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

Summary

This is a Directive issued by the BVI Financial Services Commission under section 40(1)(b) of the Financial Services Commission Act, 2001, amending an earlier Directive (originally issued 15 August 2011) against a named group of eighteen investment funds, including Aliquot Commodity Fund Inc. It imposes enhanced reporting, cost restrictions, and remedial requirements on those specific funds; it does not create general obligations for the wider investment business industry.

• Weekly reporting: The funds must submit weekly reports to the Commission covering portfolio holdings and valuations, cash balances, explanations for portfolio value changes over US$500,000, liabilities, subscriptions, redemptions paid and unpaid, all payments and expense requests with supporting invoices, investor complaints, legal proceedings, and any other regulators' investigations or actions.
• Fee and expense freeze: The funds must cease paying fees and expenses except for specified categories (management, load, entry, exit, Bloomberg fees, in-house legal costs) and must obtain prior written Commission approval before paying fund administration, brokerage/custody, or audit and legal service fees.
• Cost cuts: The funds must discontinue certain administrative and operating costs relating to their investment manager, adviser or other service providers, including office costs, corporate accommodation, IT fees, and other administrative expenses.
• New fee structure: Each fund must develop, by 31 March 2013, a Commission-approved fee structure (including a compensation scheme for the investment manager) consistent with industry practice, and implement it within the period the Commission directs.
• Governance evidence: Funds must provide the Commission with copies of directors' and members' resolutions approving the new compensation scheme or fee structure.
• Prospectus amendments: Funds must amend their prospectuses to remove references to accrual/payment of the investment manager's administrative and operating costs and to add enhanced disclosure on fees and expenses, related-party services and contracts involving Castlestone Management Incorporated, conflicts of interest, and any other disclosure required under the Public Funds Code, 2010.

The Directive is an enforcement action tied to a specific Matter ID (INV011513/009) against the named funds, licensed as Public Funds, and is published as an alert in the Commission's enforcement action library.

Key obligations

• Submit weekly reports to the Commission on portfolio holdings, cash balances, value changes over US$500,000, liabilities, subscriptions, redemptions (paid and unpaid), payments/expenses with invoices, investor complaints, legal proceedings, and other regulators' actions, commencing 30 June 2011 until directed otherwise
• Cease payment of all fees and expenses except specified permitted categories, and obtain prior written Commission approval before paying fund administration, brokerage/custody, or audit and legal service fees
• Discontinue office costs, corporate accommodation, IT fees and other administrative/operating costs of the investment manager, adviser or other service providers
• Develop, by 31 March 2013, a Commission-approved fee structure including a compensation scheme for the investment manager, 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 fund's prospectus to remove references to accrual/payment of administrative and operating costs and add disclosure on fees, related-party services, conflicts of interest, and Public Funds Code 2010 requirements

Applies to

public funds, mutual funds, investment business licensees

Deadlines

• commencing 30th June 2011, until directed otherwise: Weekly submission of specified fund information to the Commission
• 31st March 2013: Deadline to develop a Commission-approved fee structure and compensation scheme for the investment manager