Exploring the Funds Hub

The Cayman Islands is the leading jurisdiction for the offshore investment funds industry due to its combination of flexible and appropriate regulation, an approachable and effective regulator, professional service provider expertise, high reputation among investors and a tax neutral regime.

Investment funds established in the Cayman Islands fall into two broad categories: open-ended funds and closed-ended funds.

Open-ended funds provide investors with voluntary redemption or repurchase rights and closed-ended funds do not provide investors with those rights. Typically, open-ended funds will invest in liquid assets which can be readily realised to satisfy redemptions (eg listed, liquid, tradable securities) and closed-ended funds will invest in non-liquid assets requiring time to liquidate/realise value (eg real estate, unlisted companies).

This guide sets out a summary of the regulatory regime that governs closed-ended investment funds, known as private funds, which is supervised by the Cayman Islands Monetary Authority (CIMA).

For an overview of the regulatory regime that governs open-ended investment funds please see our Guide to mutual funds in the Cayman Islands.

Fund vehicle options

Exempted limited partnerships

An exempted limited partnership (ELP) is the most common vehicle for closed-ended funds including private equity, venture capital and real estate funds. An ELP has many similarities to its Delaware equivalent vehicle but an ELP is not a separate legal person and for this reason, it is popular with managers and investors in a number of jurisdictions. An ELP is operated and managed by its general partner. Please see our Guide to ELPs for more details.

Limited liability companies

Limited liability companies (LLCs) can be incorporated in the Cayman Islands in a form closely aligned to the Delaware LLC. LLCs may be used in investment fund structures where a flexible structure similar to a limited partnership is required, but where the vehicle needs to be established as a body corporate distinct from its members. LLCs are regulated by their LLC agreement and the Limited Liability Companies Act. Please see our Guide to LLCs for more details.

Companies

Exempted companies limited by shares are also used for the establishment of closed-ended investment funds, with an investor's liability being limited to the amount paid or agreed to be paid in respect of their shares. Please see our Guide to exempted companies for more details.

Segregated portfolio companies

An exempted company may register as a segregated portfolio company (SPC), which is similar to a segregated cell company in many other jurisdictions.

An SPC may establish any number of segregated portfolios. Assets and liabilities attributed to a particular segregated portfolio are legally separated from the assets and liabilities attributed to any other segregated portfolio. A creditor who is party to a contract involving a particular segregated portfolio will have restricted recourse and will be entitled to recover only against assets attributed and credited to the specific segregated portfolio to which the contract is also attributed.

SPCs can be useful as multi-strategy vehicles and platform vehicles. Savings by using multi-strategy SPCs are often not as great as anticipated however and SPCs with multiple segregated portfolios do require a greater degree of care to ensure assets are properly segregated, contracts are entered into on behalf of the correct segregated portfolio and inadvertent cross-collateralisation does not occur. Please see our Guide to segregated portfolio companies for more details.

Unit trusts

Cayman Islands unit trusts are established under and governed by the Cayman Islands Trusts Act and, save as modified under that law, generally applicable principles of English trust law. With a unit trust, investors contribute funds to a trustee which holds those funds on trust for the investors and each investor is directly entitled to a pro rata share ...

This guide looks at the roles and responsibilities of the nominated officers of financial service providers whose job it is to look out for and report suspicious activity and who oversee the compliance function and ensure that adequate systems and controls are in place to comply with the Anti-Money Laundering Regulations (Revised).

Money laundering is the process by which the proceeds of crime are channelled through the economy/financial system in a way which is intended to conceal the true origin and ownership of the proceeds of criminal activity. The Proceeds of Crime Act (the PC Act), the Terrorism Act and the supporting Anti-Money Laundering Regulations (Revised) (the Regulations) are the main pieces of legislation in the Cayman Islands aimed at combating money laundering, proliferation financing and terrorist financing. Under these laws, those persons carrying out "relevant financial business" (referred to as financial service providers or FSPs) must apply a risk based approach to anti-money laundering, proliferation financing and terrorist financing (together, AML) compliance.

Nominated officers - money laundering reporting officer and deputy

The PC Act requires that FSPs have a "nominated officer" in place for the purpose of receiving reports relating to criminal conduct, with the Regulations creating the roles of the Money Laundering Reporting Officer (MLRO), Deputy Money Laundering Officer (DMLRO) and AML Compliance Officer (AMLCO). Accordingly, natural persons must be appointed as the MLRO, DMLRO and AMLCO for all FSPs, including investment funds.

