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The British Virgin Islands ("BVI") has recently enacted the Securities and Investment Business Act 2010 ("SIBA") which came into effect on May 17, 2010.The key objectives of SIBA are to:
• regulate persons carrying on investment business in or from within the BVI;
• regulate the public issue of securities in a non-mutual funds context to persons located in
the BVI;
• repeal the Mutual Funds Act, 1996 and replace it with Part III of SIBA, and the Mutual Funds Regulations 2010;
• introduce a new framework to deal with market abuse, including the prevention of insider dealing, market manipulation and other market abuses.
This brief client update focuses primarily on the requirements and consequences of receiving an investment business license.
Investment Business
The types of activity constituting investment business are outlined in Schedule 1 of SIBA. They are as follows:
• dealing in investments;
• arranging deals in investments;
Investment business, for the purposes of SIBA, is generally defined to include - dealing in or arranging deals in or managing investments, providing investment advice, providing custodial or administration services with respect to investments or operating an investment exchange. Investments, for the purposes of SIBA is broadly defined to include shares, interests in a partnership or fund, debentures, bonds, other debt instruments and commodity transactions (including but not limited to FOREX), as well as derivatives thereof and any other interests relating to such investments.
• managing investments;
• providing investment advice;
• providing custodial services with respect to investments; and
• operating an investment exchange.
If any BVI companies or partnerships are or will be engaging in any of the aforementioned business activities, then an investment business license is required.
Highlight of Key Documents and Information Required in a License Application
• Any company seeking a license for one or more of the above activities (an "Applicant") must seek approval for its directors and senior officers from the BVI Financial Services Commission (the "Commission"). The approval of such persons is given if they satisfy the Commission's fit and proper criteria which will require the submission of various related professional background and due diligence documentation concerning such persons.
• The written consents of both an auditor and a lawyer to act on the Applicant's behalf on the grant of a License.
• Draft of the Applicant's proposed compliance manual, which should include the Applicant's client acceptance procedures and 'Know Your Client' due diligence policies.
• Applicant's financial arrangements, including a written undertaking from the Applicant that the capital will be paid up on or before the date on which the Applicant commences business.
• Statement of assets and liabilities (only required if the Applicant has been carrying business prior to the submission of the Application). This statement, if required, must be certified by a director or senior officer of the Applicant. If the Applicant owns controlling shares in another company, the Commission will also require financial statements for that company.
• Evidence of professional indemnity insurance.
• Comprehensive business plan: This should outline the objectives of the business, the area(s) of business activity, the management structure, operating policies, internal controls and available resources. In essence, the Applicant must prove to the Commission that its organization, management and financial resources are adequate to carry on the relevant investment business.
The Legal Consequences and Reporting Requirements of a Licensee
They must have the necessary academic qualifications, professional training, competency and experience in the relevant area. Additionally, the Commission must be satisfied such persons have no criminal convictions, have not been censured or disciplined by a professional body and have not filed for bankruptcy within the last ten years. including: police clearances, resumes, certified copies of passport pages or other gov't issued ID, certified utility bills, bank statements or any other form of proof of address, two references, one from a regulated entity such as a bank and the other from a financial or legal professional who has known the person for more than a year, plus any other details that may be required by the Commission. • Upon the issue by the Commission of an Investment Business License, the Licensee, together with its branches, representatives and offices, wherever domiciled (within or outside the BVI), will be subjected to the SIBA regulations. The Commission has the power to investigate and ensure compliance with SIBA, including any future changes to the legislation.
• The Licensee is required to maintain records for a period of at least five years after the completion of a transaction.
• The Licensee is required to submit audited annual financial statements to the Commission and in general comply with the policies and guidelines of the Commission.
• The Licensee is governed by the SIBA regulations in the conduct of its business, which includes a prohibition against misleading advertisements and/or statements related to its business or operations.
• The Licensee requires the prior approval of the Commission for any change in corporate control as well as a variety of other corporate actions, including establishing a branch office or changing a director or senior officer.
Authorized Representative Person
Part IV of SIBA introduces a requirement for all Licensees to have at all times a local presence in the BVI. Thus, unless the licensee has a significant management presence in the BVI, it will be required to appoint a local authorized representative, which must be a BVI regulated entity approved for this purpose.
The authorized representative will make all submissions to the Commission on behalf of the Licensee and pay all relevant fees.
Deadline for Obtaining a Business License
SIBA requires persons who have been engaged in an investment business prior to May 17, 2010 to obtain an Investment Business License within six months of May 17, 2010. Persons not engaged in an investment business prior to May 17, 2010 shall require an investment business license prior to commencement of an investment business.
Preliminary Steps to be Taken by the prospective Applicant
Prospective Applicants are encouraged to start the application process as soon as possible by:
Arnos Limited stands ready to assist prospective Applicants with any and all of the above. |