Implications of the BVI's New Investment Business Licensing Regime

The British Virgin Islands' Securities and Investment Business Act 2010 ("SIBA") has revolutionised the jurisdiction's regulatory regime.

The purpose of SIBA, which came into effect in May of this year, is to:

provide for the licensing, regulation and supervision of investment business; provide for the registration of public mutual funds, and the recognition of professional and private mutual funds; control the offers of securities to the public in the British Virgin Islands; and create offences relating to insider trading and market abuse. This article focuses on the investment business regime introduced by SIBA and explores two implications of the new regime, namely greater ongoing dealings with the jurisdiction's corporate regulator, the Financial Services Commission ("the Commission"), for companies coming within this new regime, and the potential impact of increased regulation on merger and acquisition ("M&A") activity in relation to these regulated entities.

Investment Business Regime Under SIBA

The investment business licensing regime is the most significant change implemented by SIBA. It requires any person who carries out "investment business" of any kind in or from within the British Virgin Islands to obtain a licence from the Commission.

The new regime has broad application due to the wide definition of "investment business" in SIBA and because a local company is deemed to be carrying on investment business in the jurisdiction even if all or a substantial part of that business is conducted outside the British Virgin Islands.

There are different categories of investment business in SIBA, including:

dealing in investments; managing investments; arranging deals in investments; providing investment advice; operation of an investment exchange; or providing custodial or administration services with respect to investments. "Investments" is defined widely to include shares, bonds and other debt instruments, derivatives, interests in a partnership or fund, and contracts for difference.

Dealings with the Corporate Regulator

According to the latest statistical data released by the Commission, there were 456,226 companies actively registered in the British Virgin Islands as at 31 March 2010.

For the overwhelming majority of companies that are not existing regulated entities (e.g. they are not trust companies, banks, investment businesses, money services businesses, and so on), their ongoing filing and other compliance requirements are...