It is nearly three years since the BVI launched its Approved Manager Regime. The introduction of the Approved Manager Regime at the end of 2012 was the jurisdiction’s first step towards putting together a complete package focused on the smaller and emerging manager and it has been a great success.
My Cayman colleagues will probably jump up and down when I say this; but it is such a success that we now see Cayman funds being set up with BVI Approved Managers, given that the Approved Manager out-performs the Cayman equivalent, the Cayman Islands Securities and Investment Business Law (SIBL) Exempted Manager, both on cost (establishment and ongoing) and because it has the stamp of being a regulated product, which the Cayman equivalent does not. In addition, the Approved Manager offers greater flexibility, as a Cayman Exempted Manager is limited to only acting for funds whose investors fall within the definitions of a “sophisticated investor” or “high net worth person” under SIBL, whilst the Approved Manager has no such limitation.
Although the Approved Manager is regulated by the Financial Services Commission (FSC), its ongoing obligations are limited, which is one of its key attractions. It is required to submit an annual return and financial statements, but there is no requirement for the financial statements to be audited. In addition it must notify the FSC within 14 days if there are any changes to the information contained in its original license application.
An Approved Manager is subject to caps of (i) aggregate assets under management of US$400 million for open ended funds and (ii) aggregate capital commitments of US1 billion for closed ended funds. It can act as investment manager or investment adviser to one or more:
- incubator, approved, private or professional fund recognised under the Securities and Investment Business Act, 2010 (SIBA);
- closed ended funds domiciled in the BVI with certain characteristics of a private or professional fund;
- fund (open or closed ended) domiciled in any Recognised Jurisdiction with certain characteristics of a private or professional fund;
- fund (open or closed ended) investing a substantial part of their assets in a fund described in (a), (b) or (c) above; and
- other person approved by the FSC on a case by case basis (we have seen this used most commonly for managed accounts).
Not only is it a great product but it is also really quick and easy to set up. An application must be submitted to the FSC and the following must be provided:
- a copy of the applicant’s constitutional documents;
- details of the directors or general partner, any senior officers, the individuals who carry out the day to day investment business functions of the applicant and any person to whom the applicant will delegate any of its investment business functions and a resume or curriculum vitae for each such person;
- details of each person who owns or holds and interest in the applicant;
- a written declaration by the applicant that each director, general partner, senior officer and person holding a “significant interest” (normally a ten per cent or greater interest) in the applicant is “fit and proper” in accordance with the meaning set out in the Regulatory Code;
- a written declaration by the applicant’s authorised representative or legal practitioner that the application for approval as an approved manager is complete; and
- the application fee of US$1,000.
The applicant can commence business seven days after submitting its application.
An approved manager is required to have at least two directors, one of whom must be an individual. What we have been really pleased to see is that the FSC has been open to approving applicants where a director has fairly limited investment management experience, provided that a professional director is also appointed. This means that the Approved Manager is a viable option for those just starting out in the business.
If you are interested in establishing and Approved Manager in the British Virgin Islands, please get in touch.