REGULATIONS FOR FUND MANAGEMENT COMPANY IN BHUTAN, 2011

Transcription

1 REGULATIONS FOR FUND MANAGEMENT COMPANY IN BHUTAN, 2011 SEPTEMBER, 2011

2 1. Short title and commencement i. These regulations aim at regulating the establishment, offering and management of investment funds, other funds and associated activities in Bhutan. ii. iii. iv. These regulations are issued in pursuant to Section 202 and 362 of the Financial Services Act of Bhutan, 2011 and must be read in conjunction with the additional requirements under the Financial Services Act of Bhutan, These regulations may be cited as the Fund Management Company Regulations, These regulations shall come into operation on such date as may be specified by the Royal Monetary Authority of Bhutan by notice in the Official Newspaper and RMA website. v. The requirements which are pre-conditions for granting a license should be met at all times during the on-going business operations. vi. The Fund Management Company may also manage trust funds. However, if a trust is being managed on its own, its key personnel of the trust fund shall fulfill the fit and proper criteria of these regulations. 2. Definitions In these regulations, the following terms shall have the meanings indicated unless the content clearly indicates otherwise. i. Applicant means the Promoter(s) of the proposed Fund Management Company. ii. Auditor shall mean an auditor empanelled with the Royal Audit Authority. iii. Authority means Royal Monetary Authority of Bhutan established under the Royal Monetary Authority Act of Bhutan, iv. Close-Ended Fund shall mean an investment fund that may be organized as an ordinary company with its units being the transferrable shares issued by the company and not subject to regular redemption by the company. v. Companies Act means the Companies Act of Bhutan, 2000 and amendments thereto. vi. Investment Advisor shall mean a person in the business of providing advice on investments that include in a substantial way investment in securities. vii. Investment Fund shall mean pooling of funds for purposes of collective investment of the fund thus raised in units, with a dividend or other return to each unit of interest in the fund. viii. Open-Ended Fund shall mean an investment fund that also be organized to allow frequent or continuous redemption of units. ix. Other funds shall mean those funds which are not raised in units. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 1

3 x. Person shall mean a natural or a juridical person. xi. Private Fund shall mean funds raised privately from institutions or high net worth individuals or corporate or similar entities for investment. xii. Securities shall mean: a) equity and other similar instruments; b) bonds, debentures and other similar debt instruments; c) units of interest in an investment fund; d) financial futures contracts and similar instruments traded on a securities exchange or otherwise to the extent provided in regulations adopted by the Authority; e) Hybrids of or options to acquire or dispose of any of the securities listed above and options on financial indices; and f) other instruments and contracts as defined by the Authority offered to raise funds from and provide a return to a body of investors not generally active in the management of the issuer or derivatives of these. xiii. Unit means investor s interest in the investment fund and shall represent percentage part of the investment fund. xiv. Venture capital fund shall mean a private pooled investment from institutions, or high net worth individuals or corporate for providing equity seed capital to start up a new venture to young or emerging companies primarily involved in new products or new technology through undertakings that have not been publicly listed. 3. Guiding Principles A fund management company s business shall be guided by the principles of: i. Security protecting investors or clients by exercising due diligence in the investment process and by making informed decisions. ii. iii. iv. Profitability maximize returns on its investment. Liquidity using risk management concepts such as diversification and asset- liability management. Development- promoting the growth of the financial market through the development of SMEs, infrastructure, real estate, venture capital and other similar ventures. 4. Application for license i. An application for a license to conduct fund management business shall be made in writing to the authority and shall contain the following documents along with a REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 2

