Formation and Registration of a Private / International Mutual Fund (PMF or IMF)
The International Mutual Funds Act of St. Lucia provides for two distinct types of Mutual Funds. The first is a Private Mutual Fund (PMF) and the other is an International (or Public) Mutual Fund (IMF).
A PMF is basically an investment club and is restricted to having no more than 100 members all of whom contribute funds on a basis proportionate to their shareholding or unit holding in the fund but whose minimum investment must not be less than US$50,000. Each investor must declare themselves either to be a sophisticated investor or a high net worth individual. Such funds are not scrutinized by the regulators once formed, hence the need for investors to declare their understanding of Funds and/or their ability to stand the loss of their investment. Oddly enough a third sort of investor – an IBC can buy into such funds. An IBC would seem to meet neither the sophisticated or HNW rules. Such funds, in theory, are not required to obtain a license to operate but must register with the Director and Registrar and pay an annual registration fee of US$500. In practice these private funds undergo a “registration” process that is in all material ways the same as the “application” process for a public fund. Such funds are exempt from production of an offering document and are not required (unless their own charter so directs) to have an annual audit.
For the remainder of this page we will focus on the licensing of an IMF. It is important to first of all differentiate between the person organizing the Fund and the Fund itself. The license is granted to the Fund itself, not the organizer and this licensee must be either an IBC company or a Unit Trust. This entity is the actual fund vehicle (the IMF). In establishing an IMF there are various parties to the fund that must be accepted by the Director in order to earn the license for the Fund entity.
First is the Promoter. The Director must be satisfied that the Promoter is of sound reputation and requisite experience. The Promoter (frequently the same person who is organizing the IMF) is the person who will be promoting the IMF in the international marketplace and also often serves as the Fund Manager. The next party that the Director must approve is the Fund Administrator. This person (or company) satisfies a hybrid role of Transfer Agent and Fund Accountant and may also act as Investment Advisor (rarely) and Custodian (again, in rare circumstances). St. Lucian law requires that all IMFs have a Fund Administrator that is licensed by the Government of St. Lucia.
As of today, only three Administrators are licensed to provide such services, including ADCO’s sister company, ADCO Fund Administrators Inc. (AFAI). AFAI provides Transfer Agent and Fund Accounting services but does not engage in providing investment advice or custodial services. Fund organizers can either make their own selections to fill these roles or AFAI will recommend firms that we utilize to provide these services. For established mutual fund companies that either have these functions in house or already employ the services of another firm, AFAI will work with you, first assessing your capabiltiy in the relevant area and once satisfied can sub-contract the function out to you.
- Details of the proposed IBC or Unit Trust which will hold the license (Name, Authorized and Issued Capital, Registered Office and Agent or registered Trustee)
- In-depth resumes on the principals (Organizer / Promoter) detailing the qualifications and past experience that make them suitable applicants to operate an IMF.
- Certified copies of passports, police certificates of character and references (three, one of which must be from a recognized banking institution) for each Organizer or Promoter (except where the either is a well known financial services or mutual fund company).
- Engagement letter from an acceptable auditing firm.
- Engagement letter from an acceptable local law firm.
- The IMF’s current Offering Document. This must be accompanied by certifications from the IMF’s attorney and Fund Administrator that the offering Document meets the standards established by the International Mutual Funds Act.
The Application Process
Once all of the items listed above are gathered, the licensing process involves the following steps:
- The application forms are filled out and submitted in duplicate along with all the required information above and a non-refundable US$500 application processing fee.
- The Director of Financial Services reviews the application and replies to ADCO either with a request for additional information or confirming that a conditional license has been granted (or denied).
- Assuming the conditional license has been granted, ADCO then proceeds to form the International Business Company (IBC) with the name that was previously submitted.
- ADCO submits a copy of the IBC’s Certificate of Good Standing or Trust Registration to the Director along with the payment of the relevant fees. The annual license fee is US$1,000 per annum. A US$300 per annum IBC / Trust registration fee is also required.
- The Director then issues the license upon payment of the relevant annual license fees.
Other Relevant Facts
- The affairs of the IMF or its Administrator may be subject to review by the Director’s office at any time, however the only required filing is submission of the annual audited financial statements, due within three months of the IMF’s year-end.
- St. Lucia recognizes the need for confidentiality in business affairs. To this end, the country’s IBC Registrar only maintains a copy of the IMF’s license and a copy of its Memorandum and Articles of Association or Trust Deed. The shareholders and directors or investors and trustees are known only to ADCO and to the Director. Both ADCO and the Director are required by law, under threat of severe fines and penalties, to keep confidential all information obtained whether it be during the incorporation process, ongoing fund administration or a Director’s examination.
Professional fees are a mixture of set charges for certain functions and time-based billings for other situations. Please contact us to discuss your requirements and allow us to prepare a fee quote for your unique needs.
We hope that you have found this information to be helpful in providing the basics of International Fund formation. Please do not hesitate to contact us if we can be of further assistance. We look forward to working with you.