Investment manager

Investment management regimes in the Cayman Islands and BVI

Asia-based sponsors working with multi-jurisdictional fund structures have long been accustomed to the use of an offshore entity acting either as an investment manager or as an advisor. Over the past two years, the options available have become increasingly clear, with both the maturation and increased prevalence of fund managers registered in the British Virgin Islands (BVI) under the Investment Firms Regulations (approved managers) (AMR) and the BVI Securities and Investment Business Act (BVI SIBA), and the improvement of the Cayman Islands regulatory framework following the introduction of the International Tax Cooperation Act (Economic Substances) and its related regulations (ES Act) and welcome updates on the Securities Investment Firms Act (Cayman SIBA). This article discusses some of the main features of investment management regimes that have a lighter regulatory touch in both jurisdictions; namely entities registered with the Cayman Islands Monetary Authority (CIMA) as a “registered person” under Cayman SIBA (which replaced the old “excluded person” regime), and those registered with the Commission BVI Financial Services (FSC) as an approved managing entity in accordance with AMR.

Fund managers established outside the BVI and the Cayman Islands will normally not need to be registered or licensed in that jurisdiction, as long as they and the funds they manage do not have a physical presence. in that jurisdiction (except agents and registered offices of funds). There are no specific qualifications or other requirements for these overseas managers imposed by the BVI or the Cayman Islands.

Applicability and eligibility

Most managers and advisers in the Cayman Islands will be subject to the Cayman SIBA requirements due to the performance of an “investment activity in securities”, which includes managing, dealing, arranging ‘operations and advice on securities operations and acting as’ EU Connected Director’.

An entity may apply for registration as a registered person rather than a full license under Cayman SIBA if it is:

  1. Company of a group of companies carrying out an investment activity in transferable securities exclusively for one or more companies of the same group.
  2. An entity having a registered office in the Cayman Islands and carrying out securities investing activities exclusively for “sophisticated persons”, “high net worth persons” or corporations, partnerships or trusts of which shareholders, limited partners or holders of shares are all knowledgeable and / or wealthy people.
  3. An entity regulated with respect to securities investing activities by a recognized foreign regulatory authority in the country or territory (other than the Cayman Islands) in which the securities investing activity is carried on (by (example, Monetary Authority of Singapore, China Securities Regulatory Commission, Financial Services Agency of Japan, and Securities and Futures Commission of Hong Kong).

BVI managers and advisers are eligible to apply to become Chartered Managers if they (a) manage total assets of up to US $ 400 million if they manage open-end funds and / or commitments total capital not exceeding US $ 1 billion if they operate closed-end funds; and (b) provide advice only to the following categories of clients:

  1. Private or professional funds registered in BVI or in a jurisdiction recognized under BVI SIBA
  2. Closed-end funds, registered under BVI laws with the characteristics of a private or professional fund
  3. People affiliated with a fund structure under 1 and 2 above.
  4. Any fund domiciled in a recognized jurisdiction having the characteristics of a private or professional fund (e.g. Cayman Islands, China, Singapore, Australia, Japan and Hong Kong)
  5. Foreign funds registered in an unrecognized jurisdiction having the characteristics of a private, professional or closed fund which invest all or a substantial part of their assets in a fund structure under 1 or 2 above
  6. Anyone else that FSC may approve on a case-by-case basis.

Registration process

Both registrations involve a relatively straightforward application form setting out certain details and statements / CVs from the directors, significant shareholders and clients of the registrant or potential approved manager.

In accordance with international practice, registrants should also include in their application the contact details of their Anti-Money Laundering Compliance Officer, Money Laundering Reporting Officer and Deputy MLRO. Licensed Managers should only appoint a Money Laundering Reporting Officer, but they should submit a copy of the written policies and procedures they have in place to combat money laundering, terrorist financing and proliferation financing (CIMA does not currently request that these be filed with respect to registrants, but they must have been adopted).

In addition, the application for an approved manager requires both a copy of the investment management or advisory agreement between the applicant and each fund (or person) for which it intends to act at the start of ” relevant activities ”, and written confirmation of agreement to act. of his BVI lawyer.

If CIMA or FSC is satisfied that the application is complete and that the shareholders of the applicant and the directors or senior officers are “fit and appropriate persons”, then it will proceed with the registration of the registrant or approved manager. A licensed manager may commence operations if the FSC does not raise any issues within seven days of submitting a completed application. CIMA did not provide any timelines, but generally recognizes registrants’ registrations within two weeks.


The annual application / renewal fee for a registrant and an approved manager is US $ 6,100 / US $ 6,100 and US $ 1,000 / US $ 1,500, respectively. Note, however, that licensed managers must appoint an “authorized representative” to liaise with the FSC, which creates an additional cost. There will be legal fees with either application and all Cayman Islands and BVI entities (regulated or not) are required to appoint a licensed head office provider / registered agent in the respective jurisdiction.

Current requirements

As regulated entities, registrants and authorized managers have several ongoing requirements in addition to those of unregulated entities in the Cayman Islands and BVI.

Similar to funds registered by CIMA, registrants must appoint at least two individual directors / managers or one corporate director / manager, each registered with CIMA under the Registration and Licensing Act directors from 2014. Unlike entities holding a full CIMA license under Cayman SIBA, registered Individuals are not (a) required to submit annual financial statements or business plans, (b) are not subject to the prior approval of any change of directors, shareholders or beneficial owners, and (c) are not subject to the conduct of the business and finances of Cayman SIBA. Conditions. An annual declaration must be filed and the CIMA must be notified within 21 days of any modification of the information contained in the application form or the annual declaration of the registrant.

Approved managers must also have two directors appointed at all times (one of whom must be an individual) although there are no additional registration requirements for directors at BVI. In addition to an annual report to be filed each year in January, unaudited financial statements must be filed within six months of year end. The FSC must be informed within 14 days of any modification of the information appearing in the application form of the Authorized Manager or of any matter which has, or is likely to have, a significant impact or a significant regulatory impact on the Authorized Manager or its “Company managers”.

Economic substance analysis

The other key regulatory consideration for fund promoters is meeting the requirements of the applicable economic substance regime.

In the Cayman Islands, “relevant entities” engaged in “relevant activities” are required to pass an economic substance test (Cayman ES Test) with respect to gross income from that activity. Fortunately, “investment funds” (including the entities they invest in) are not “relevant entities” and therefore do not pass a Cayman ES test. Conversely, registrants are likely to be a “relevant entity”, but “the fund management company” is the only Cayman SIBA management member included in “relevant activities”. A registrant acting solely as an advisor offering non-discretionary advice is therefore unlikely to have any Cayman ES tests to complete.

In BVI, the corresponding definition of “fund management activity” is limited to “the conduct of an activity which requires the legal entity to hold an investment firm license in accordance with Article 4 and category 3 of Schedule 3 of the Securities and Investment Business Act, 2010 ”. “Approved AIFMs” currently do not need to hold an investment firm license, so they do not fall under the definition and therefore have no economic substance test to meet BVI (other than commitment of its head office and its authorized representative).


The Registered Person and Approved Manager plans provide useful and lightweight regulatory options for sponsors looking to set up an offshore fund manager or investment advisor. By highlighting the nuances between the two plans, promoters should have a clearer idea of ​​which one is best for their needs.

An original version of this article first appeared in AIMA Journal Edition 128, November 2021.

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