The British Virgin Islands introduced a ‘regulation light’ regime for investment managers on 10 December 2012 when the Investment Business (Approved Manager) Regulations 2012 (Old Regulations) came into force. During its first year, the approved manager regime for investment managers incorporated or formed as BVI companies or partnerships (Approved Managers) has been remarkably successful and popular with start-ups, family office and closed ended investment managers by striking the right balance between regulation, cost and flexibility. However, it has not been available to investment managers who manage non BVI funds.
In welcome news, The Investment Business (Approved Managers) (Amendment) Regulations 2013 (New Regulations) came into force on 2 January 2014 and open up the possibility of Approved Managers managing non BVI funds.
Approved Managers under the Old Regulations could only provide services to BVI open ended private or professional funds and BVI closed ended funds with equivalent characteristics to private or professional funds provided they had no more than US$400 million assets under management (in the former case) and capital commitments of less than US$ 1 billion (in the latter).
The New Regulations permit Approved Managers to manage funds from any recognised jurisdiction that have equivalent characteristics to BVI private or professional funds subject to the US$400 million and US$1 billion asset caps.
The recognised jurisdictions for these purposes are Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom and the United States of America.
The New Regulations also provide that an Approved Manager may provide services to a fund that is not from a recognised jurisdiction where it invests all or a substantial part of its assets in a qualifying fund based in the BVI or a recognised jurisdiction.
If the Approved Manager exceeds or is likely to exceed the relevant asset cap it can apply for a full Category 3 Investment Management licence under the Securities and Investment Business Act, 2010 (SIBA).
BVI Approved Managers and Managed Accounts
Pursuant to the Old Regulations, the BVI Financial Services Commission (the Commission) was granted authority to licence Approved Managers to manage “such other person as the Commission may approve on a case by case basis”. This category is open to expansion but to date the Commission has been prepared to accept applications from managers of “managed accounts” subject to a US$400 million cap on assets under management and provided the Approved Manager can demonstrate “appropriate segregation” of client assets and that its clients are high net worth individuals or sophisticated investors. Interestingly, the Commission has not necessarily required there to be any nexus between the BVI and the location of the managed accounts or the ultimate beneficial owners of the assets in the managed accounts. It will be interesting to see how this develops in 2014.
The amendments brought in by the New Regulations will make the BVI Approved Manager regime even more attractive to a wider range of investment managers and solidify its current competitive advantage over regimes in other jurisdictions.
Harneys has also published a legal guide on the Approved Manager regime updated to reflect these latest developments.