On 22 April 2021, the BVI House of Assembly passed the Financial Services Commission (Amendment) Act, 2021 which introduces a new section 54B to the Financial Services Commission Act, 2001. This new provision introduces the legal basis on which the BVI Financial Services Commission (FSC) may waive monetary penalties for the failure of licensees to file a document within a prescribed time limit where the failure is caused by either the registered agent, authorised agent or other persons (collectively BVI agents), or an act of God.
These amendments regularise past practice of the FSC where it would generally seek to lessen penalties on licensees where culpability rested with a third party such as a BVI agent or force majeure event. It also deals with grey areas in the regime since it was not clear if the FSC had legislative authority to waive the penalties in these circumstances.
Under the previous regime a licensee could be held liable and be levied with monetary penalties for the consequences of any failure on the part of its BVI agents to file certain documents with the FSC or else file them within the prescribed time limit. The amendment should therefore be seen as a welcome development to the regime.
Examining the new provisions in more detail
- The amendments provide the criteria for granting waivers. As they relate to failures attributable to BVI agents, a licensee must submit an application detailing the circumstances which gave rise to the failure to file, who was responsible for the filing, confirmation from the BVI agent accepting fault for the failure (or part of it).
- As potentially relevant to the on-going global Covid-19 pandemic, for failures caused by an ‘act of God’, a licensee must describe in writing the nature of the act of God which gave rise to the failure, the aspects of its business affected and to what extent and provide an indication on when it will rectify the failure (if it has not already been rectified).
- The amendments also place a statutory obligation on BVI agents to notify the licensee or other person immediately where it has failed to file or provide a document in compliance with any financial services legislation (including the companies law regime) giving reasons for its failure to do so.
Increased awareness for registered agents and other BVI agents
BVI agents commit an offence for which they would liable on summary conviction to a fine not exceeding US$10,000 when they fail to comply with the new requirements.
In addition, the changes clarify that the FSC will now have the power to take significant enforcement action against BVI agents in breach including the power to:
- Suspend the BVI agent from taking on new business
- Direct the licensee to change the BVI agent
- Direct the BVI agent to make systems and controls changes within their firm
The changes also seem to leave open the possibility that the FSC may take action against other service providers of licensees, beyond the core of registered or authorised agents, potentially extending to fund functionaries, law firms and auditors.
While the rules clarifying the waiver powers of the FSC are welcome these amendments clearly increase risks for registered agents, BVI agents more broadly and potentially wider industry stakeholders if not managed appropriately.
The new amendments, ie introduction of new section 54B and related, are deemed to have come into force as of 17 March 2017.