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The BVI Approved Manager regime is a popular option for fund managers that want a regulated structure without the requirements of a full investment business license. It is designed for qualifying managers and advisers that operate within certain limits and want a more practical way to establish and manage an offshore investment business.
What is an Approved Manager?
An Approved Manager is a BVI company or partnership that has been recognised by the BVI Financial Services Commission (FSC) to provide certain investment management and/or investment advisory services mainly to investment funds.
Instead of obtaining a full investment business license, qualifying managers can apply under the Approved Manager regime, which provides a more streamlined regulatory framework.
Who uses the Approved Manager regime?
The regime is commonly used by:
• start-up fund managers;
• emerging investment managers;
• boutique asset managers; and
• family office-related investment managers.
It can be particularly useful for managers that want to operate from a recognised offshore jurisdiction while keeping their regulatory and administrative requirements manageable.
How much can an Approved Manager manage?
An Approved Manager can generally manage up to:
• US$400 million in aggregate assets under management for qualifying open-ended funds; or
• US$1 billion in aggregate capital commitments for qualifying closed-ended funds.
These limits allow many growing managers to use the regime before they need to consider applying for a full investment business licence.
Why do fund managers choose an Approved Manager?
One of the main reasons is simplicity.
The application process is generally more straightforward than applying for a full investment business licence, while the manager still operates within a recognised regulatory framework.
The regime can also reduce some of the compliance and operational burden that may apply to a fully licensed investment manager.
British Virgin Islands | BVI Insight
HERMES CORPORATE SERVICES LTD.
This makes it a practical option for managers that want to focus on launching and growing their fund business without taking on unnecessary regulatory complexity at an early stage.
Does an Approved Manager fall under BVI Economic Substance?
For its Approved Manager activities, an Approved Manager will generally not be treated as carrying on “fund management business” for BVI Economic Substance purposes.
This is because the Economic Substance definition of fund management business is linked to investment management activity that requires the relevant investment business to be licensed under BVI law. An Approved Manager operates under a separate approval regime and is exempt from that full licensing requirement.
As a result, an Approved Manager carrying on only its approved management and/or advisory activities would generally not be required to meet the full Economic Substance Test in the BVI for fund management business.
However, the company’s activities should still be assessed in order to determine whether it carries on any other activity that may fall within one of the BVI Economic Substance relevant activities. Applicable ES reporting requirements should also continue to be considered.
Is an Approved Manager still regulated?
Yes.
An Approved Manager is still subject to the supervision of the BVI FSC and must comply with ongoing regulatory, AML and reporting requirements.
The main difference is that regulatory burden is less than that for a fully licensed investment manager.
Approved Managers must also keep proper records, maintain appropriate service providers and meet their ongoing filing obligations.
Is an Approved Manager suitable for every fund manager?
Not necessarily.
The structure is best suited to managers that fall within the permitted asset limits and meet the eligibility requirements of the regime.
For larger managers, or businesses carrying on activities outside the scope of the Approved Manager regime, a full investment business licence may be required.
For many emerging and mid-sized managers, however, the BVI Approved Manager regime offers a practical balance between regulation, flexibility and cost efficiency.
It can provide a straightforward platform for managers looking to establish or grow an offshore investment management business in the BVI.
To find out more about Approved manager regime in BVI, please contact us at enquiries@hcsoffshore.com.