The Regulations and Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands (and amendments) (Guidance Notes) published by the Cayman Islands Monetary Authority (CIMA) set out more details on each of these roles and functions.

Who can be appointed as MLRO?

Under the Regulations each person carrying out relevant financial business must designate a person at management level as their MLRO, to whom suspicious activity reports (SARs) must be made. The MLRO should be someone who is well versed in the business of the FSP which may give rise to opportunities for money laundering, proliferation financing or terrorist financing. A DMLRO must also be appointed to perform the MLRO's functions in their absence. The DMLRO should be a staff member of similar status and experience as the MLRO.

The Guidance Notes provide that the MLRO should:

Be a natural person

Be autonomous, meaning the MLRO is the final decision maker as to whether to file a SAR

Be independent, meaning no vested interest in the underlying activity

Have access to all relevant material in order to make an assessment as to whether an activity is or is not suspicious

What is the role of the MLRO?

The primary duties of the MRLO (or the DMLRO in their absence) are to:

Receive reports of any information or other matter which comes to the attention of a person carrying out relevant financial business, which gives rise to an actual knowledge or suspicion of money laundering, proliferation financing or terrorist financing

Consider and investigate such reports in light of all other relevant information to determine if the information or other matter gives rise to such knowledge or suspicion

Have access to other information which may assist in considering such report

Make prompt disclosures to the Financial Reporting Authority (FRA) in the standard SAR form if after considering a report there is knowledge or a suspicion of money laundering, proliferation financing or terrorist financing

Establish and maintain a register of money laundering, proliferation financing or terrorist financing reports made by staff

Maintain a register of reports to the FRA

How do we identify unusual or suspicious transactions?

As the types of transactions which may be used by money launderers are unlimited it is difficult to define a suspicious transaction. The Guidance Notes are instructive in t...

This guide provides a high level summary of the main obligations for Cayman Islands investment funds under Cayman Islands automatic exchange of information (AEOI) legislation.

Background and legislative framework

Over recent years governments around the world have agreed international standards for the automatic sharing of financial account information between global fiscal authorities, with the aim of reducing tax evasion.

As part of its commitment to international transparency standards, the Cayman Islands Government is a signatory to:

A Model 1B intergovernmental agreement with the United States (US IGA) which provides the framework for the implementation of the US Foreign Account Tax Compliance Act (FATCA) in the Cayman Islands

The OECD sponsored Multilateral Competent Authority Agreement and certain bilateral agreements or tax treaties regarding the common reporting standard on automatic exchange of information (CRS, together with the US IGA, AEOI Agreements)

As Cayman Islands entities are not directly subject to the AEOI Agreements, the Cayman Islands has introduced legislation to implement the AEOI Agreements under the Tax Information Authority Act (TIA Act) including the Tax Information Authority (International Tax Compliance) (United States of America) Regulations (FATCA Regulations) and the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, as amended (CRS Regulations), together AEOI Legislation). Definitions used in this guide are as set out in the AEOI Legislation unless otherwise indicated.

The Department of International Tax Co-operation (DITC) is the Cayman Islands government department responsible for tax affairs and the Tax Information Authority (TIA), created by the TIA Act, is the Cayman Islands competent authority for tax co-operation and is housed within the DITC. The DITC has issued guidance notes (Guidance Notes) on the AEOI Legislation, which can be found here and here, which provide details of the notification, reporting and ongoing obligations that apply, as well as a useful reminder of the differences between FATCA and CRS.

How are investment funds classified for AEOI purposes?

In practice, the vast majority of Cayman Islands investment funds fall within the definition of an Investment Entity (one of the types of Financial Institution under AEOI Legislation) and will be classified as Cayman Reporting Financial Institutions. There are certain differences between the definitions in each of the FATCA Regulations and the CRS Regulations, with the term Foreign Financial Institution being used under FATCA. In this guide we will be discussing 'FIs' or 'Financial Institutions'.

What are the notification obligations?

The most notable notification obligations are:

To register with the Internal Revenue Service of the United States (IRS): to obtain a global intermediary identification number (GIIN) (even if a Reporting FI has no US Reportable Accounts) either through the IRS FATCA Portal or through a paper submission. Registered Deemed Compliant FIs are also obliged to register with the IRS.

