Fund Safekeeping Arrangements Guidelines 2019

Summary

These BVI Financial Services Commission guidelines explain what safekeeping arrangements the Commission expects private investment funds, incubator funds and approved funds to have in place for fund property, depending on the type of assets the fund holds. They implement requirements already set out in the Private Investment Funds Regulations 2019 and the Securities and Investment Business (Incubator and Approved Funds) Regulations 2015.

• Financial instruments: Funds investing in stocks, bonds, futures, contracts for difference, options and similar assets should have safekeeping arrangements with an appropriately licensed or qualified person, such as a traditional custodian or a prime broker providing custodial arrangements.
• Tangible assets: For land, real estate, equipment, private equity and similar tangible assets, a traditional custodian or prime broker is not required, but the fund must appoint a person responsible for maintaining and safeguarding ownership documentation, who has sufficient expertise and resources.
• Investments in other funds: For feeder funds or fund of funds structures, the fund must ensure a person is responsible for confirming that underlying funds have appropriate custodial or safekeeping arrangements, understands those arrangements, and monitors investments in and redemptions from the underlying funds.

Funds must be able to demonstrate at authorisation and at all times that appropriate safekeeping arrangements are in place, and must notify the Commission if these arrangements cease or are altered.

Key obligations

• Maintain appropriate safekeeping arrangements for fund property appropriate to the type of assets held (financial instruments, tangible assets, or investments in other funds)
• For financial instruments, use an appropriately licensed or qualified custodian or prime broker with custodial arrangements
• For tangible assets, appoint a person responsible for maintaining and safeguarding ownership documentation who has sufficient expertise and resources
• For feeder fund or fund of funds structures, appoint a person responsible for confirming and understanding underlying funds' custodial arrangements and monitoring investments and redemptions
• Be able to demonstrate at the time of authorisation and at all times that safekeeping arrangements are in place
• Notify the Commission where safekeeping arrangements have ceased or are altered

Applies to

private investment funds, incubator funds, approved funds