Directive - Aliquot Precious Metals 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 dated 15 August 2011. It applies to Aliquot Precious Metals Inc. and a group of related public funds (including Aliquot Agriculture Fund Inc., Aliquot Commodity Fund Inc., Aliquot Gold & Precious Metals Equities Fund Inc., Aliquot Gold Bullion Inc., and numerous other named funds), restricting their financial activities and requiring enhanced reporting and disclosure.

• Weekly reporting: Each Fund must submit to the Commission weekly information on portfolio assets and valuations, cash balances, explanations for portfolio value changes over US$500,000, liabilities, subscriptions, redemption requests (paid and unpaid), payments and expenses with supporting invoices, investor complaints, legal proceedings, and any regulatory actions by other regulators, commencing 30 June 2011 until directed otherwise.
• Fee and expense freeze: Funds must cease and desist paying most fees and expenses, except management fees, load fees, entry fees, exit penalties, Bloomberg fees, in house legal costs, and fees for fund administration, brokerage, custody, audit and legal services, and only with the Commission's prior written approval for the latter category.
• Cost discontinuation: Funds must stop incurring administrative and operating costs related to their investment manager, investment advisor or other functionaries/third party service providers, including office costs, corporate accommodation, IT fees, and other administrative fees or expenses.
• New fee structure: Each Fund must develop, by 31 March 2013, a fee structure (including an investment manager compensation scheme) consistent with industry practice and approved by the Commission, and implement it within a period directed by the Commission.
• Board approval 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 administrative and operating costs of the investment manager or third party service providers, and add enhanced disclosure on fees and expenses, related-party services involving Castlestone Management Incorporated, conflicts of interest, and any other disclosure required under the Public Funds Code, 2010.

The Directive remains binding on the named funds until varied or lifted by the Commission; the matter is recorded under Matter ID INV011513/009 with Licence Type Public Funds.

Key obligations

• Submit weekly reports to the Commission on portfolio assets, valuations, cash balances, material portfolio value changes, liabilities, subscriptions, redemptions, payments, complaints, legal proceedings and other regulators' actions, commencing 30 June 2011 until directed otherwise
• Cease and desist paying fees and expenses except a specified permitted list, and obtain prior written Commission approval for administration, brokerage, custody, audit and legal service fees
• Discontinue administrative and operating costs such as office costs, corporate accommodation, IT costs and other administrative fees relating to the investment manager or third party service providers
• Develop a Commission-approved fee structure and investment manager compensation scheme by 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 fund's prospectus to remove references to accrual/payment of certain administrative costs and add enhanced disclosure on fees, related-party services, and conflicts of interest, per the Public Funds Code, 2010

Applies to

public funds, mutual funds, investment business licensees

Deadlines

• commencing 30th June 2011, until directed otherwise: Weekly submission of portfolio, cash, liabilities, subscription/redemption and related information to the Commission
• no later than 31st March, 2013: Deadline to develop a Commission-approved fee structure and investment manager compensation scheme