Fund Custodian and Manager Exemption Application Guidelines

Summary

These BVI Financial Services Commission guidelines explain when a private, professional or public mutual fund may be exempted from the statutory requirement to appoint a custodian and/or fund manager under the Mutual Funds Regulations, 2010, and set out the application procedure and forms (IB-E1 and IB-E2) that must be used. They replace the 2012 guidelines and, for the first time, formalise the custodian-exemption process for public funds. The guidelines are deemed to have taken effect from 31 December 2019.

• Custodian exemption: Private, professional or public funds may apply on Form IB-E1 for exemption from appointing a custodian under regulation 7(2) or 16(2) of the Mutual Funds Regulations, 2010, providing reasons and details of safekeeping arrangements.
• Accepted scenarios: The Commission may grant a custodian exemption where the fund uses a prime broker only, is a feeder fund, is a fund of funds, is winding down, or invests in esoteric assets, each requiring specified supporting information.
• Manager exemption: Private or professional funds may apply on Form IB-E2 for exemption from appointing a fund manager under regulation 7(2), where directors carry out the management function, the fund is winding down, or the fund is not currently carrying out fund business.
• General information: All exemption applications must include the fund's bank details and account signatories, and, for manager exemptions, details of the individuals managing the fund's assets and their CVs.
• Change of circumstances: An exempted fund must notify the Commission if circumstances change such that a custodian or manager will need to be appointed; public funds must also seek prior approval under section 54(1) of the Securities and Investment Business Act, 2010 before appointing a custodian.

Applications may be submitted alongside a fund's initial recognition or registration application or at any time afterwards, and must comply with the relevant regulation 7 or 16 requirements. The Commission may request additional information depending on the fund type and can delay or refuse an application if required information is not provided.

Key obligations

• A private, professional or public fund seeking exemption from appointing a custodian must submit a written application using Form IB-E1, including reasons for the exemption and details of safekeeping arrangements.
• A private or professional fund seeking exemption from appointing a fund manager must submit a written application using Form IB-E2, including reasons for the exemption and details of management arrangements.
• Applications must include confirmation of the fund's bank(s) and account signatories, and, for manager exemptions, details and CVs of the individuals carrying out the management function.
• Funds relying on specific scenarios (prime broker only, feeder fund, fund of funds, winding down, esoteric assets, or director-managed) must provide the additional supporting information specified for that scenario.
• A fund granted a custodian or manager exemption must notify the Commission of its intention to appoint a custodian or fund manager within seven days of the proposed appointment if its circumstances change so that the exemption would no longer be valid.
• A public fund whose circumstances change such that it needs a custodian must notify the Commission and seek prior approval for the appointment under section 54(1) of the Securities and Investment Business Act, 2010.

Applies to

private funds, professional funds, public funds, mutual funds, fund managers, fund custodians

Deadlines

• within seven days of the proposed appointment: An exempted private, professional or public fund must notify the Commission of its intention to appoint a custodian or fund manager within seven days of the proposed appointment (or such shorter time as the Commission allows) once circumstances change.
• 31st December, 2019: Deemed commencement/effective date of these Guidelines.