Continuing Obligations of British Virgin Islands Approved Managers

Introduction

Any person carrying on investment business in or from within the British Virgin Islands (the "BVI") must be authorised under the Securities and Investment Business Act, 2010 (as amended) ("SIBA"), unless an exemption applies. There are two routes to obtaining such authorisation. The first is by being granted a full investment business licence by the Financial Services Commission (the "FSC") under SIBA, subject to compliance with the applicable licensing and ongoing regulatory requirements. In addition, the BVI provides for a streamlined approval regime for certain qualifying investment managers and investment advisers ("Approved Managers") pursuant to the Investment Business (Approved Managers) Regulations, 2012 (as amended) (the "Approved Managers Regulations").

The light touch regime for Approved Managers has proved very popular, and is now widely used for managers of funds established in the BVI and elsewhere (including in the Cayman Islands). 

An entity approved as an Approved Manager benefits from a lighter regulatory regime than a fully licensed investment business. However, Approved Managers remain regulated entities and subject to various ongoing obligations, reporting requirements, restrictions and must adopt Anti-Money Laundering ("AML") compliance policies and procedures. Failure to comply with such obligations may result in regulatory action by the FSC, including administrative penalties or loss of Approved Manager status.

This article summarises the principal annual filing requirements and continuing obligations applicable to Approved Managers. It is intended as a high‑level compliance reference only and should be read alongside SIBA, the Approved Managers Regulations and related FSC guidance.

Scope of the Approved Manager regime

An Approved Manager may only carry on the categories of “relevant business” expressly permitted under the Approved Managers Regulations, which broadly include acting as an investment manager or investment adviser to:

• BVI private funds or professional funds;
• qualifying closed‑ended funds formed in the BVI or in a recognised jurisdiction (including for example, Cayman Islands domiciled investment funds);
• certain affiliated entities within a qualifying fund structure; 
• certain foreign funds and other persons meeting the equivalence and look‑through criteria set out in the Approved Managers Regulations and related FSC guidelines; and
• other entities on a case by case basis (the FSC has shown some flexibility in this regard, and for example has used this as a basis to approve management of SMAs).

An Approved Manager must not carry on any business other than the relevant business permitted under the Approved Managers Regulations, unless otherwise approved by the FSC. Any material deviation from the permitted business perimeter will result in the Approved Manager ceasing to qualify under the regime.

Annual filing and fee obligations

Annual return

An Approved Manager must file an annual return with the FSC no later than 31 January in each calendar year in respect of the preceding year.

The annual return must be submitted in the prescribed form and typically includes confirmations that:

• the Approved Manager remains in compliance with the Approved Managers Regulations;
• each director, senior officer and any shareholder holding a significant interest remains fit and proper; and
• specified information relating to the Approved Manager’s business as at 31 December of the preceding year (including the funds or persons for which it acts, assets under management and any significant complaints received).

Annual renewal fee

The continued approval of an Approved Manager is subject to the payment of an annual renewal fee to the FSC. The renewal fee is currently payable by 31 March in each year.

Failure to pay the renewal fee when due may give rise to administrative penalties and, if not remedied, may result in the Approved Manager ceasing to be permitted to carry on relevant business.

AML/CFT return

Approved Managers are subject to the BVI anti‑money laundering and counter‑terrorist financing framework and are generally required to submit an annual AML/CFT return to the FSC in respect of each calendar year. The AML/CFT return is required to be filed by 31 March.

Financial statements

An Approved Manager must prepare financial statements for each financial year in accordance with an acceptable accounting standard and must submit those financial statements to the FSC within six months of the end of its financial year.

Unlike many fully licensed investment businesses, Approved Managers are not generally required to appoint an auditor or submit audited financial statements, unless otherwise directed by the FSC.

FATCA and CRS reporting

Where an Approved Manager is classified as a reporting financial institution for the purposes of FATCA and/or the Common Reporting Standard ("CRS"), it will be required to complete annual reporting through the BVI International Tax Authority’s reporting portal within the applicable statutory deadlines (31 May).

Continuing obligations

Directors and authorised representative

An Approved Manager must at all times have:

• at least two directors, one of whom must be an individual; and
• an authorised representative resident in the BVI and certified by the FSC.

This requirement applies on a continuous basis and any breach must be rectified promptly.

Notification of changes

An Approved Manager must notify the FSC within 14 days of any change to the information previously submitted in connection with its approval, including (without limitation):

• changes to directors, senior officers or shareholders holding a significant interest;
• changes to service providers or delegation arrangements;
• changes to the persons carrying out day‑to‑day investment management functions; or
• changes to the Approved Manager’s constitutional or organisational arrangements.

Assets under management thresholds

The Approved Managers regime is subject to prescribed assets under management thresholds, including (in broad terms):

• an aggregate limit of US$400 million in respect of open‑ended fund business; and
• a separate US$1 billion threshold applicable to closed‑ended fund business.

If an Approved Manager exceeds or is likely to exceed an applicable threshold, it must notify the FSC within seven days.

Where a threshold is exceeded, the Approved Manager will cease to qualify under the Approved Managers Regulations unless, within three months, it:

• reduces its assets under management to within the applicable limit;
• applies for and obtains a full investment business licence under SIBA; or
• obtains written approval from the FSC to continue operating as an Approved Manager.

During this three‑month period, the Approved Manager may continue existing relevant business but must not take on any new relevant business.

Ceasing to qualify

If an Approved Manager otherwise ceases to qualify under the Approved Managers Regulations, it must:

• immediately notify the FSC; and
• refrain from taking on any new relevant business.

The Approved Manager will generally have three months from the date of disqualification to cease carrying on relevant business, subject to any extension granted by the FSC and without prejudice to the FSC’s enforcement powers.

Regulatory status

Although subject to a lighter regulatory regime, an Approved Manager is still treated as a “licensee” for the purposes of the Financial Services Commission Act and remains subject to FSC supervision, information‑gathering powers and enforcement jurisdiction.

Consequences of non‑compliance

Failure to comply with the Approved Managers Regulations, including failure to meet filing deadlines, maintain required appointments or remain within the permitted business perimeter, may result in administrative penalties, regulatory directions or loss of approved status. Where approved status is lost, the Approved Manager must either cease regulated activity or transition to a fully licensed investment business under SIBA.

Schedule – Ongoing Compliance Calendar

Carey Olsen's team can assist with the preparation and filing of the above. Please get in contact if you have any questions or would like further details.

If you would like to read our latest news and briefings in Simplified Chinese, please follow our official WeChat account. Our WeChat ID is CareyOlsen and you can find us via the WeChat 'discover' tab or by scanning the QR code below: