Monday, 17th January 2011The Securities and Investment Business Act, 2010
Definitions, functions, and rules
The Securities and Investment Business Act, 2010 ("SIBA") was brought into force in the British Virgin Islands ("BVI") on 17 May 2010 (other than Part II dealing with the public issue of securities).
SIBA augments the BVI's regulatory regime to ensure it complies with international best practice and implements standards laid down by the International Monetary Fund ("IMF") and the International Organisation of Securities Commissions ("IOSCO"). SIBA provides for:
1. A new investment business licensing regime to regulate investment advisors, broker-dealers, market makers, custodians and operators of investment exchanges.
2. Adoption of restrictions on, and regulation of, the public issues of securities in a non-mutual funds context.
3. Introduction of a market abuse regime which provides for the offences of insider trading, circulating misleading information and market manipulation.
4. Repeal of the Mutual Funds Act, 1996 and its replacement with Part III of SIBA and the Mutual Funds Regulations, 2010 and the Public Funds Code.
The first three pieces of regulation are almost entirely new in the BVI. The fourth piece - the regulation of mutual funds - is already well established in the BVI and, in this regard, SIBA only brings about limited changes.
Investment Business
SIBA regulates "investment business" in or from within the BVI and provides that no
person may carry on "investment business" of any kind in or from within the BVI unless
they are licensed by the BVI Financial Services Commission ("FSC") to carry on such
investment business. Investment business is defined by reference to certain "investment activities" in relation to "investments" (see Schedules 1 and 2 of SIBA).
The scope of SIBA includes any BVI Business Company which carries on investment business anywhere in the world even if the only link with the BVI is the location of its registered office, as well as any person who solicits a person in the BVI in order to offer investment services. However, due to certain exclusions in SIBA, a non-BVI person providing investment services to an "International" BVI Business Company (i.e. whose only link with the BVI is the location of the registered office) should not fall within the scope of the new regime (though legal advice should be obtained on a case by case basis).
Public Issues of Securities
Part II of SIBA introduces a new regime to regulate any person offering issues
of securities to "the public" in the BVI, but it does not include securities issued by mutual
funds or offers to "qualified investors" (which includes listed companies, FSC regulated
entities and persons having a close connection with the issuer and professional
investors).
Market Abuse
SIBA introduces criminal offences for BVI based individuals who conduct insider
dealing, carry on market manipulation or make misleading statements relating to
investment business. These provisions are intended to bring the BVI in line with
internationally accepted standards for the prevention of market abuse and similar
financial crimes.
Mutual Funds
The fundamental structure of the BVI mutual funds regime has not been changed and in many instances SIBA has merely codified existing FSC policies. A particular point to note is a general audit requirement for private and professional funds, although funds may apply to be exempt from this requirement.