A Cayman Islands investment fund which is a Reporting FI is required by the FATCA Regulations to register with the IRS within 30 days of 'starting business'. While a fund is not technically operating until it starts to accept subscription payments from investors (for the purposes, at least, of the Mutual Funds Act), in reality, all funds have to provide their GIIN numbers to banking and other counterparties at a very early stage of their creation in order to open accounts. It is therefore important to get this registration done as soon as possible after the vehicle has been formed.

When registering for a GIIN, the IRS portal requires the name of a natural person to be listed as the FI's Responsible Officer. The Responsible Officer of a Reporting FI will be the person required to deal with the IRS online registration, certify that certain information (entered as part of the on...

This guide provides an overview of the powers, duties and obligations of a director of an exempted company incorporated under the Companies Act of the Cayman Islands (Companies Act) which is registered with the Cayman Islands Monetary Authority (CIMA) as a fund (Fund).

This guide is limited to those Funds registered with CIMA under section 4(3) or 4(4)(a) of the Mutual Funds Act (a Mutual Fund) and those Funds registered with CIMA under the Private Funds Act (a Private Fund) as well as the law and practice of the Cayman Islands. Other duties, obligations and potential liabilities may also arise under the laws of other jurisdictions.

Who are the directors of a Fund?

There is no precise definition of a 'director' under Cayman Islands law. The directors of a Fund may be individuals or corporate bodies and they are the persons with ultimate responsibility for the management and conduct of the Fund's affairs.

The first directors of a Fund (whether described as 'executive' or 'non-executive') are typically appointed by the initial subscribers to the Fund or otherwise in accordance with the articles of association of the Fund (Articles). The register of directors maintained by the Fund will be prima facie evidence of the identity of the directors from time to time.

A person undertaking the activities of a director without being formally appointed may be found to be acting as a 'de facto director'. Also, if the duly appointed directors of a Fund are found to be acting in accordance with the directions or instructions of another person then that person may be found to be acting as a 'shadow director'. A person is not deemed to be a shadow director however by reason only that the directors act on advice given by such person in a professional capacity, so that an investment adviser of a Fund making recommendations to the directors as to the purchase or sale of investments should not usually constitute a shadow director.

Executive directors, non-executive directors, shadow directors and de facto directors are all subject to the duties and obligations set out in this guide.

Should I agree to act as a director of a Fund?

When deciding whether or not to act as a director of a Fund, the following points should be considered:

Who will be the other directors of the Fund? Will your fellow directors have the ability to work with you to properly coordinate the proper oversight and management of the Fund?

Any other interests you may have in the overall structure of the Fund and its advisers or service providers. If you are a connected person (for example, a principal of the Fund's investment manager) you may want to consider either not sitting on the board of the Fund or making sure that you are in a minority position. These measures will reduce the potential for conflicts of interest to arise which could increase the risk of your actions later being challenged by the investors of the Fund as not being in accordance with your duties to the Fund.

The expectations of the Fund's key investors. They may be comfortable with a board of directors comprised of connected persons or they may require the Fund to have one or more directors independent of the Fund's investment manager. This is something that you may wish to discuss further with the Fund's representatives and the Fund's current or proposed key investors before agreeing to accept any appointment as a director.

You need to have sufficient and relevant knowledge and experience to discharge your duties as a director. It is up to you to acquire and maintain sufficient knowledge to enable you to carry out your role. You should use the Fund's professional advisers to provide advice on any areas or transactions of which you are unsure. In particular, you should ensure that you are able to properly read and understand the financial information relating to the Fund, including its financial statements. If there is anything that you do not understand, then you should promptly obtain professional advice.

...

This guide provides an overview of the British Virgin Islands' Approved Manager regime. The regime came into effect on 10 December 2012 with the Investment Business (Approved Managers) Regulations 2012 (the Regulations) and the Approved Investment Managers Guidelines (the Guidelines). It introduces a less onerous regulatory regime for BVI domiciled investment managers and investment advisers and compliments the more heavily regulated investment business licensing regime under Part I of the Securities and Investment Business Act 2010 (SIBA).