4 non-refundable application fee of Nu.50,000 in cash/draft/cheque in favor of the Authority: a. Letter of Application (Annexure I) b. Application Form (Annexure II) c. Biographical Report (Annexure III) ii. Application not complete in all respects and not conforming to the instructions specified in the Annexure II and III of these regulations shall be rejected. However, the applicant shall be given 30 days to complete the application in all respects and rectify the errors, if any. 5. Type of licence i. An applicant seeking approval to carry on fund management company under these regulations shall be granted a licence to carry on any or all of the following activities: ii. a. Open -ended fund b. Close-ended fund c. Private Fund, and d. Other Funds Any other services incidental to the above activities may be carried out by the fund management company. 6. Capital requirement and other financial resources i. A fund management company shall have a minimum paid up capital of Nu.20 million which shall be increased to Nu.50 million within a period of 5 years of its operation ii. iii. iv. The capital contribution by the applicants of the proposed company shall be deposited with the Authority, a month prior to the commencement of the operations and must be verified by the Financial Regulation and Supervision Department of the Authority. The contribution shall not be funded through borrowings and must be from legitimate sources. The applicant must be financially sound with strong capital support and good track record of operating profits/income to ensure that the proposed company provides good security and continued commitment to its business. A fund management company shall maintain on a continuous basis a sum of quick assets not less than 10% of their net worth. The quick asset shall mean cash or cash equivalent and time deposits with a remaining maturity of less than one year. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 3

5 v. A fund management company shall transfer at the minimum 5 percent of the profit after tax to the reserve fund until the reserve fund is equal to the paid up capital. 7. Ownership and Governance i. A Fund Management Company shall be a private limited company registered under the Companies Act of Bhutan, 2000 with a minimum of 4 shareholders. ii. iii. iv. A Fund management company shall be fully owned and managed by Bhutanese nationals. The fund management company shall not be considered as a financial institution. The promoters/applicant should have a minimum of two years experience in the investment/ finance related business. v. Every significant shareholder and key post holders shall fulfill the fit and proper criteria as required under Annexure III of these regulations. In addition, the Chief Executive Officer shall have a minimum of 10 years experience in the investment and finance related business. vi. vii. viii. ix. There shall be a fund management committee with a minimum of 3 and a maximum of 7 members. This committee must meet at least once a quarter to discuss the main issues related to the fund and its investments in accordance with its proclaimed policy. For the purpose of carrying out fund management business, all the key post holders should undergo investment and finance related training programme conducted by the Financial Training Institute. The applicant must be able to demonstrate that the proposed business could contribute effectively to the development of the financial sector. A fund management company is required to have at least one fund manager which shall be approved by the Authority. 8. Safekeeping of the fund management company s assets i. An investment fund s assets shall be entrusted to a depository for safekeeping. ii. iii. A depository shall be a bank. A depository shall receive, deliver safe-keep and maintain the transaction affected by the fund management company on behalf of the customers. 9. Requirements for the fund management company and the depository i. No single company shall act as both fund management company and a depositary. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 4

6 ii. iii. 10. Fund Manager In the context of their respective roles, the fund management company and a depositary shall act independently and solely in the interest of the unit-holders. A fund management company or depository acting on behalf of an investor may not grant loans or guarantees out of or against funds assets. i. She/he should at least attain the age of 25 years. ii. iii. iv. She/he shall have a minimum work experience of 5 years in the field of investment/finance related business. In addition, she/he shall meet the fit and proper criteria set out in Annexure III of these regulations. The fund manager s fiduciary responsibilities to the investors include a duty of loyalty and a duty to exercise reasonable care. v. A fund manager may not engage in any of the following activities without prior disclosure of the conflict (when possible) or immediate disclosure (when prior disclosure of a conflict of interest is not possible) to the fund management company s board and approval shall be sought for that action: a. A material conflict between the interests of the fund manager or assistant fund manager and the interests of any fund it manages. b. A conflict between the interests of any fund it manages and another such fund or another customer account. vi. vii. In addition to a fund manager, a fund management company may appoint one or more assistant to provide advisory services pursuant to contract in writing. The fund management company shall contribute from their own account an amount of investment equal to at least 4% of the close-ended fund which shall be locked until the redemption by the last investor in the fund. 11. Establishment of Investment Fund and preparation of offer documents i. A fund management company shall establish a fund with the highest level of prudence and such fund shall be unambiguous and easy to understand for the investors to invest. ii. iii. iv. The offer of unit in an open-ended fund shall be in the form of a prospectus (Annexure V) to be issued to the public. The offer of unit in a close-ended fund shall be made in the form of memorandum (Annexure V) to a selected group of investors. An increase in the offer units of an open-ended fund shall be permitted only upon the approval of the authority on a written request by a fund REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 5

