The British Virgin Islands' financial regulator has been granted a raft of new enforcement powers, the BVI Financial Services Commission said in a statement on 28 February.  

The Financial Services Commission (Amendment) Act 2022 expanded the regulator's powers to include issuing disqualification orders against directors, general partners or limited partners, suspending and withdrawing licence approvals, directing the removal of persons within licensees and taking steps to prevent abuse of customers by licensees.

Further powers were also granted to the Financial Services Commission under the Banks and Trust Companies (Amendment) Act 2022 and the Insolvency (Amendment) Act 2023 and associated rules and code of practice.

The new amendment legislation came into force on 1 March 2023.

The Financial Services Commission (Amendment) Act, 2022 expands the functions of the Commission to include: 

  • promoting financial stability within the Virgin Islands; 
  • taking steps as necessary to grow the Virgin Islands as an internationally competitive financial service centre; 
  • issuing disqualification orders against persons and exercising powers to suspend and withdraw approvals granted to persons
  • approved and direct the removal of persons within licensees; and
  • taking steps to prevent abuse of customers by licensees and promoting practices for the protection of licensees' customers. 

The Amendment Act also establishes a Register of Directors and Senior officers that outlines details of directors and senior officers approved by the Commission.

In addition, the Amendment Act grants the Commission with power to disqualify directors, general partners or limited partners of licensees, BVIBCs and LPs through the issuance of disqualification orders, which must specify the time period and conditions of the disqualification.

Once such person is disqualified, the Commission is obligated to maintain the required information in a Register of Disqualified Persons.

Further, the Commission is also obligated to maintain a Register of Restricted and Prohibited Persons, requiring a licensee to remove a senior officer or other person or where the Commission suspends or withdraws an approval granted.

 In consideration of the future enactment of the Virgin Islands Deposit Insurance Act, 2016, the Amendment Act streamlines the relationship between the Commission and the Virgin Islands Deposit Insurance Corporation (VIDIC). A key function of the VIDIC is to establish and manage a system that insures deposits or parts of deposits at banks against loss to depositors. Given the Commission's banking supervisory role, provisions have been created to allow for collaborative functioning between the Commission and the VIDIC.

In streamlining the relationship, the Amendment Act: 

  • expands the Commission's crisis management measures and resolution proceedings to allow for undertaking resolution proceedings in relation to an institution that is failing or likely to fail; and 
  • enables coordination and sharing of information between the Commission and the VIDIC in relation to a bank that is in, or likely to be in, financial distress or for the purpose of maintaining financial stability in the Territory. 

The Amendment Act also placed obligations on a bank to report to the Commission and the VIDIC where it knows or forms the view that the institution is in financial distress. In addition, the Amendment Act granted the Commission powers to appoint a rehabilitator to take over and direct the affairs of a licensee in some form of financial distress as an intervention measure to secure or rescue the financial viability of the licensee. 

Conduct provisions have also been included in the Amendment Act that obligates licensees (in addition to notifying the Commission) to notify a customer of any fraud committed by an employee that relates to that customer and advise on the steps being taken to address the fraud and prevent future reoccurrence. 

The Virgin Islands further said its cooperation regime had been enhanced via the Amendment Act by creating provisions for cooperation between the Commission and other domestic competent authorities similar to the regime that currently exists for cooperation with foreign competent authorities. 

The Amendment Act also removed provisions relating to Authorised and Recognised Custodians, which were instituted to hold bearer shares as part of the jurisdiction's bearer shares immobilising regime. Given that bearer shares have been abolished under the BVI Business Companies Act, these functions will no longer be required. 

The provisions of the Banks and Trust Companies Act are amended to facilitate the implementation of the Virgin Islands Deposit Insurance Corporation (VIDIC) and the effective handling of any crisis that may arise with respect to a licensed bank. In doing so, the Amendment Act governs the exercise of the Commission's powers regarding initiating resolution powers in a bank, the functioning of a bridge bank and designations of systemically important banks.

The Amendment Act also obligates any person carrying on banking business upon the coming into force of the Virgin Islands Deposit Insurance Act to obtain a policy of insurance issued in accordance with the said Act and provide a copy to the Commission.

Further, as a condition of licensing, a new bank applicant must make a written undertaking to provide the Commission with a copy of its policy of deposit insurance in accordance with the Virgin Islands Deposit Insurance Act within six months of the issue of its licence. 

The Amendment Act further obligates licensed banks to notify the Commission immediately when it receives a qualified audit report. 

The Insolvency (Amendment) Act 2022 aims to enable the VIDIC to make an application to the High Court to appoint eligible insolvency practitioners as liquidators to banks in financial distress or in resolution. The VIDIC is also empowered to apply to the High Court to remove a court-appointed insolvency practitioner via the provisions of the Amendment Act. 

The Amendment Act also transfers the Office of the Official Receiver from the Commission to the Government of the Virgin Islands.

The Virgin Islands Government will therefore be responsible for policy oversight and administrative responsibilities where the office of the Official Receiver is concerned.

Lastly, the Amendment Act also makes provision for the cancellation of an insolvency practitioner's licence that is voluntarily being surrendered. Prior to the amendment, cessation of a license was mainly undertaken through revocation. 

The Insolvency (Amendment) Rules, 2023, complements the Insolvency (Amendment) Act, 2023, in facilitating the role of the VIDIC.  

The Amendment Rules further introduces Part 8A, which outlines the responsibilities of the Registrar upon the completion of liquidation, with respect to striking the name of the company from the Register of Companies or Register for Foreign Companies, respectively and the subsequent dissolution of the company.

The Insolvency (Amendment) Code of Practice, 2023 amends the Insolvency Code of Practice by outlining the residency requirements applicable for a licensed Insolvency Practitioners, pursuant to section 476(1)(a) of the Insolvency Act.  In addition, Amendment Code specifies that the Commission's fit and proper standards will be applied in assessing an application for licensing as an Insolvency Practitioner.