Valuation Policies And Procedures And Acceptable Accounting Standards

The Mutual Funds Regulations, 2010 (the Mutual Funds Regulations) (the "Mutual Funds Regulations") and Securities and Investment Business (Incubator and Approved Funds) Regulations, 2015 (together with the Mutual Funds Regulations, the "Regulations") have been amended through the enactment of the Mutual Funds (Amendment) Regulations, 2019 and the Securities and Investment Business (Incubator and Approved Funds) (Amendment) Regulations, 2019.

A summary of the key amendments (the "Amendments") is set out below. 

Valuation Policies and Procedures

Any open-ended fund registered or recognised in the British Virgin Islands is now required to maintain a clear and comprehensive fund valuation policy, which must include procedures to ensure that such valuation policy is effectively implemented.

The new requirements require the valuation policy and procedures to:

(a) be appropriate for the nature, size, complexity, structure and diversity of the fund and the fund property;

(b) be consistent with the provisions concerning valuations contained in the fund's constitutional documents and offering documents;

(c) require valuations to be undertaken at least on an annual basis;

(d) include procedures for preparing reports on the valuation of fund property; and

(e) specify the mechanisms in place for the dissemination of valuation information and reports to investors.

The appointed person responsible for the valuation of fund property must value the fund's assets in accordance with the valuation policy.

Acceptable Accounting Standards

The Regulations have been further amended to specify applicable auditing standards required for the audit of fund's financial statements, namely:

(a) US GAAP;

(b) International Standards on Accounting (UK);

(c) International Standards on Auditing;

(d) Hong Kong Standards on Auditing;

(e) Canadian Auditing Standards; or

(f) such other recognised international auditing standard as may be approved by the FSC on a case by case basis.

Transitional Period

Although the Amendments are now in force and immediately apply to any new structures, open-ended funds that were in existence prior to 31 December 2019, have until 1 July 2020 to comply with these new requirements.

Conclusion

Most open-ended funds will already maintain valuation policies and use international accepted accounting standards.  Accordingly, these amendments are not expected to have any material impact.  Open-ended funds will however need to ensure that they comply with the new requirements.

The Maples Group can assist with preparing and / or reviewing valuation policies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.