7 management company. The request shall accompany the following information for each investment fund: a. Terms and conditions; b. Subscription/redemption forms; c. Any contracts entered into by the fund manager (for the benefit of the fund), including those made with affiliates or third parties in relation to the fund including, but not limited to, contracts for investment submanagement services, custody services to be performed by appropriately authorized persons, maintenance of any register of unit holders, and any other services related to the distribution of units; and d. The investment fund's latest audited report (if any) and, if more recent, the latest unaudited report. v. A fund manager shall secure the consent of the Authority prior to making any material change to the terms and conditions of an investment fund. vi. vii. viii. A fund manager shall notify the Authority of any material change made to documentation provided in support of the application for the offering of units in an investment fund. Separate accounts and accounting record must be kept for each funds being managed on behalf of the investors. An open-ended fund shall update its prospectus as and when it issues additional units. 12. Disclosure to Investors i. A fund manager shall disclose the following information to the unit holders in the following manner: a. Unit holders with an investment equivalent to Nu. 500,000 and above on a quarterly basis; and b. Unit Holder with an investment less than Nu. 500,000 on an Annual basis. ii. The information are: a. The net asset value of total fund units; b. The number of and net value of fund units owned by the unit holder; and c. A record of transactions specific to the unit holder including payment of dividends subsequent to the last report provided to the unit holders. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 6

8 iii. The fund manager shall disclose for other fund and private fund investors any information related to their investment on an annual basis. 13. Contractual Form of Organization i. Investment fund a. An investment fund shall be established and formally organized by the signing of contracts between the fund manager and the unit holders, which contract shall be in the form of terms and conditions, as set out in Annexure V. b. The terms and conditions shall include covenants on the part of the fund manager to perform or to contract for the performance of the following activities or services: 1) The investment management of the portfolio of the fund; 2) The custody of portfolio assets of the fund; 3) Dealing in securities or other assets of the fund; and 4) The administration of the fund; c. The terms and conditions shall also set out the fees, commissions or other remuneration with which the fund manager proposes to compensate itself from investment fund assets or subscriptions for the performance of the activities or services specified in this paragraph. 2) Other funds and private fund i. A fund management company shall sign a contract with the investors which shall contain amongst others the following: a. To invest the fund; b. Custody of the portfolio assets of the fund; c. Administration of the fund; d. Fees, commission and other remuneration to be charged; e. Rate of return on the fund if applicable; and f. Avoidance of conflict of interest. ii. The contract shall have appropriate Know Your Customer Policy in place. 14. Valuation of Assets (Investment Fund) i. A fund management company shall calculate the assets value by using the fair value and specify the period of announcement of the assets value to the client to acknowledge the changes in the assets value. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 7

