BVI & Cayman Funds Round-Up: From FATCA to Fund Directors


Legislative Update
In the BVI, the BVI Business Companies Act has been amended to take into account a number of improvements and enhancements and to address a number of proposals that BVI practitioners had requested. The amendments came into effect on 15 October and the Harneys summary can be found here.
In the Cayman Islands, the main sources of statutory law affecting investment funds were recently codified, the reference points now being the Mutual Funds Law (2012 Revision), the Companies Law (2012 Revision) and the Exempted Limited Partnerships Law (2012 Revision). The recent legislative initiative to revise the Mutual Funds Law to clarify the requirement to register master funds which have a single feeder fund is ongoing and the government draft Bill has been the subject of comment by the local financial sector. A further revised draft Bill is awaited.
Litigation Update
There has recently been some important clarification to the insolvency world as the UK Supreme Court has rejected the "universalist" doctrine and established that common law rules as to the enforcement of foreign judgments do not (or should not) apply to insolvency orders. The Harneys summary can be found here.
The Alternative Investment Fund Managers Directive ("AIFMD")
The AIFMD is due to be transposed into the national laws of all member states of the EU by 22 July 2013. The Directive seeks to regulate the activities of fund managers in relation to funds they manage or market to investors in the EU. Following the Directive coming into force in July 2011, the funds industry is awaiting the publication of the Level 2 advice which are expected to provide further clarity as to what precisely will be required. As yet, the Level 2 Regulations are yet to be published, but in the interim, both the British Virgin Islands and Cayman Islands have established specialist committees (which contain representation from Harneys) to examine the impact of the Directive upon the jurisdictions and to ensure that the governments are in the best possible place to ensure that BVI and Cayman based funds continue to have full access to the EU market after the implementation dates. We will provide a further update as soon as the Level 2 Regulations have been published and analysed.
Foreign Account Tax Compliance Act ("FATCA")
Despite the recent announcement by the US IRS that it has postponed key staggered dates for the implementation of the FATCA rules and reporting requirements, including the principal launch date being postponed until January 2014, the US Treasury Department continues to work towards implementation of the country to country information sharing agreements (IGAs). With regards to recent developments in the British Virgin Islands and Cayman Islands relating to the negotiation of an IGA with the US, both governments have confirmed that they are monitoring developments with other IGAs and whilst it is anticipated that both the BVI and Cayman will seek an IGA with the US, there is ongoing discussion regarding the exchange of information requirements.
BVI AML Penalties and Fines
Fines and penalties for breaches of the BVI’s anti-money laundering regime have been significantly increased through recent amendments to the Proceeds of Criminal Conduct Act, 1997 , the Anti-Money Laundering Regulations, 2008 and the Anti-money Laundering and Terrorist Financing Code of Practice, 2008 . The amendments are effective immediately and the Harneys summary can be found here.
Regulation of Directors
Still a topic of intense debate in the Cayman Islands, the terms of any proposed legislative changes remain uncertain. It is generally true that there is an expectation of some form of registration requirement for directors acting on the boards of regulated mutual funds, but the precise nature of the legislative changes to effect that and the process for seeking and being registered are unclear.
According to the statistics released by the BVI Financial Services Commission, as at the end of June 2012, the numbers of regulated mutual funds in the BVI were:
Professional: 1621
Private: 641
Public: 160
Total: 2,422
According to statistics released by the Cayman Islands Monetary Authority, as at the end of September 2012, the numbers of regulated mutual funds in Cayman were:
Registered: 8,596
Administered: 411
Licensed: 123
Master: 1,849
Total: 10,979

For more information about BVI and Cayman funds please contact Ross Munro ( or Philip Graham ( in the British Virgin Islands or Marco Martins ( or Jonathan Law ( in the Cayman Islands.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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