Public Statement No. 1 of 2008 - Reserve International Liquidity Fund Ltd. (28 October 2008)

Summary

This is a public statement issued by the BVI Financial Services Commission under Section 37A of the Financial Services Commission Act, 2001, concerning Reserve International Liquidity Fund Ltd., a public fund registered under the Mutual Funds Act, 1996. It discloses that the Commission investigated investor complaints alleging the Fund mis valued defaulted bond holdings, overstated its NAV, and allowed some investors to redeem at par before the write down, disadvantaging remaining investors.

Following its investigation, the Commission issued a directive on 17 October 2008 under Section 40(1)(b) of the Financial Services Commission Act, 2001, requiring the Fund to take specific remedial and reporting actions until further notice.

• Suspension: The Fund must forthwith suspend subscription of shares by new or existing investors, redemption of shares by investors, and payment of redemption proceeds, until further notice from the Commission.
• Monthly reporting: The Fund must submit monthly reports to the Commission detailing its cash balances and holding institutions, its investments (jurisdiction, type and value at cost and market value), and updates on all ongoing litigation involving the Fund, until further notice.
• Ongoing investigation: The Commission's investigation into the Fund is continuing and further updates will be issued as matters progress.

Key obligations

• Reserve International Liquidity Fund Ltd. must forthwith suspend subscription of shares by new or existing investors
• Reserve International Liquidity Fund Ltd. must forthwith suspend redemption of shares by investors and payment of redemption proceeds, until further notice by the Commission
• Reserve International Liquidity Fund Ltd. must submit monthly reports to the Commission on cash balances, investment holdings and valuations, and ongoing litigation, until further notice by the Commission

Applies to

public funds, mutual funds, Reserve International Liquidity Fund Ltd.

Deadlines

• until further notice by the Commission: Suspension of subscriptions, redemptions and redemption payments by the Fund remains in effect until the Commission gives further notice
• monthly, until further notice by the Commission: The Fund must submit recurring monthly reports on cash, investments and litigation status