Directive - Aliquot Agriculture Fund Inc. (2013-01-25)

Summary

This is an enforcement Directive issued by the BVI Financial Services Commission under section 40(1)(b) of the Financial Services Commission Act, 2001, amending an earlier Directive of 15 August 2011. It applies to Aliquot Agriculture Fund Inc. and seventeen related funds (all licensed as Public Funds), and imposes enhanced reporting, cost, and disclosure restrictions on them.

• Weekly reporting: Each Fund must submit weekly to the Commission (from 30 June 2011 until directed otherwise) details of its asset portfolio and valuations, cash balances, explanations for portfolio value changes over US$500,000, liabilities, subscriptions, redemptions paid and unpaid, payments/expenses with supporting invoices, investor complaints, legal proceedings, and any regulatory actions by other regulators.
• Fee freeze: Each Fund must cease paying all accrued or other fees and expenses, except management fees, load fees, entry/exit fees, Bloomberg fees, in-house legal costs, and fund administration, brokerage, custody, audit and legal service fees paid without the Commission's prior written approval.
• Cost discontinuation: Each Fund must stop incurring administrative and operating costs of its investment manager/advisor or other functionaries, including office costs, corporate accommodation, IT fees, and other administrative expenses.
• New fee structure: Each Fund must develop, by 31 March 2013, a fee and compensation structure consistent with industry practice, subject to Commission approval, and implement it within the period the Commission directs.
• Governance evidence: Each Fund must provide the Commission with copies of directors' and members' resolutions approving the new compensation scheme or fee structure.
• Prospectus amendments: Each Fund must amend its prospectus to remove references to accrual/payment of the investment manager's administrative and operating costs, and add enhanced disclosure on fees, related-party services and contracts (including those involving Castlestone Management Incorporated), conflicts of interest, and any other disclosure required under the Public Funds Code, 2010.

The Directive names Aliquot Agriculture Fund Inc. and seventeen other affiliated funds (e.g. Global Property Growth & Income REITS Fund Inc., Aliquot Commodity Fund Inc., Porcupine Absolute Return Fund Inc., and others) as subject to these restrictions until the Commission directs otherwise.

Key obligations

• Submit weekly reports to the Commission on portfolio assets, cash balances, portfolio value changes over US$500,000, liabilities, subscriptions, redemptions (paid and unpaid), payments/expenses with invoices, investor complaints, legal proceedings, and other regulatory actions, commencing 30 June 2011 until directed otherwise
• Cease payment of all fees and expenses except specified categories, and obtain prior written Commission approval for fund administration, brokerage, custody, audit and legal service fees
• Discontinue incurring specified administrative and operating costs of the investment manager, advisor or other functionaries/third party service providers
• Develop a Commission-approved fee structure and compensation scheme for the investment manager no later than 31 March 2013, and implement it within the period the Commission directs
• Provide the Commission with copies of directors' and members' resolutions approving the compensation scheme or fee structure
• Amend the prospectus to remove references to accrual/payment of investment manager's administrative and operating costs and add enhanced disclosure on fees, related-party services, conflicts of interest, and disclosures required under the Public Funds Code, 2010

Applies to

Public Funds, mutual funds, investment business

Deadlines

• commencing 30th June 2011, weekly basis, until directed otherwise: Submission of specified fund information to the Commission
• no later than 31st March, 2013: Develop a Commission-approved fee structure and compensation scheme for the investment manager