Preliminary Administration Public Funds Private Funds Managers and Administrators General Registration of a Public Fund Fee for a Certificate of Compliance Application Fees Annual Fees Objects and Reasons Legal Report

MUTUAL FUNDS ACT, 1996

OBJECTS AND REASONS

This Bill is designed to establish credibility to the British Virgin Islands based mutual funds and reassure investors of the legitimacy and security of their investments. To this end, it provides funds promoters and operators with a suitable location to manage their existing funds (wherever they may be constituted) or to establish new funds under available convenient legal structures as international business companies, limited partnerships or unit trusts.

The Bill is divided into five Parts, with Part I dealing with matters relating to administration generally. This embraces such matters as the appointment of the Registrar and Deputy Registrar of mutual funds, the delegating powers of the Governor in Council and the Minister, the requirement for the submission of annual reports by the Registrar of mutual funds, the keeping of records and the creation of a Mutual Funds Advisory Committee to advise the Minister on issues relating to mutual funds.

Parts II, III and IV represent the main thrust of the Bill. The Bill addresses matters relating to public funds (Part II) which offer their shares or units to the general public and private funds (Part III) which offer their shares or units to a restricted number of wealthy and sophisticated investors. Both types of fund, wherever they may be incorporated, formed or constituted, are allowed under the Bill to operate in or out of the Territory. In the case of private funds, however, these are only required to be recognised by the Minister upon proof that they are lawfully constituted under the laws of any country or jurisdiction and that they are not offering their shares or units to the general public. Private funds which are constituted under the laws of the Territory could not be denied recognition unless they fail to prove that they are private funds within the meaning of the Bill and are lawfully constituted.

In order to operate in or from within the Territory public funds are required to be registered. The Bill outlines the mode of application for registration and the information to be supplied by the applicant with a view to striking a balance between the principle of freedom of international enterprise and the need for a measure of regulatory accountability to assure investors of the safety of their investments.

Part IV of the Bill essentially provides the regulatory requirements of mutual funds managers and administrators. A person wishing to carry on business in or from within the Territory as manager or administrator of mutual funds is required to apply for a licence to the Minister. A statement of the financial and human resources available to the applicant is to accompany the application to satisfy the Minister that the applicant is a fit and proper person to be granted a licence. Provisions are also made to allow managers and administrators who are qualified and authorised to act as such pursuant to the laws of a recognised Country or Jurisdiction to operate in or from within the Territory without the need to be licensed.

The fifth Part of the Bill addresses general provisions concerning notices, forms and conditions of certificates and licences, annual fees, cancellation procedures, appeals, exemptions, offences and penalties, powers of amendment, regulations and transitional provisions.

Ralph T. O=Neal

Minister of Finance