British Virgin Islands regulatory framework for small managers

On 10 December 2012 the British Virgin Islands (BVI) introduced a new legal framework for smaller fund managers in the BVI. This innovative and pioneering approach could lead to a rise in investment manager applications in the BVI. It is hoped that BVI will attract more fund managers, particularly boutique and start-up businesses.

The change follows from the introduction of the Securities and Investment Business Act (SIBA) in 2010. SIBA introduced an enhanced regulatory framework to the BVI, improving the standards of the jurisdiction over its main competitor, the Cayman Islands, but also potentially damaging its competitiveness as a funds domicile. However as the BVI does not ‘exempt’ its managers from regulation, it may gain momentum again with the Alternative Investment Fund Managers Directive which requires non-EU managers to be AIFMD compliant, for example in order to continue being able to market their funds in the EU.

Under the new rules, to qualify as an “Approved Manager” with the Financial Services Commission (FSC), a manager cannot manage more thaUSD 400 million in aggregate in opened-ended funds, and USD 1 billion in aggregate in closed-ended funds. However firms should be aware that if the assets under management in open ended funds exceed USD 400 million, the Approved Manager is required to apply to the FSC for an investment business licence under SIBA. Where the excess may fall back below the limit within 3 months, the firm will be able to continue as an Approved Manager.

The new regime will allow the registration of an Approved Manager within 30 days, with permission to begin the business 7 days after filing an application with the FSC. The application process under the regulations is straightforward. An application form must be completed with basic supporting documentation in respect of the manager and the fund, including details of the funds, a copy of the investment management agreement, details on the firm’s directors and senior officers etc. Additional advantages of the new regime also include lighter compliance requirements as Approved Managers will be exempt from many provisions of SIBA and the Regulatory Code 2009.

Jerome Lussan, CEO of Laven comments: “We have always felt that the BVI was a great jurisdiction to set up funds in. Despite being a smaller domicile when compared to the Cayman Islands, the regulatory framework is of high standards and BVI is very business-minded as we can see with these latest developments. This is why in 2008, as part of our fund formation services we set up a platform for smaller managers in the BVI. Our platform has a local manager which will also be able to benefit from the Approved Manager’s regime, making it even easier for our clients to set up their funds on our existing platform.”

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