9 ii. A fund management company shall have a system prescribing the fair value of the securities and other assets of the fund as per the Net Asset Value method. iii. The fund management company shall provide the rules for calculating the issue price and redemption price, if any, of the units of an investment fund. 15. Issue and redemption of Units A fund management company shall ensure to have in place a fair and efficient means of effecting the issue and redemption of units in the following ways: i. There should be a procedure for account opening and entering into a contract with a client which should have appropriate Know Your Customer Policy to ensure that the person opening the account is the same as the one appearing in the document. ii. Process to collect the orders. iii. Process to rectify and amend errors in the order process. iv. Verification of client s order for accuracy and complete disbursement. v. Control of receipt and disbursement of money including relevant documents. vi. The subscription/redemption of unit shall be made as per annexure IV. 16. Investment Management System A fund management company should have in place a risk management system in the following ways: i. Define structure, roles and duties of investment committee. ii. Investment decision shall be based on the following factors: a. Analysis of the overall economy, financial market, capital market, political and social conditions; b. Industry analysis and businesses to be invested; c. Have a clear basis on an analysis/research done to support a investment decision; and d. Have in place an appropriate liquidity management policy. iii. Describe the investment policy of each type of fund. iv. The assets being managed are not the assets of the fund management company; it should be treated as a separate fund in the event of the insolvency of the company and do not form part of the company s assets. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 8

10 17. Monitoring and Control of investment i. A fund management company shall not invest more than 25 percent of any fund in one investee company. ii. The total investment in the venture capital shall not be more than Nu.2 million. iii. Under venture capital, a fund management company shall not invest in any company that is promoted directly or indirectly by a company/individual with a gross income of Nu.50 million and above. iv. A fund management company shall ensure that investment has been done in accordance with the investment policy for each type of fund. v. Should have in place risk management system commensurate with the present/potential risk. vi. Funds raised by a fund management shall be permitted to be invested in its own securities up to a maximum of 5 percent. 18. Grant of License i. Only a licensed fund management company shall be permitted to carry out fund management business in Bhutan. ii. The Authority shall grant a license to an applicant, only if the Authority amongst other is satisfied that: a. The managerial capacity of the applicant is adequate to conduct the proposed operations; b. The applicant will conduct its business in an honest and transparent manner and with the professional skills appropriate to the nature and scale of its proposed activities; c. The applicant will conduct its business in a sound and prudent manner so as not to jeopardize performance of financial obligations; d. The applicant will maintain adequate accounting and other records of its business with adequate systems of control; and e. It will become economically sustainable within a period of three years. iii. After consideration of the documents and other investigations, the Authority if satisfied may issue an In-Principle Approval. This approval shall be valid for the period of three months. During this period, the applicant shall take all necessary preliminary measures specified REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 9

11 therein. The issue of In-Principle Approval does not bind the Authority to issue a license to conduct business. iv. A company in respect of which an In-Principle Approval has been given should not commence business before the issue of a license. Every advertisement, notice, etc. issued prior to the issue of the license should specify that it has not been issued a license to carry on fund management business. v. An applicant upon complying with the conditions specified in the In- Principle Approval may request the Authority to issue a license. The Authority being satisfied may issue a license to an applicant to carry on fund management business. vi. vii. viii. A fund management company shall commence business within three months of issuance of a license. A license issued by the Authority to the applicant is non-transferable and shall be valid for a period of one year. A fund management company shall pay an annual non-refundable renewal license fee of Nu. 25,000 in cash/cheque/draft in favor of the Authority and shall be paid 15 days before the expiry of the license. 19. Cancellation and Suspension of license i. With Notice The license of a fund management company may be cancelled or suspended, after due notice and after giving him a reasonable opportunity of being heard, if he: a) violates the provisions of the Financial Services Act of Bhutan 2011 or rules or regulations, made there under; b) fails to furnish any information relating to his activities as a fund management company as required by the Authority; c) furnishes wrong or false information; or conceals or fails to disclose material facts in the application submitted for obtaining a license; d) does not co-operate with any inspection or enquiry conducted by the Authority; e) fails to maintain the capital requirements in accordance with the provisions of these regulations; f) fails to pay the fees to the Authority; g) violates the conditions of license; and REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 10