The key features of the new regime are:

For eligible managers and advisors, an alternative to licensing under Part I of SIBA

The applicant must be a BVI company or limited partnership

Application form provides for self-certification of "fit and proper" status of the applicant

The approved manager can commence business seven days after filing a short and simple application with the Financial Services Commission (the Commission) pending formal approval

The approved manager can act as manager or advisor to any number of incubator, approved, private or professional funds recognised under SIBA, as well as funds domiciled outside of the BVI in a Recognised Jurisdiction (as defined below) and closed ended funds domiciled in the BVI or in a Recognised Jurisdiction, if they have the key characteristics of a private or professional fund

The approved manager is subject to caps of (i) aggregate assets under management of US$400 million for open ended funds and (ii) aggregate capital commitments of US$1 billion for closed ended funds

Annual return and unaudited financial statements to be filed with the Commission

No capital adequacy or professional indemnity insurance requirements and no requirement to appoint a compliance officer. The Regulatory Code does not apply

At this point in time, a Recognised Jurisdiction for these purposes means:

Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom and the United States of America.

Criteria for approved managers

An approved manager may carry on business (defined as "relevant business" in the Regulations) as an investment manager or investment adviser to:

1. One or more incubator, approved, private or professional funds recognised under SIBA (or funds domiciled outside the BVI but in a Recognised Jurisdiction)

2. One or more closed ended funds which are domiciled in the BVI and have certain key characteristics of a private or professional fund

3. One or more open ended or closed ended funds which are domiciled in a Recognised Jurisdiction and have certain characteristics of a private or professional fund

4. One or more non-BVI funds (open ended or closed ended) investing a substantial part of its assets in a fund described in (a), (b) or (c) above

5. One or more persons who are affiliated (as defined in the Guidelines) to a fund described in (a) or (b) above

6. Such other person(s) as the Commission may approve on a case by case basis (the most common application under this section being for the purposes of providing some form of management advice to "managed accounts")

Application process - timeframe

An applicant must submit its application in the prescribed form to the Commission at least seven days prior to the intended date of commencement of the "relevant business". After the expiry of the seven day period (or such shorter period as the Commission may approve), the applicant may commence and carry on "relevant business" for a period of up to 30 days (such period being extendable for a further period of 30 days by the Commission). During this 30 day (or extended) period, the applicant will be deemed to have been approved under the Regulations....

As a recognised fund, your professional or private fund is regulated by the British Virgin Islands (BVI) Financial Services Commission (the FSC). This note provides a quick reference to your professional or private fund's ongoing BVI obligations.

Professional and private funds are recognised under the Securities and Investment Business Act, Revised Edition 2020 and are subject to the Mutual Funds Regulations, Revised Edition 2020.

A professional or private fund must:

At all times have at least two directors, at least one of whom must be an individual

Appoint an appropriately qualified and independent individual as Money Laundering Reporting Officer (MLRO) for the fund who may, in practice, be a person provided by one of the functionaries to the fund (see below for more detail on anti-money laundering obligations)

Appoint a Foreign Account Tax Compliance Act (FATCA) responsible officer and a principal point of contact for the BVI International Tax Authority (ITA)(see below for more detail on obligations under FATCA and CRS)

A private or professional fund is required to have the following functionaries and other service providers:

Manager

A private or professional fund must at all times have a manager.

Yes, in certain circumstances, on application to the FSC.

Administrator

A private or professional fund must at all times have an administrator.

No exemption is available.

Custodian

A private or professional fund must at all times have a custodian. The custodian must be functionally independent from the manager and administrator.

Yes, in certain circumstances, on application to the FSC.

The most common exemptions are for feeder funds in a "master-feeder" structure and for funds whose prime broker provides the custodial services.

Auditor

A private or professional fund must appoint and at all times have an auditor to audit its financial statements.

Yes, in certain circumstances, on application to the FSC.

Authorised Representative

A private or professional fund must have an FSC licenced authorised representative (Authorised Representative) to act as a point of contact between the fund and the FSC.

No exemption is available.

On the happening of certain events, a professional or private fund is required to notify the FSC. The table below summarises these notification requirements and the timeframe for providing notice.

The appointment of a functionary (ie the manager, administrator, investment advisor, custodian, any prime broker or (in the case of a unit trust) the trustee).

Not less than 7 days prior to the date of appointment.

A functionary ceasing to act (notice must include a statement of the reasons for such functionary ceasing to act).

Within 7 days.

The appointment of a director.

