BVI Private Investment Fund Update

The BVI Financial Services Commission (“FSC”) recently announced and introduced amendments to the Securities and Investment Business Act (the “SIBA Amendment Act”), bringing private investment funds (traditionally known as closed-ended funds) under regulatory supervision. The amendments came into force on 31st December 2019.

The key points to note from the SIBA Amendment Act, in summary, are as follows:

1. Existing closed-ended funds are afforded a transitional period to 1 July 2020 to comply with the new requirements of the regime.
2. New funds which fall within the definition of a “private investment fund”, will be required to submit an application for recognition as a “private investment fund” within 14 days of commencing business.

SIBA Amendment Act

As a result of the requirements of the European Union that the BVI should also regulate close-ended collective investment schemes, the BVI has enacted new legislation which introduces a new regulatory regime for close-ended funds.

The SIBA Amendment Act introduces the “private investment fund”, which is a new category of fund and requires regulation. A “private investment fund” is a fund where the following two-part test is satisfied:

(i) it collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk; and
(ii) it issues fund interests, which entitle the holder to receive an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets.

As a consequence of the SIBA Amendment Act, close-ended funds falling within the definition of private investment fund will be required to comply with the following obligations:

(i) to have at all times “appointed persons” responsible for:

• the management of fund assets;
• the valuation of fund assets; and
• the safekeeping of fund assets;

(ii) appoint an Authorised Representative in the BVI (AMS can provide this service for a fee of $1,000 per annum);

(iii) if structured as a company, to have at all times at least two directors;

(iv) its offering terms shall contain the regulatory disclosures required by the Private Investment Fund Regulations;

(v) to maintain a clear and comprehensive policy for the valuation of fund assets, which must be followed by the “appointed person” responsible for the valuation of fund assets;

(vi) to prepare each year audited financial statements and file a copy of these audited financial statements with the FSC within 6 months of the financial year (an exemption may be requested under certain circumstances);

(vii) to provide notification to the FSC within 14 days of certain key changes; and

(viii) to maintain financial records that: are sufficient to show and explain its transactions; at any time enable its financial position to be determined with reasonable accuracy; and enable it to prepare such financial statements and make such returns as it is required to prepare and make under the SIBA Amendment Act and the Private Investment Fund Regulations.

Should you have any queries in relation to the impact of the SIBA Amendment Act on existing closed ended funds or in relation to any new fund structures you or your clients are looking to set up, please do not hesitate to contact David Payne at david.payne@amsfinancial.com

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