Directive - Consistent Return (Cash Management) Fund Inc. (2013-01-25)

Summary

This is an enforcement action 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 a named group of public funds, including Consistent Return (Cash Management) Fund Inc., and imposes enhanced reporting, spending restrictions, and remedial fee/prospectus requirements.

• Weekly reporting: The Fund must submit weekly to the Commission detailed information on portfolio assets and values, cash balances, explanations of portfolio value changes over US$500,000, liabilities, subscription and redemption schedules, unpaid redemption requests, payments/expenses with supporting invoices, investor complaints, legal proceedings, and other regulatory actions, commencing 30 June 2011 until directed otherwise.
• Fee and expense freeze: The Fund must cease paying all fees and expenses attributable to it, except management fees, load fees, entry fees, exit penalties, Bloomberg fees, in-house legal costs, and fund administration, brokerage/custody, audit and legal service fees, the latter only with prior written Commission approval.
• Discontinued administrative costs: The Fund must stop incurring office costs, corporate accommodation costs, IT fees, and any other administrative fees/expenses relating to its investment manager, adviser or other service providers.
• New fee structure: The 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 a period the Commission directs.
• Governance evidence: The Fund must provide the Commission with copies of directors' and members' resolutions approving the new compensation scheme or fee structure.
• Prospectus amendment: The Fund must amend its prospectus to remove references to accrual/payment of administrative and operating costs of its manager/adviser/functionaries, and add enhanced disclosure on fees, related-party services and contracts, conflicts of interest, and any other disclosure required under the Public Funds Code, 2010.

The Directive applies collectively to Consistent Return (Cash Management) Fund Inc. and seventeen other named public funds licensed under the Investment Business regime, and remains in force as an amendment to the 2011 Directive.

Key obligations

• Submit weekly reports to the Commission covering portfolio assets/values, cash balances, material value changes over US$500,000, liabilities, subscriptions, redemptions (paid and unpaid), payments/expenses with invoices, investor complaints, legal proceedings and other regulatory actions, from 30 June 2011 until directed otherwise
• Cease and desist from paying fees and expenses except the specified carve-outs, and obtain prior written Commission approval for fund administration, brokerage/custody, audit and legal service fees
• Discontinue incurring office, corporate accommodation, IT and other administrative costs relating to the investment manager, adviser or other functionaries/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 certain cost references and add enhanced disclosure on fees, related-party services, conflicts of interest and Public Funds Code, 2010 requirements

Applies to

public funds, investment business licensees

Deadlines

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