Within 14 days.

A director ceasing to hold office (for whatever reason).

Within 14 days.

The appointment of an Authorised Representative.

Within 14 days.

An Authorised Representative ceasing to hold office (for whatever reason).

Within 14 days.

The appointment of an auditor.

Within 14 days.

An auditor ceasing to hold office (for whatever reason).

Within 14 days.

Any change in the address of the fund's place of business, whether in or outside the BVI.

Within 14 days.

Any amendment to its constitutional documents.

Within 14 days.

The issuance of any offering document not previously provided to the FSC.

Within 14 days.

The amendment of any offering document previously provided to the FSC.

Within 14 days.

There are various reporting and payment deadlines for a professional or private fund throughout the year.

31 March

Pay recognition fee of US$1,200 to the FSC. Failure to pay may attract administrative penalties and/or other enforcement action

30 April

For funds that are limited partnerships, pay the Registrar of Corporate Affairs (together with the Registrar of Limited Partnerships, the Registry) licence fee of US$750

31 May

FATCA reporting deadline and Common Reporting Standard (CRS) reporting deadline

31 May

For funds that are companies incorporated ...

Provision

What to do and when?

Regulation 16/Guideline 6.4

An Approved Manager must file an annual return with the Financial Services Commission (the Commission) no later than 31 January each year.

The annual return must be in the prescribed form and must contain:

1. A statement that the Approved Manager is not in breach of the requirements of the Regulations

2. A confirmation that each director and senior officer of, and shareholder with a "significant interest" (generally speaking, more than ten per cent) in, the Approved Manager is fit and proper

3. Details, as at 31 December of the preceding year, of:

1. the funds (and persons) for which it provides services

2. the assets under management of each fund (and person) for which it acts

3. the number of investors in each fund for which it acts

4. any significant complaints received by the Approved Manager

Provision

What to do and when?

Regulation 6(2)/Guideline 7.1

An Approved Manager must pay an annual renewal fee of US$1,800 to the Commission by 31 March of each year.*

* Harneys Corporate Services' invoices for disbursements are distributed annually in November and are payable by 15 January.

Provision

What to do and when?

BVI Companies Act 2004 (as amended)

For companies incorporated from 1 January to 30 June, pay the Registry licence fee by 31 May and for companies incorporated from 1 July to 31 December, pay the Registry licence fee by 30 November.* The Registry licence fee is US$550 for companies authorised issue up to 50,000 shares and US$1,350 for companies authorised to issue more than 50,000 shares.

* Harneys Corporate Services' invoices for disbursements are distributed annually in November and are payable by 15 January.

Provision

What to do and when?

Regulation 14(1)/Guideline 6.2

An Approved Manager must prepare financial statements for each financial year in accordance with either UK GAAP, US GAAP, Canadian GAAP, IFRS or such other recognised international accounting standards as may be approved by the Commission on a case-by-case basis. The financial statements do not need to be audited.

Financial statements must be signed by a director and submitted to the Commission within six months of the end of the financial year to which they relate. Such statements must be accompanied by a director's certificate (in the prescribed form) and a report on the affairs of the Approved Manager.

Provision

What to do and when?

Regulation 13(1)/Guideline 6.1.1

An Approved Manager must at all times have:

1. At least two directors, at least one of whom shall be an individual (or in the case of a limited partnership, at least one general partner)

2. An authorised representative – this entity acts as the conduit between the Approved Manager and the Commission. An affiliate entity of Harneys Corporate Services (Craigmuir Authorised Representative Limited) provides this service

Provision

What to do and when?

Anti-Money Laundering Regulations 2008

Anti-Money Laundering and Terrorist Financing Code of Practice 2008

Financial Services (Prudential and Statistical Returns) Order 2009

The BVI anti-money laundering regime applies to all Approved Managers as they are classified as "relevant persons" under the Anti-Money Laundering Regulations, 2008. In summary, an Approved Manager will be required to:

1. Put in place client onboarding procedures which address typical "know your client" requirements in respect of the funds (and persons) that will be clients of the Approved Manager

2. Appoint an officer or another individual as Money Laundering Reporting Officer

3. Report suspicious transactions to the BVI Financial Investigation Agency

4. Put in place documentation, such as a compliance manual, which outlines how the Approved Manager complies with the BVI antimoney laundering requirements (the Manual) and review the Manual on an annual basis to ensure compliance with the AML regime in the British Virgin Islands.

