Directive - Global Property Growth & Income REITS 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 dated 15 August 2011. It applies to Global Property Growth & Income REITS Fund Inc. and a group of related public funds (including several Aliquot funds and other Castlestone Management-linked entities), imposing enhanced reporting, cost restrictions and prospectus amendment requirements.

• Weekly reporting: The Fund must submit weekly reports to the Commission on portfolio assets and values, cash balances, large value changes (over US$500,000), liabilities, subscriptions, redemptions (paid and unpaid), payments/expenses with supporting invoices, investor complaints, legal proceedings, and any other regulatory actions, commencing 30 June 2011 until the Commission directs otherwise.
• Fee freeze: The Fund must cease paying most fees and expenses, except specified items (management, load, entry, exit, Bloomberg fees and in-house legal costs) and certain service fees (administration, brokerage, custody, audit, legal) which require prior written Commission approval.
• Cost discontinuation: The Fund must stop incurring administrative and operating costs of its investment manager/advisor or other service providers, including office costs, corporate accommodation, IT fees and other administrative expenses.
• New fee structure: By 31 March 2013 the Fund must develop a Commission-approved fee structure (including an investment manager compensation scheme) 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 fee structure.
• Prospectus amendments: The Fund must amend its prospectus to remove references to accrual/payment of the discontinued administrative costs and add disclosure on fees, related-party services and contracts, conflicts of interest, and any other disclosure required under the Public Funds Code, 2010.

The Directive is a targeted enforcement action against this specific fund and a named group of related public funds rather than a general rule applicable to the wider investment business industry.

Key obligations

• Submit weekly reports to the Commission covering portfolio assets/values, cash balances, explanations of value changes over US$500,000, liabilities, subscription and redemption schedules, unpaid redemption reasons, payment details with invoices, investor complaints, legal proceedings and other regulators' actions, commencing 30 June 2011 until directed otherwise
• Cease and desist payment of all fees and expenses except specified categories, and obtain prior written Commission approval before paying fund administration, brokerage, custody, audit or legal service fees
• Discontinue incurring specified administrative and operating costs (office costs, corporate accommodation, IT fees, other administrative expenses)
• Develop, by 31 March 2013, a Commission-approved fee structure including an investment manager compensation scheme, and implement it within the period directed by the Commission
• Provide the Commission with copies of directors' and members' resolutions approving the compensation scheme or fee structure
• Amend the prospectus to remove references to the discontinued costs and add specified disclosures on fees, related-party services, conflicts of interest and Public Funds Code 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
• no later than 31st March 2013: Deadline to develop a Commission-approved fee structure and investment manager compensation scheme