12 h) does not carry out his obligations as specified in these regulations. ii. Without notice The license of a fund management company may be cancelled or suspended without notice, if he: a) is found guilty of fraud, or is convicted of a criminal offence; b) commits such defaults, which require immediate action in the opinion of the Authority, provided that the Authority has communicated the reasons for the cancellation in writing; and c) has not commenced the business within three months of being granted a license. 20. Maintenance of books of account, records, etc i. A fund management company shall prepare the following accounts for every accounting year: a. A balance sheet or a statement of affairs as at the end of each accounting period; b. A profit and loss account for that period; and c. A statement of cash/fund flow. ii. Additional statements on fund management business as may be required by the Authority. iii. A fund management company shall submit to the Authority, a copy of the audited financial statements along with the auditor s report within ninety days from the close of the accounting year along with the remarks or observations of the auditors, if any, on the conduct of the business, state of accounts, etc., and a suitable explanation on such observations shall be appended to such accounts filed with the Authority. iv. All the books and documents, statements, contract notes etc., referred to in these regulations and maintained by a fund management company shall be retained for a period of at least ten years from the end of the year to which they relate. v. A fund management company shall carry out all administrative and service activities, required to conduct its business, including, for example, bookkeeping of independent accounts of each client, maintaining documentary records for portfolio management and records of transfer of ownership of sold or redeemed stocks, payment of dividends, interest and commission and responding to the shareholders' queries, etc. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 11

13 21. General Provisions i. The Authority will maintain fund management company register and responsible officers register. Both registers will be made available for inspection by the public which will record, for each type of fund and its responsible officers, the name, address and such other information, if any, regarding each of them as the Authority determine would be useful for the public. ii. From the date of commencement of these regulations, no person shall carry on or advertise that it carries on fund management business as a fund manager or use in business activity the words fund management or words of similar connotation unless a license has been granted to him by the Authority under these regulations. However, the fund managers and key post holders of the fund shall fulfill the fit and proper criteria of these regulations. iii. The fund management company shall not engage in criminal activities including fraud, money laundering and the financing of terrorism. iv. The fund management company shall display its license at all places at which it carries on its business. v. The fund management company shall display at all times, its charges wherever appropriate. vi. The fund management company shall ensure that a proper system of internal audit is practiced in business and that the internal control systems are adequate for the size, nature and complexity of the business. 22. Submissions All enquiries, applications and information in pursuant to these regulations shall be addressed to the following: Hon ble Governor Royal Monetary Authority of Bhutan P.O. Box 154 Chhophel Lam, Kawajangsa Thimphu, Bhutan Telephone: /217 Fax: frsd.rma@rma.org.bt REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 12

14 ANNEXURE I The Hon ble Governor Royal Monetary Authority of Bhutan Thimphu, Bhutan Date: Sub: Application to establish Fund Management Company in Bhutan Hon ble Dasho, I/We would like to request for a license to establish Fund Management Company in Bhutan under section 18 of Financial Services Act of Bhutan, I/We confirm and declare that all applications made by us/me are in full compliance with the Fund Management Company Regulations issued by the Authority. I/We further confirm and declare that I/we are satisfied to the best of our knowledge, information and belief that there is no information or statement nor is there any omission which would make our application false or misleading. I/We undertake to provide to Authority such information and documents as the Authority may reasonably require in relation to the application. This application is made by the undersigned authorized person of ( ) pursuant to the authority granted to by written resolution of promoters passed on ( ). For and on behalf of proposed company. Yours faithfully, Name: Address: Tel No: Fax No: Encl: Documents pertaining to the application including the resolution signed by all the promoters. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 13

15 ANNEXURE II LICENSING APPLICATION FORM (Please ensure that this form is filled properly. In case of any clarifications, please feel free to call or visit Financial Regulation and Supervision Department of Royal Monetary Authority). In accordance to the Financial Services Act of Bhutan, 2011 an application form is required to be submitted by the applicant to the Authority for a licence to conduct the fund management business in Bhutan. NAME OF THE APPLICANT ADDRESS : : CONTACT ADDRESS : TELEPHONE NO : FAX NO : 1. Please indicate which of the following activities the applicant intends to provide or seek to be licensed: 1. Open ended fund ( ) 2. Close ended Fund ( ) 3. Pvt. Fund, and ( ) 4. Other similar activities ( ) 2. Instructions for filling up the form i. It is important that before this application form is filled in, the regulations made by the Authority are studied carefully and understood in full. ii. Applicants must submit a duly completed application form together with all appropriate, supporting documents to the Authority. iii. Application for licence will be considered only if it is complete in all respects. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 14

