Directive - Porcupine Global Macro Plus 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, addressed to a group of Public Funds, including Porcupine Global Macro Plus Inc. It amends an earlier Directive issued to the same funds on 15 August 2011, imposing ongoing reporting, fee and prospectus restrictions.

• Weekly reporting: Each named fund must submit weekly to the Commission detailed information on portfolio assets and values, cash balances, explanations for portfolio value changes over US$500,000, liabilities, subscription and redemption schedules, payment details with invoices, investor complaints, legal proceedings, and any other regulatory actions.
• Fee freeze: The funds must cease and desist paying all fees and expenses except specified permitted categories (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 only with prior Commission approval.
• Cost discontinuation: The funds must stop incurring certain administrative and operating costs of their investment manager, adviser 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 Commission-approved fee structure (including an investment manager compensation scheme) 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 amendment: Funds must amend their prospectuses to remove references to accrual/payment of administrative and operating costs of the investment manager or other 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 to Porcupine Global Macro Plus Inc. and a named group of other Public Funds regulated under the Public Funds licence type, continuing restrictions first imposed in 2011 pending compliance with the amended requirements.

Key obligations

• Submit weekly reports to the Commission on portfolio assets, cash balances, liabilities, subscriptions, redemptions, payments, complaints, legal proceedings and regulatory actions
• Cease payment of all fees and expenses except specified permitted fees, and obtain prior written Commission approval for administration, brokerage, custody, audit and legal service fees
• Discontinue incurring specified administrative and operating costs (office costs, corporate accommodation, IT costs, other administrative fees)
• Develop a Commission-approved fee structure and investment manager compensation scheme by 31 March 2013 and implement it within the period directed by the Commission
• Provide the Commission with copies of directors' and members' resolutions approving the new compensation scheme or fee structure
• Amend the fund's prospectus to remove references to accrual and payment of certain administrative and operating costs and to add enhanced disclosure on fees, related-party services, and conflicts of interest

Applies to

Public Funds, mutual funds, investment business

Deadlines

• commencing on 30th June 2011: Weekly submission to the Commission of portfolio, cash, liability, subscription, redemption, payment, complaint and legal proceedings information, until directed otherwise
• no later than 31st March 2013: Development of a Commission-approved fee structure, including investment manager compensation scheme