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Financial services regulation

New legislative provisions will come into effect shortly in the British Virgin Islands (BVI) relating to financial services, insurance business and financing and money services. They will provide an enhanced platform in these areas of the financial services industry, again demonstrating the commitment of the BVI to ensuring its legislation provides transparent regulation that is appropriate for the BVI as an OECD white-listed jurisdiction.

While the new legislation will be of immediate relevance to those businesses already established or operating within the BVI, anyone looking to make an acquisition or investment in a BVI company will need to be aware of them going forward. Where the BVI company is active in the relevant field, proper compliance and licensing will need to be established from a due diligence perspective, and appropriate warranties agreed to cover liabilities for any breach of the legislation, as the penalties could potentially have a material effect on the business.

Regulatory Code

The Regulatory Code 2009 came into force on February 1 2010. The Code was enacted pursuant to the Financial Services Commission Act 2001 and applies to all persons holding a licence as set out in Schedule 1 of the Code. Licencees in this context include persons with BVI banking, insurance, trust, money services or company management licences, and it is expected that in future this will be extended to cover fund administrators and investment managers licensed by the BVI Financial Services Commission.

Paul Heath, Ogier

The Code contains detailed requirements in relation to the regulation and conduct of licencees (and officers and agents of licencees) that conduct financial services business in the BVI.

Although some of the Code formalises existing procedures, there are also a number of new requirements for licencees. In order to give them time to comply with the new requirements, Schedule VI of the Code makes a number of provisions transitional and they only come into effect on June 20 2010.

The Code has the status of law in the BVI and must be complied with by every person to whom it applies. The Financial Services Commission has the power to take enforcement action against a licencee for contravention of the Code and any such contravention will be taken into account in assessing whether a licencee is "fit and proper" to continue to hold a licence.

Insurance Act

The new Insurance Act 2008, which replaces the Insurance Act 1994, and the Insurance Regulations 2009, which replace the 1995 regulations, also took effect on February 1 2010. The Insurance Regulations provide clarity on details relating to insurance business, maintenance of registers and what constitutes public information.

In addition, there are some new requirements under the Insurance Regulatory Code 2009 that will affect BVI insurance companies and foreign insurance companies operating in or from within the BVI. Under the new regime, there are restrictions prohibiting multinational companies, non-governmental organisations and companies in the BVI from purchasing life insurance, heath insurance, disability insurance or pension plans from an insurer resident outside the BVI.

Financing and Money Services Act

In the field of financing and money services, the Financing and Money Services Act, 2009 (FMSA) will come into effect on March 31 2010. The FMSA is a further step by the BVI to ensure its statutory provisions meet or exceed international best practice for financial regulation, the FMSA in particular bringing the BVI into full compliance with Recommendation 23 of the Financial Action Task Force.

The FMSA introduces a regime for the licensing, regulation and supervision of financing and money services business carried out from or within the BVI, together with criminal offences for breach or non-compliance.

As the FMSA stands, the provisions relating to financing will only apply to companies providing credit or leasing moveable property within the BVI. Consequently BVI registered companies providing these services in other jurisdictions will not be affected. However, a BVI company providing money services (such as money transmission or currency exchange) anywhere in the world will need to be licensed and comply with the record-keeping and reporting requirements of the FMSA. The same applies to an overseas company providing money services within the BVI.

There is a six-month transitional period to allow existing businesses to make the required application to the Financial Services Commission, but with fines of up to $60,000 for non-compliance once this period ends. Therefore all businesses in the financing and money services sectors should be preparing for the new regime as soon as possible.

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