During the liquidity crisis, fund and other restructuring work, together with litigation deriving from insolvencies and/or disputes between funds and their investors have been the mainstay of many practitioners in the BVI’s financial services industry. Whilst this work has continued (although not at the levels of Quarter 4/2008 and Quarter 1/2009), there has in recent months been a pick up in the number of new fund launches in the BVI.
However, investor appetite for new funds seems to be very definitely favouring established investment managers with track records, rather than new start up investment managers, which has impacted upon the volume of new fund launches so far in 2010. As at 31 December 2009, being the most recent date that statistics are available, there were 2,937 active funds licensed with the BVI’s Financial Services Commission, the majority of such funds being hedge funds, making the BVI firmly the alternative jurisdiction of choice for the hedge funds industry after the Cayman Islands.
Following a dip in transactional activity during the liquidity crisis, transactional activity, which represents an important part of the BVI’s financial services industry, has picked up during Quarter 4/2009 and 2010, with a number of public bids being made for listed BVI entities, including Kudelski SA’s takeover offer for OpenTV Corp, Amber Petroleum Ltd’s reverse takeover of AfNat Resources Limited and Essilor International SA’s takeover of FGX International Holdings Limited. There have also been a number of substantial private company deals in recent months.
Listings in the equity capital markets using BVI companies has also begun to show signs of revival after a barren period during 2009 with Ncondezi Coal Company recently being admitted to listing on the AIM market of the London Stock Exchange and High Win Plc Inc recently being admitted to listing on the Frankfurt Stock Exchange. These listings, when taken with the recent approval by the Hong Kong Stock Exchange for the use of BVI companies for listings on that market enforce a general uptick in confidence amongst practitioners in the BVI’s financial services industry.
With the recent enactment of the Securities and Investment Business Act, 2010, interest is already being seen for the utilisation of the investment business licensing regime by, for instance, broker dealers, looking for a licensing regime for their domestic operations without the minimum market capital constraints which would otherwise apply to them domestically.
The BVI has continued to be committed to providing tax transparency and cooperates with international initiatives in this regard. As at June 2010, the BVI had 17 Tax Information Exchange Agreements in place, enabling it to attain “white list” status as having substantially implemented the OECDs internationally agreed tax standards.
Amongst the jurisdictions in which the BVI currently has TIEAs in place are TIEAs with the USA, the UK and a number of European nations. The BVI remains committed to agreeing and putting in place further TIEAs and has approached all OECD member states with a view to negotiating TIEAs with them.
Amongst the TIEAs agreed during 2009 was a TIEA with China, the first such TIEA entered into by China.
The BVI is also on the Peer Review Group (PRG) which was formed at the OECD Global Forum on Taxation in Mexico in September 2009. The PRG is responsible for assessing the implementation of OECD standards in member jurisdictions of the Global Forum, and non-Member jurisdictions, as well as ensuring there is a monitoring and assessment process which is universally applied to all finance centres.
Efforts and existing regimes with regard to transparency
With the enactment of the SIBA and its accompanying regulations, together with the introduction of the Regulatory Code, 2009, which has the status as law in the BVI, the BVI has recently introduced a new modern statutory regime for the regulation of financial services business undertaken from or within the BVI, which is in tune to both the wider legal and regulatory environment.
SIBA introduces more robust requirements for licensed entities and the ongoing continuing obligations owed by them to the FSC, requiring, inter alia, (i) minimum board composition requirements, facilitating effective oversight by directors over the entities for whom they represent; (ii) an authorised representative concept, requiring all entities licensed under SIBA to engage the services of a BVI resident representative licensed by the FSC for these purposes, so ensuring ongoing compliance with the regulatory obligations owed under SIBA; (iii) obligations to file audited accounts with the FSC; and (iv) notificational filing and/or prior consent requirements in relation to certain material changes.
As it relates to the BVI’s funds industry, SIBA repealed the Mutual Funds Act, 1996. Whilst the changes to the regulatory regime for professional and private funds (the categories of licensed funds utilised by 2,721 of the 2,937 licensed funds in the BVI) are not substantively changed by SIBA, the regulatory regime applicable to public funds, which is a category of fund utilised for retail offerings by BVI funds (of which 216 of the 2,937 licensed BVI funds are so registered) will be changing under SIBA.
The precise regulatory landscape has not yet been finalised, as an industry consultation of the draft Public Funds Code, pursuant to which most regulatory changes for public funds will be contained, is currently ongoing. The overriding objective of the Public Funds Code is to adopt a regime for the regulation of BVI funds used for retail offerings which is consistent with IOSCO’s principles, in particular Principles 17, 18, 19 and 20.
Vision for the future
The BVI has a high level of cross sector expertise resident in the territory, supported by strict adherence to competency requirements. A strong relationship with the private sector enables the BVI to attract the requisite skills base from overseas as well as develop these skills from the local employment base. The BVI International Finance Centre’s strong relationship with the private sector has enabled the region to achieve greater diversification while growing its existing trust and fund sectors.
Relevant statistics, or side bar information that you feel relevant to the responses
- As at 31 December 2009, there were 410,293 companies and 629 limited partnerships active and registered with the BVI’s Registry of Corporate Affairs. Of this number:
- 2,937 are licensed as funds
- 573 are licensed as either investment managers or administrators; and
- 320 are licensed as insurers by the FSC.