5. Submit the anti-money laundering/countering the financing of terrorism return on...

This guide provides an overview of the British Virgin Islands' Approved Manager regime. The regime came into effect on 10 December 2012 with the Investment Business (Approved Managers) Regulations 2012 (the Regulations) and the Approved Investment Managers Guidelines (the Guidelines). It introduces a less onerous regulatory regime for BVI domiciled investment managers and investment advisers and compliments the more heavily regulated investment business licensing regime under Part I of the Securities and Investment Business Act 2010 (SIBA).

The key features of the new regime are:

For eligible managers and advisors, an alternative to licensing under Part I of SIBA

The applicant must be a BVI company or limited partnership

Application form provides for self-certification of "fit and proper" status of the applicant

The approved manager can commence business seven days after filing a short and simple application with the Financial Services Commission (the Commission) pending formal approval

The approved manager can act as manager or advisor to any number of incubator, approved, private or professional funds recognised under SIBA, as well as funds domiciled outside of the BVI in a Recognised Jurisdiction (as defined below) and closed ended funds domiciled in the BVI or in a Recognised Jurisdiction, if they have the key characteristics of a private or professional fund

The approved manager is subject to caps of (i) aggregate assets under management of US$400 million for open ended funds and (ii) aggregate capital commitments of US$1 billion for closed ended funds

Annual return and unaudited financial statements to be filed with the Commission

No capital adequacy or professional indemnity insurance requirements and no requirement to appoint a compliance officer. The Regulatory Code does not apply

At this point in time, a Recognised Jurisdiction for these purposes means:

Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom and the United States of America.

Criteria for approved managers

An approved manager may carry on business (defined as "relevant business" in the Regulations) as an investment manager or investment adviser to:

1. One or more incubator, approved, private or professional funds recognised under SIBA (or funds domiciled outside the BVI but in a Recognised Jurisdiction)

2. One or more closed ended funds which are domiciled in the BVI and have certain key characteristics of a private or professional fund

3. One or more open ended or closed ended funds which are domiciled in a Recognised Jurisdiction and have certain characteristics of a private or professional fund

4. One or more non-BVI funds (open ended or closed ended) investing a substantial part of its assets in a fund described in (a), (b) or (c) above

5. One or more persons who are affiliated (as defined in the Guidelines) to a fund described in (a) or (b) above

6. Such other person(s) as the Commission may approve on a case by case basis (the most common application under this section being for the purposes of providing some form of management advice to "managed accounts")

Application process - timeframe

An applicant must submit its application in the prescribed form to the Commission at least seven days prior to the intended date of commencement of the "relevant business". After the expiry of the seven day period (or such shorter period as the Commission may approve), the applicant may commence and carry on "relevant business" for a period of up to 30 days (such period being extendable for a further period of 30 days by the Commission). During this 30 day (or extended) period, the applicant will be deemed to have been approved under the Regulations....

An incubator fund is required to prepare and submit the following to the FSC:

Financial statements, which do not need to be audited but are required to be approved or signed by a director or the general partner of the fund, within six months of the end of the financial year to which they relate

A semi-annual return, no later than 31 January and 31 July containing the following information as at 31 December of and 30 June of the preceding semi-annual period:

the number of investors in the fund

the total investments in the fund

the aggregate subscriptions to the fund

the aggregate redemptions paid to investors

the net asset value of the fund

any significant investor complaint received by the fund and how the complaint was dealt with

A statement that the fund is not in breach of the requirements of the Regulations that allow it to continue as an incubator fund, no later than 31 January (such statement is included in the semi-annual return).

The BVI anti-money laundering (AML) regime applies to all funds as they are classified as "relevant persons" under the Anti-money Laundering Regulations 2008. In addition to appointing an officer to the fund or another individual as MLRO (as mentioned above), a fund will be required to:

Put in place investor on-boarding procedures which address typical "know your client" requirements

Put in place and maintain a written and effective system of internal controls which provides appropriate policies, processes and procedures for forestalling and preventing money laundering and countering the financing of terrorism (the Manual). The Manual should be reviewed annually to ensure compliance with AML regime in the British Virgin Islands

Report suspicious transactions to the Financial Investigation Agency (FIA) in the BVI

Report the identity of its appointed MLRO to the FIA Agency

The BVI rules do provide for funds to outsource all and any of these obligations to functionaries based outside of the BVI. If the incubator fund has an administrator and/or investment manager, it may consider doing this. Any outsourcing must, however, be documented in writing.

