Directive - World Index Growth and Income 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. It amends an earlier Directive (originally issued 15 August 2011) and applies to World Index Growth and Income Fund Inc. together with seventeen other named public funds. It imposes enhanced reporting, cost restrictions, and remediation requirements on these funds.

• Weekly reporting: The funds must submit weekly information to the Commission (from 30 June 2011 until directed otherwise) covering portfolio assets and values, cash balances, explanations for portfolio value changes over US$500,000, liabilities, subscription and redemption schedules, unpaid redemption requests, payments and expenses with supporting invoices, investor complaints, legal proceedings, and any regulatory actions by other regulators.
• Fee freeze: The funds must cease 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 payments beyond these require the Commission's prior written approval.
• Cost discontinuation: The funds must stop incurring administrative and operating costs of their investment manager, investment advisor or other functionaries/third-party service providers, including office costs, corporate accommodation, IT fees, and any other administrative expenses.
• New fee structure: Each fund must develop, by no later than 31 March 2013, a fee structure (including a compensation scheme for the investment manager) consistent with industry practice and approved by the Commission, and implement it within the 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 amendment: Funds must amend their prospectuses to remove references to accrual/payment of the discontinued administrative and operating costs and to add enhanced disclosure on fees and expenses, related-party services and contracts (including those involving Castlestone Management Incorporated), conflicts of interest, and any other disclosure required under the Public Funds Code, 2010.

The Directive remains in force and continues to apply to the listed funds until varied or lifted by the Commission.

Key obligations

• Submit weekly reports to the Commission on portfolio assets, cash balances, portfolio 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 exempted categories, and obtain prior written Commission approval for administration, brokerage, custody, audit and legal service payments.
• Discontinue incurring specified administrative and operating costs (office costs, corporate accommodation, IT fees, other administrative expenses) relating to the investment manager, adviser or other service providers.
• Develop, by 31 March 2013, a Commission-approved fee structure and 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 new fee structure or compensation scheme.
• Amend the fund's prospectus to remove references to the discontinued costs and add enhanced disclosure on fees, related-party services, conflicts of interest, and Public Funds Code, 2010 requirements.

Applies to

Public Funds, World Index Growth and Income Fund Inc., Aliquot Agriculture Fund Inc., Global Property Growth & Income REITS Fund Inc., Aliquot Commodity Fund Inc., Inflation Target Recovery Fund Inc., Aliquot Gold & Precious Metals Equities Fund Inc., Intelligent Portfolio (IQ-Asset Allocation) Inc., Aliquot Gold Bullion Inc., Next 11 Emerging Fund Inc., Aliquot Precious Metals Inc., Porcupine Absolute Return Fund Inc., Balanced Opportunity Inc., Systematic Growth Fund Inc., Collection of Modern Art Inc., Concerto Alternative Alpha Inc., Consistent Return (Cash Management) Fund Inc., Emerging Markets Growth And Income Fund Inc., Porcupine Global Macro Plus Inc.

Deadlines

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