Public Funds Code (Revised 2020)

Summary

The Public Funds Code is subsidiary legislation made by the BVI Financial Services Commission under the Securities and Investment Business Act (SIBA), setting out detailed operational, governance and disclosure requirements for public funds that supplement SIBA and the Mutual Fund Regulations. It has the force of law, applies to every public fund (and, where relevant, its trustee if the fund is a unit trust), and is enforceable by the Commission under the FSC Act, including through directives, mandatory appointment of a qualified person, investigations and administrative penalties.

• High level principles: Public funds must act with integrity, organise and control their affairs effectively, have due regard for investors' interests and treat them fairly, and deal with the Commission openly and cooperatively.
• Prospectus: A prospectus must contain the information listed in Schedule 1 (including risk disclosures, umbrella fund arrangements, and other material information investors would reasonably expect).
• Corporate governance: Public funds must have directors and a governing body with defined responsibilities, and must establish policies and procedures, including for identifying and managing conflicts of interest.
• Safekeeping and valuation: Funds must maintain custodial arrangements, procedures for issue and redemption of fund interests, and an independent valuation policy governing pricing, NAV calculation, NAV reporting and disclosure to investors.
• Dealing and record keeping: Requirements govern dealing and managing by functionaries, and public funds must maintain and retain records.
• Reporting to the Commission: Funds must disclose matters of significant regulatory impact, meet a required standard of disclosure, and notify the Commission of specified events and changes (listed in Schedule 2), most on an immediate basis.
• Investor disclosure: Material changes to investors' rights must be notified to investors and, per Schedule 2, to the Commission within a reasonable time before the change takes effect.

The Code commenced on 31 March 2011 and applies to all public funds registered on or after that date; existing funds were given a transition period (extended to 30 June 2011) to comply with prospectus-related requirements. Explanatory Notes accompanying each section are guidance only and do not have the force of law, though the Commission and courts may have regard to them.

Key obligations

• Public funds must conduct business in accordance with the four high level principles: integrity, management and control, investors' interests, and open dealing with the Commission.
• A public fund's prospectus must contain all information specified in Schedule 1, including umbrella fund disclosures and any other material information investors would reasonably require.
• Public funds must establish and maintain corporate governance arrangements, including a governing body (board or trustee) with defined responsibilities and, per the MFR, at least two directors.
• Public funds must establish policies and procedures, including for identifying and managing conflicts of interest.
• Public funds must put in place custodial arrangements and procedures for the safekeeping of fund property and for issue and redemption of fund interests.
• Public funds must establish an independent valuation policy and procedures for pricing, NAV calculation, NAV reporting, and disclosure of valuation matters to investors.
• Public funds must maintain records and retain them as required by the Code.
• Public funds must disclose matters with significant regulatory impact to the Commission and meet the required standard of disclosure.
• Public funds must notify the Commission of the events and changes listed in Schedule 2, most immediately upon occurrence, and material changes to investors' rights or proposed significant restructurings must be notified within a reasonable time before they take effect.

Applies to

public funds, directors of public funds, governing bodies/trustees of public funds (unit trusts), fund managers, fund administrators, functionaries of public funds

Deadlines

• 31 March 2011: Commencement date of the Code; applies to all public funds registered on or after this date.
• 30 June 2011: Extended transition period for existing public funds to comply with prospectus and public invitation requirements under SIBA sections 46 and 50(3).
• Immediate: Time limit for notifying the Commission of most events listed in Schedule 2 (e.g. insolvency proceedings, striking off, fraud, enforcement actions, prosecutions).
• Within a reasonable time period prior to the proposed change: Notification to the Commission of any material change to investors' rights.
• Within a reasonable time prior to the proposed restructuring or reorganisation taking effect: Notification to the Commission of any proposed significant restructuring or reorganisation of the public fund.