Given the global harmonisation of the various financial markets and the increase in cross-border operations and activities of managers of alternative investment funds (AIFs), the BVI’s Financial Services Commission (the FSC) and the UK’s Financial Conduct Authority (the FCA) have signed a memorandum of understanding (MoU) relating to mutual legal assistance in the supervision of managers of AIFs, their delegates and depositaries that operate on a cross-border basis in the BVI and the UK. The MoU is generally structured similarly to an information exchange agreement. The MoU comes into force on the date the European Union legislation cease to have direct effect in the UK.
What is the MoU designed to achieve?
The FSC and the FCA have, under the MoU, agreed to:
- express their willingness to cooperate with each other in the interest of fulfilling their respective regulatory mandates;
- focus on investor protection;
- foster market and financial integrity; and
- maintain confidence and systematic stability.
What does the MoU not do?
The MoU does not:
- create any legally binding obligations, confer any rights or supersede domestic laws;
- confer upon any person the right or ability directly or indirectly to obtain, suppress or exclude any information or to challenge the execution of a request for assistance under the MoU;
- intend to limit the FSC or the FCA to take solely those measures described in the MoU in fulfilment of their supervisory or oversight functions; and
- affect any right of the FSC or the FCA to communicate with, or obtain information or documents from, any person or Covered Entity (an AIFM or AIF (as defined in the MoU)) subject to its jurisdiction that is established in the territory of the other.
The MoU compliments but does not alter the terms and conditions of the IOSCO Multilateral Memorandum, of Understanding Concerning Consultation and Cooperation and the Exchange of Information, to which the FSC and the FCA are signatories, which also covers information sharing in the context of enforcement investigations, and any of the existing arrangements concerning cooperation in securities matters between the FSC and the GFCA.
The cooperation under the MoU
The FSC and the FCA will provide one another with the fullest cooperation permissible under the law in relation to the supervision and oversight of the Covered Entities. However, following consultation cooperation may be denied:
- where the cooperation would require an authority to act in a manner that would violate domestic law;
- where a request for information is not made in accordance with the terms of the MoU; or
- on the grounds of the national public interest.
No domestic banking secrecy, blocking laws or regulations will prevent the FSC and the FCA from providing assistance to each other. The FSC and the FCA will periodically review the functioning and effectiveness of the cooperation arrangements with a view to expanding or altering the scope or operation of the MoU should that be necessary.
Cooperation under the MoU will be useful in relation to:
- the initial application of a Covered Entity for authorisation, registration or exemption from registration in another jurisdiction;
- the ongoing oversight of a Covered Entity;
- regulatory approvals or supervisory action taken in relation to a Covered Entity by the FSC or the FCA that may impact the operations of the entity in the other jurisdiction; and
- enforcement action taken.
Notification and exchange of information
The MoU contains specific rules relating to notification and exchange of information. Provisions for cross-border on-site visits may also take place under the MoU.
Execution of requests for assistance
These will need to be made in writing and addressed to the relevant contact persons set out in Annex A of the MoU. The request should specify:
- the information sought by the requesting authority, including specific questions to be asked and an indication of any sensitivity about the request;
- a concise description of the facts underlying the request and the supervisory purpose for which the information is sought, including the applicable regulations and relevant provisions behind the supervisory activity; and
- the desired timeframe for reply and where appropriate the urgency.
There is a procedure laid out in the MoU for how emergency situations are to be treated.
Use of information
Non-public information obtained may be used under the MoU solely for the purpose of supervising Covered Entities and seeking to ensure compliance with the laws and regulations of the requesting authority including assessing and identifying systemic risk in the financial markets or the risk of disorderly markets. The MoU contains provisions on confidentiality and onward sharing of information.
The MoU contains provisions relating to how it can be terminated.
If you have any questions, please contact Mirza Manraj or your usual Harneys contact.