It is just over a year since the British Virgin Islands (BVI) adopted the Investment Business (Approved Managers) Regulations, 2012. The Approved Managers Regime was designed to be a regulatory “light” regime for qualifying managers and advisors who are incorporated or formed in the BVI whilst maintaining appropriate regulatory oversight in line with standards found in other major investment fund jurisdictions.
Prior to the Approved Managers Regime coming into force on 15 December 2012, all BVI managers of open-ended funds and closed-ended funds were required to be fully licensed under the provisions of the Securities and Investment Business Act, 2010 (SIBA), therefore requiring full compliance with the regulatory requirements of SIBA, the BVI’s Regulatory Code, 2009 and the anti-money laundering regime. As a result of being licensed, BVI managers are also subject to supervision by the Financial Services Commission, under the Financial Services Commission Act, 2001.
It is generally acknowledged that the systemic risk posed by start-up and existing mid-sized managers of both open-ended and closed-ended funds is lower than those managing larger sums of investor money; however, such managers are usually subject to the same regulatory load as larger managers, leading to a disproportionate amount of regulatory compliance cost. To help address this, the BVI adopted the Approved Managers Regime.
BVI managers that qualify for approval under the Approved Managers Regime are subject to fewer continuing obligations than managers holding a full license under SIBA. Notably, under the Approved Managers Regime:
(a) The Regulatory Code does not apply to approved investment managers;
(b) There is no requirement for an approved investment manager to appoint (i) an auditor; or (ii) a compliance officer; and
(c) there is no requirement to maintain a compliance manual.
Notwithstanding these lighter-touch regulatory provisions, an approved BVI manager is still subject to the BVI’s anti-money laundering regime and supervision by the Commission, and must have at least two directors (at least one of whom must be an individual), an authorised representative in the BVI and must engage a BVI legal practitioner. 
Whilst the Approved Managers Regime has proved popular with both the BVI’s existing private and professional fund regime and growing closed-ended fund formation business, it was limited in scope as it was only available to a qualifying BVI manager that acts:
(a) As investment manager or investment advisor to private or professional funds recognised under SIBA, feeder funds into such funds and affiliates of those funds, provided the assets under management in such open-ended structures are $400 million or less; and/or
(b) As investment manager or investment advisor to closed-ended funds incorporated, formed or organised under the laws of the BVI and having the characteristics of a private or professional fund , together with their feeders and affiliates, provided the assets under management in such closed-ended structures are $1 billion or less.
Extension of the Approved Managers Regime
In recognition of this restriction and limitation placed on investment managers and investment advisors, recent legislation in the form of the Investment Business (Approved Managers) Amendment Regulations, 2013 was introduced on 2 January 2014 which has extended the operating scope of the Approved Managers Regime to include the ability for funds from certain recognised jurisdictions that have equivalent characteristics to BVI private or professional funds to be managed or advised by investment managers or investment advisors approved under the Approved Managers Regime subject to the assets under management cap noted in (a) and (b) above.
The recognised jurisdictions for these purposes are currently Argentina, Australia, the Bahamas, Bermuda, Belgium, Brazil, Canada, the Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, the Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, the Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, the United Kingdom and the United States of America.
The 2013 Regulations also permit an investment manager or advisors to provide services to a fund that is not from a recognised jurisdiction where such funds invest all or a substantial part of their assets in a fund qualifying under the Approved Managers Regime based in the BVI or a recognised jurisdiction.
Application process and commencement
The application process under the Approved Managers Regime has not changed under the 2013 Regulations and involves the completion of a straight-forward application form which is submitted to the Commission together with supporting documentation and the application fee.
The required information includes:
(a) The constitutional documents of the BVI manager.
(b) Details as to the directors, senior officers and the owners of a 10% or more interest in the BVI manager.
(c) Details as to the funds it intends to manage.
(d) The date on which it intends to commence relevant business. 
(e) Copies of the investment management or investment advisory agreement between the BVI manager and each fund.
(f) Confirmation of which individual will be carrying out the day-to-day investment business functions.
(g) Details of any delegation of any relevant business functions.
(h) Confirmation from the BVI manager’s BVI legal practitioner that he has agreed to act for the BVI manager.
In addition, the BVI manager will be required to declare that each director, senior officer and owner of a 10% or more interest in the BVI manager is “fit and proper”, as that term is used in the Regulatory Code, and the authorised representative or BVI legal practitioner will be required to declare that the application for approval is complete.
Where an application is approved, the approved BVI manager will be issued with a certificate of approval and will be registered in the Commission’s register of approved investment managers.
A qualifying BVI manager can commence business seven days after submitting a completed application for approval and, assuming all is in order, the application should be processed within 30 days of the date of its submission.
Once approved, the BVI manager must notify the Commission within 14 days of any change in any information submitted in the application for approval together with any matter which has or is likely to have a material impact or a significant regulatory impact with respect to the approved BVI manager or its conduct of relevant business.
The fees for registration as an approved investment manager are currently $1,500 per annum plus a one-off application fee of $1,000.
Given the lighter regulatory touch, the simplicity of the application process and the introduction of the 2013 Regulations, the Approved Managers Regime is an attractive proposition for start-up and existing mid-sized managers who provide investment management services to funds incorporated or formed in the BVI or other recognised jurisdictions.
Tim Clipstone is a partner in the British Virgin Islands office of Maples and Calder. He advises on all aspects of British Virgin Islands and Cayman Islands securities, corporate and partnership law. He has particular expertise in advising managers and institutional investors on all aspects of investment funds.
Guy Williamson is an associate in the British Virgin Islands office of Maples and Calder. He advises on the structuring, formation and financing of regulated and unregulated vehicles, hedge funds and private equity funds. He also has a broad range of corporate finance transactional experience.