US GAAP, Canadian GAAP or UK GAAP, or another internationally and generally accepted accounting standards equivalent to these accounting standards.
• Authorised representative: Unless the fund has a significant management presence in the BVI, it is required to appoint a local ‘authorised representative’, which will be a BVI entity or individual certified by the FSC for this purpose. The authorised representative acts as the liaison between the FSC and the licensee, and is required to maintain certain records.