Investment management includes more than just purchasing and selling financial assets and other investments. For example, creating a short- or long-term strategy for acquiring and selling portfolio holdings is a management component.
It may also cover banking, budgeting, and tax-related services and obligations. Here’s everything you need to know about the process and the relevant regulations.
Activities Carried out by the Asset Management Company
An asset management company can facilitate
- Investment advice
- Administrative or managerial services pertinent to investments
- Management of third-party investments
- Expertise in negotiating deals
- Assistance in the investment exchange
Why Choose the BVI for Creating the Investment Fund?
The British Virgin Islands ("BVI") is a well-established and thriving destination for creating offshore investment funds. It is also the second-largest offshore jurisdiction for hedge funds globally.
Establishing investment managers and advisers in the BVI is a wise choice due to the flexibility of the BVI's alternative regulatory regimes for small to mid-sized hedge fund firms. Here are some advantages of the investment management company:
- The BVI Business Companies Act of 2004 combines solid corporate governance with a flexible corporate code.
- Compliance with the BVIs' opt-in regime under the Alternative Investment Fund Managers Directive 2011/61/EU
- The regulatory environment for private equity and venture capital firms is more welcoming and has a "lighter touch".
- Uses the Approved Manager Regime and the specialized Approved and Incubator Fund products to market to smaller fund managers.
- Strong commercial court and affordable incorporation costs.
What is the Role of the Security and Investment Business Act?
The Securities and Investment Business Act(SIBA), 2010, governs the regulation of investment business in the British Virgin Islands (BVI). It mandates obtaining a license from the BVI Financial Services Commission (FSC) before engaging in investment activities in the BVI. The act spans:
- BVI entities carrying out investment business within or outside the BVI, and
- Non-BVI entities carrying out investment business within the BVI
Before the SIBA’s enactment, the regulatory landscape was confined to mutual funds (open-ended investment funds).
How to Conduct Investment Management in the BVI?
The BVI introduced the Approved Manager’s regime in 2012. This special license may be issued in cases where a full management license is unwarranted under SIBA.
To be classified as an approved manager, a licensee must:
- Be a BVI company,
- Have two directors (who needn’t necessarily be BVI residents),
- Have an authorized representative in the BVI
In addition to managing or offering advice on funds outside the BVI, the certified manager can advise on private or professional funds recognized by SIBA. Many managers also choose nominee directors in BVI to add a layer of privacy and operational separation.
How to Set up an Investment Management Business in the BVI?
Here is the breakdown of key steps required to set up an Investment Management Business in the BVI:
Step 1: Incorporate the BVI Company
This first involves a company formation in the BVI. Partner with a certified agent to register a BVI Business Company or Limited Partnership. Also, go through our guide on BVI Offshore Company Formation Rules to get an overall idea of the legal proceedings.
Step 2: Appoint Key Management Officials
Appoint at least two directors and a senior management official. Make sure they fulfill FSC’s “fit and proper” criteria.
Step 3: Appoint an AR and MLRO
Appoint an authorized representative (AR) holding the BVI residency and a Money Laundering Reporting Officer (MLRO) to fulfill Anti-money laundering (AML) norms.
Step 4: Draft Manual and Agreement
Draft crucial paperwork, including the AML manual and Investment Management Agreement(s), which outline the connection between the fund and its clients.
Step 5: Choose the Right License
Depending on the portfolio size to be managed, choose between the lighter Approved Manager status or the Full SIBA License.
- For the Approved Manager Path (AUM Limits), confirm that assets do not surpass:
- $400 million for open-ended funds
- $1 Billion for closed-ended commitments
Prompt your agent to file the prescribed application with the relevant authority, along with the required paperwork. The applicant firm can pursue a qualified business activity seven days after filing, pending formal approval. During this phase, the applicant firm does not need to appoint an auditor.
- For the Full SIBA Licence Path (No AUM Limits):
- Ensure you have the minimum capital resources and professional indemnity insurance
- Appoint a certified auditor and a compliance officer (typically compulsory for full licensees)
- File the application attached with the comprehensive business plan and compliance manual
Upon the receipt of the license, the company must adhere to the Securities and Investment Business Act (SIBA) and the Regulatory Code.
How Can We Help?
The most successful and economical way to launch a business is with the assistance of our team of seasoned experts. With Business Setup Worldwide, you can establish an investment company in the BVI, backed by comprehensive regulatory support and expert consulting. Please don't hesitate to contact us; we'll be happy to help.