The Fund is required to maintain a valuation policy setting out the applicable procedures for the valuation of fund property, the preparation of reports on the valuation and setting out the mechanisms for sharing valuation information with investors (Valuation Policy). The Fund is also required to have a safekeeping policy and have adequate arrangements in place for the safekeeping of fund property (Safekeeping Policy).

On an annual basis, the Fund should review its Valuation Policy and Safekeeping Policy to ensure compliance with BVI legislation.

Incubator funds are required to register for a Global Intermediary Identification Number (GIIN) with the US Internal Revenue Service. Funds are also required to enrol with the ITA. Enrolment for FATCA reporting is made through the ITA's online portal, called BVI Financial Account Reporting System, and for CRS is made by email to [email protected].

Incubator funds will need to identify reportable accounts and start to report the necessary information to the ITA. The reporting deadline for US FATCA, UK FATCA and CRS is 31 May.

The information that must be reported under US and UK FATCA and CRS is broadly similar and includes: the name, date of birth, tax identification number (TIN) (for Specified US Persons where available); National Insurance Number (for Specified UK Persons, where available); jurisdiction of residence (for reportable persons under CRS only); the account number; name and GIIN of the reporting financial institution; and the account balance (some minimums apply under FATCA).

Reporting and financial statements

An approved fund is required to prepare and submit the following to the FSC:

Financial statements, which do not need to be audited but are required to be approved or signed by a director or the

general partner of the fund, within six months of the end of the financial year to which they relate.

An annual return, no later than 31 January containing the following information as at 31 December of the preceding

year:

the number of investors in the fund

the total investments in the fund

the aggregate subscriptions to the fund

the aggregate redemptions paid to investors

the net asset value of the fund

any significant investor complaint received by the fund and how the complaint was dealt with

a statement that the fund is not in breach of the requirements of the Regulations that allow it to continue as

an approved fund

Anti-money laundering obligations

The BVI anti-money laundering (AML) regime applies to all funds as they are classified as "relevant persons" under the Anti-Money Laundering Regulations 2008. In addition to appointing an officer to the fund or another individual as MLRO (as mentioned above), a fund will be required to:

Put in place investor on-boarding procedures which address typical "know your client" requirements

Put in place and maintain a written and effective system of internal controls which provides appropriate policies, processes and procedures for forestalling and preventing money laundering and countering the financing of terrorism (the Manual). The Manual should be reviewed annually to ensure compliance with AML regime in the British Virgin Islands

Report suspicious transactions to the Financial Investigation Agency (FIA) in the BVI

Report the identity of its appointed MLRO to the FIA

The BVI rules do provide for funds to outsource all and any of these obligations to functionaries based outside of the BVI, such as an administrator or investment manager (if the fund has one). Any outsourcing must, however, be documented in writing.

Fund policies and arrangements

The Fund is required to maintain a valuation policy setting out the applicable procedures for the valuation of fund property, the preparation of reports on the valuation and setting out the mechanisms for sharing valuation information with investors (Valuation Policy). The Fund is also required to have a safekeeping policy and have adequate arrangements in place for the safekeeping of fund property (Safekeeping Policy).

On an annual basis, the Fund should review its Valuation Policy and Safekeeping Policy to ensure compliance with BVI legislation.

Obligations under FATCA and CRS

Approved funds are required to register for a Global Intermediary Identification Number (GIIN) with the US Internal Revenue Service. Funds are also required to enrol with the ITA. Enrolment for FATCA reporting is made through the ITA's online portal, called BVI Financial Account Reporting System, and for CRS is made by email to [email protected].

Approved funds will need to identify reportable accounts and start to report the necessary information to the ITA. The reporting deadline for US FATCA, UK FATCA and CRS is 31 May.

The information that must be reported under US and UK FATCA and CRS is broadly similar and includes: the name, date of birth, tax identification number (TIN) (for Specified US Persons where available); National Insurance Number (for Specified UK Persons, where available); jurisdiction of residence (for reportable persons under CRS only); the account number; name and GIIN of the reporting financial institution; and the account balance (some minimums apply under FATCA).