BVI FSC’s virtual “Meet the Regulator”

On 3 June 2020, the BVI Financial Services Commission (BVI FSC) held its first virtual Meet the Regulator (MTR) meeting. The MTR focussed on issues related to the 30 June 2020 deadline for registration of closed-ended funds, such as private equity and venture capital funds, known in the BVI as private investment funds (PIF). Closed-ended funds in the BVI were not previously subject to regulatory oversight.

MTRs in the BVI are typically held as plenary meetings for BVI financial services industry heads. Owing to social distancing requirements due to COVID19, this was the first time such a meeting was held online.

Key points from the MTR:

Importantly the BVI FSC made some key points regarding the way it is interpreting the PIF definition:

• The BVI FSC will focus purely on the entity itself. There is no "look-through" either at the investors or the investments, which may be relevant when considering master-feeder structures.
• The "offering of fund interests" is crucial in the analysis. Although there is no express language around this in the BVI definition itself, the BVI FSC is clear that there should be some form of "offering" to third parties in order for an entity to be classified as a PIF. This approach is reasonable would seem to bring the BVI into line with the approach taken in other jurisdictions such as the Cayman Islands which have also implemented PIF-like regulations recently, as well as historic guidance issued by the EU’s European Securities and Markets Authority (ESMA).

• It was acknowledged that a PIF may be structured as a segregated portfolio company (SPC), however PIF SPCs that permit only single investors into each SP will still be regarded as "collecting and pooling".

• As expected, most joint venture vehicles and carried interest vehicles should fall outside of scope of the PIF definition.

In terms of administrative issues surrounding the application and on-going supervision:

• The FSC has a dedicated “PIF” team which aims to turn around applications within twenty-four hours.

• “Appointed persons” of PIFs will need to demonstrate that they have the expertise to perform their functions. If an individual is listed, for example, a CV or resume will need to be provided.

• For PIFs without a term sheet or offering document the surrounding circumstances will need to be explained as part of the application. This could be as a result of the PIF no longer offering interests.

• Audited financial statements must be prepared and submitted to the standard expected of BVI open-ended funds (i.e. complying with Regulation 10 of the PIF Regulations), unless the PIF applies for an exemption.

Moving forward:

• Further regulations clarifying the status of PIF SPCs are expected in the near future.

• No written guidance notes will be produced by the BVI FSC for the time being. However this position will be reviewed following the first round of submissions to the EU and their assessment.