Regulatory Code (Revised 2020)

Summary

The Regulatory Code (Revised 2020) is subsidiary legislation issued by the BVI Financial Services Commission under the FSC Act. It sets out detailed, legally binding conduct and prudential requirements for licensees regulated under the Banks and Trust Companies Act, Insurance Act, Financing and Money Services Act, and Securities and Investment Business Act, supplementing the high-level framework in those primary Acts.

• General requirements (Part II): Apply to all licensees regardless of sector: licensing applications and business plans, fit and proper assessments, corporate governance, risk management, internal controls and audit, compliance function and manuals, outsourcing controls, financial statement audits, customer asset protection, and notification of significant events to the Commission.
• Banking (Part III): Capital adequacy (tier 1/tier 2 capital, risk-weighted capital ratio), regulatory deposits, large exposure limits, credit/country/liquidity/interest rate/operational risk management, investment restrictions, and consolidated supervision of branches and subsidiaries.
• Insurance (Part IV): Solvency margin and capital requirements for insurers, valuation of assets and liabilities, investment strategy, reinsurance approval, actuarial requirements, and contributed capital/professional indemnity requirements for insurance managers and intermediaries.
• Trust and company management (Part V): Capital resource and regulatory deposit requirements for trust companies and company managers, professional indemnity insurance, and additional obligations on managed trust companies including outsourcing and record-keeping.
• Money services business (Part VI): Capital resource requirements, regulatory deposits for foreign providers, corporate governance, internal controls, record-keeping and customer asset/money handling rules.
• Investment business conduct (Part VII): Conduct of business standards, client agreements, disclosure, suitability, best execution, conflicts of interest, and safekeeping of customer investments for securities and investment business licensees.

Contravention of any Code requirement is enforceable by the Commission and can lead to directives, mandatory appointment of advisors, investigations, administrative penalties, public statements, or affect a licensee's fit and proper status. Explanatory Notes accompanying the Code provide guidance but are not themselves legally binding. Schedule 6 sets out transitional dates by which existing licensees had to comply with specific sections following the Code's 1 February 2010 commencement, and provides that the 2019 amendments take effect for transitioning licensees on 1 July 2020.

Key obligations

• Licensees must submit a business plan in the required form and content with any licence application.
• Licensees must conduct fit and proper assessments of directors, senior officers and controllers and remain responsible for those assessments.
• Licensees must establish and maintain a corporate governance framework, including board and senior management responsibilities and appropriate span of control.
• Licensees must establish strategies, policies, systems and controls for risk management, including business continuity plans.
• Licensees must establish and maintain internal controls, an internal audit function, and (where required) an audit committee.
• Licensees must maintain records and retain them for the periods specified in the Code.
• Licensees must appoint a compliance officer, maintain a compliance manual, and ensure the compliance officer submits reports to the Commission on request.
• Licensees must have written outsourcing policies and manage outsourcing risk, subject to prohibitions on certain outsourcing arrangements.
• Licensees must ensure auditors are qualified, independent, and provide information to the Commission when requested.
• Licensees must safeguard customer assets and money, including maintaining customer bank accounts and records relating to customer money.
• Licensees must notify the Commission of certain events and changes as specified in Schedule 3, and disclose matters of significant regulatory impact.
• Banks must comply with minimum tier 1 capital, risk-weighted capital adequacy ratio, regulatory deposit, and large exposure limit requirements.
• Insurers must maintain minimum solvency margins, contributed capital, and submit reinsurance arrangements to the Commission.
• Trust companies and company managers must meet minimum capital resource and regulatory deposit requirements and maintain professional indemnity insurance.
• Money services businesses must meet minimum capital resources and, if foreign, make a regulatory deposit and appoint a BVI manager.
• Investment business licensees must meet conduct of business standards including client agreements, disclosure, suitability assessments, best execution, and safekeeping of customer investments.

Applies to

banks, licensed insurers, insurance managers and intermediaries, trust companies, company management companies, money services businesses, securities and investment business licensees, BVI licensees generally

Deadlines

• 1 February 2010: Commencement date of the Regulatory Code.
• 31 March 2010: Compliance deadline for existing licensees for numerous provisions including strategies/policies/systems/controls (ss.25-28), internal controls (ss.29-33), internal audit (ss.34-35), retention of records policy (s.39(1)), professional indemnity insurance for auditors (s.61), policies on abuse of financial services (s.69), investment requirements for licensed insurers (ss.134-137), corporate governance for insurers (Part IV Div 2), managed trust companies (Part V Div 2), and money services business (Part VI).
• 30 June 2010: Compliance deadline for existing licensees for majority of non-executive directors on audit committee (s.19(3)), submission of internal audit report lists and reports (s.36(a)-(b)), and audit committee requirement (s.37).
• On first appointment or re-appointment of auditor after commencement date: Deadline for compliance with auditor independence requirement (s.57).
• The date specified by the Commission by notice: Deadline for compliance with outsourcing requirements (Part II, Division 5), as substituted by S.I. 91/2010.
• 1 July 2020: Date on which the Regulatory (Amendment) Code, 2019 provisions take effect for transitioning licensees who held a licence immediately before the 2019 amendment came into force.