BVI OFFSHORE MUTUAL FUNDS

British Virgin Islands is the global leader in registration of offshore mutual funds. More than 3000 mutual funds are currently registered in the BVI, with the total of over 100 billion US dollars under management. The popularity of the BVI as the prime location for offshore mutual funds grows by the day, as investment professionals increasingly recognize the benefits of this tax haven jurisdiction. Fidelity Corporate Services Ltd can provide a comprehensive incorporation and licensing services package to establish a private, professional or public mutual fund in the BVI, or to register a fund management company in the BVI.

Licensing of Fund Managers and Administrators

All managers or administrators of mutual funds who carry out their activities in or from within the BVI must be licensed by the BVI Financial Services Commission. The BVI Mutual Funds Act prescribes several general conditions that must be met by any such licensee. In particular, the Financial Services Commission must be satisfied that the applicant "is a fit and proper person" to be engaged in the proposed fund management or administration business. The applicant is also required to have "adequate knowledge, expertise, resources and facilities necessary for the nature and scope of the business proposed."

The Act only states the licensing requirements in a rather general manner. However, the Policy Guidelines, issued by Financial Services Commission, contain a very detailed and exact explanation of the applicable conditions. These conditions are uniformly applied to any applicant who wishes to be licensed as a fund manager or administrator in the BVI. Following is a synopsis of those requirements.

A "fit and proper" test is a regulatory benchmark for all professionals involved in the mutual funds business in the BVI. In direct words of the Policy Guidelines, "the purpose of the "fit and proper" standard is to ensure, as far as possible, that the dishonest, the incompetent and the inexperienced cannot easily take up positions of trust and responsibility to the detriment of investors in mutual funds." All licensees must be able to demostrate that they are likely to act "with integrity, in a way which is truthful and fair, that is in the best interests of investors and which is consistent with best market practice in respect of the business of managing or administering mutual funds."

Requirements to apply for a Mutual Fund / Fund Manager license in the BVI

The following is the listing of main information and documents required by the BVI Financial Services Commission from all applicants for a Mutual Fund license.

Every applicant for a Mutual Fund license will have to provide the following:

  1. Proposed names for the Fund and/or for the Fund Management company.
  2. Initial minimum size of the Fund at the commencement of operation.
  3. Personal information and documents for each principal / director /manager of the Fund and the Management Company:
    1. Good quality copy of valid passport.
    2. Personal resume (Curriculum Vitae), with emphasis on the professional experience.
    3. One bankers` reference.
    4. Two personal or professional references.
    5. Police clearance certificate (absence of criminal record).
  4. For each director, manager and controller of the fund: full business and professional background, including relevant experience, qualifications and any regulatory registrations, (for example SEC/SFA).
  5. Identification and description of the proposed professional connections of the fund:
    1. custodians
    2. bankers
    3. brokers
    4. administrators
    5. investment advisors
    6. auditors
    7. legal advisors
  6. A description of the primary characteristics of the proposed fund:
    1. Type of the Fund: public, private, professional?
    2. Category of the Fund: open-ended, close-ended?
    3. Limitations on advertising and marketing policy.
    4. Limitations on number of investors.
    5. Authorised share classifications.
    6. Minimum subscription.
    7. General rules for subscriptions and redemptions.
    8. Limitations on minimum amount of investments ("professional investors").
    9. General description of who will be the prospective investors.
    10. Restrictions on the geographical origin of investors, if any.
    11. How shall investors be attracted, what services shall be offered?
    12. Where will the actual place and location of business management be situated?
    13. What managerial control procedures will be implemented?
    14. Proposed structure of management fees.
    15. A broad description of underlying investments (optional).
    16. Restrictions to invest in any particular instruments (if any).
    17. Proposed leverage.
    18. Investment objectives and benchmarks that the fund will follow.
    19. A broad description of the proposed investment strategies - for instance, convertible arbitrage, distressed securities, emerging markets, growth funds, macro funds, market neutral, market timing, merger arbitrage, multistrategies, opportunistic, sector funds, short selling, etc.

IN ADDITION to the above, every applicant for a Mutual Fund Managers` license will also have to provide the following:

  1. Resources statement. A description of the human resources and administrative facilities available to the applicant including details of the use of information technology. Also include details of any data security and back-up arrangements.
  2. Financial statements. If available, a copy of the applicant´s most recent audited accounts must be provided. If the Applicant is part of a group, the latest audited group accounts should also be provided.
  3. Business plan. This should include details of the following:
    1. Brief resume of the applicant`s or the group`s history. A group structure chart showing the name and jurisdiction of all subsidiaries and where it is proposed the applicant will appear in the group. Indicate any regulatory authorities to which any group companies report. Include a brief description of the major sources of income for the group.
    2. Business objectives of the applicant - include details of the types of services and products to be provided, the reason for establishing in the BVI, marketing strategy and marketing methods and markets to which services/products are to be offered.
    3. Management and staff structure of the applicant: including a structure chart and a description of the responsibilities of each director and manager and a description of managerial control procedures and segregation of functions.
    4. Projected financial position - a projected profit and loss account and balance sheet for the next two years, to be confirmed by the applicant`s auditor.

The information stated above is not exhaustive - it is customary that during the review of the licence applications, the BVI Financial Services Commission requests further clarifications or statements

Fidelity Corporate Services Ltd can provide a complete formation services package to establish a private, professional or public mutual fund in the BVI, or to register and license fund management company in the BVI. For more information on formation of BVI Mutual Funds and Fund Managers, please contact us.