16 iv. Applicants should sign the application form. v. Information which needs to be supplied in more details may be given on separate sheets which should be attached to the application form. 3. Particulars of the Applicant: i. Name of the Applicant : ii. (A) Address - Principal Place of business / Registered Office. Post Box Number: Telephone No: Fax No: iii. Address for Correspondence: Post Box Number: Telephone No: Fax No: iv. Name of fund manager 4. Capital Structure of the proposed Fund Management Company: i. Amount of Authorized Capital : ii. Amount of Issued Capital : iii. Amount of Paid-up Capital : 5. Shareholding pattern i. List of major shareholders (holding 10% and above of applicant directly or along with associates-applicable only to limited companies) REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 15

17 ii. Share holding as on: Name of shareholder No. of Shares held % of total paid up capital of the company iii. Three years audited accounts of the company, if applicable. 6. Organization Structure i. Status of the Applicant ( e.g. limited company-private/public): ii. Date and Place of Incorporation: Day Month Year Place iii. Copy of draft Article of Incorporation (final Articles of Incorporation to be submitted upon incorporation of the Company with the Registrar of Companies). 7. Business Information i. A business plan/feasibility report for a period of 3 years to be submitted. The business plan should include projected volume of business & income for each class of business and income & expenditure statement in detail. Organization Chart separately showing functional responsibilities to be enclosed. ii. Particulars relating to the significant owner, directors, principal officer of the company to be completed in the prescribed format Annexure III. iii. Any other information considered relevant to the nature of services rendered by the applicant. iv. Details of infrastructure like office space, equipment and manpower available with the applicant after the issuance of In-Principle Approval. v. Declaration should be provided by the person nominated as the applicant, fund manager and all directors of the applicant company declaring that they were not associated with a company as a director or fund manager, whose registration as a fund management company was suspended or cancelled or refused by the Authority. These declarations should be submitted separately by the Applicant, Fund Manager& each Director of the company. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 16

18 DECLARATION I, the undersigned, solemnly declare that the above information given in this application form and other documents submitted on behalf of the proposed fund management company are true, complete and correct to the best of my knowledge and belief. Should the Authority come across any inconsistencies on the information provided, I hereby agree to fully abide by the penalties as specified under Section 138 of the Financial Services Act of Bhutan Further, I would like to pledge that if granted a license to conduct the business, the proposed company will not violate any laws and regulation of the Authority. Name: Position: Citizenship ID No: (Please attest copy) Signature (Affix Legal Stamp): Date: Witness: Name: Citizenship ID No: (Please attest copy) Occupation: Signature: REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 17

19 ANNEXURE III BIOGRAPHICAL REPORT To be filled by all the significant owner (owning equal to or more than 10 percent), Director and Fund Manager of the company. 1. Personal Details. a. Name b. Date of Birth c. Nationality d. Citizenship ID No. 2. Contact Information a. Telephone No b. Mobile No. c. Fax No. d. 3. Present Position a. Name and Address of the Firm b. Nature of Business c. Telephone No 4. Family History/Dependents Relationship Name CID No. Date of Birth Occupation Address Mobile No. Father Mother Spouse Dependents REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 18

20 5. Education Name & Address of University Years Attendance of Major Area of Study Degree/Certificate Granted Date Awarded 6. Employment Record (Pertaining to previous 5 years). Use additional sheets, if necessary, and account for all gaps in employment. Position/ Department Main responsibilities Organization Country Duration 7. Do you have a license to practice any profession? Yes No If yes, please give details. a. Nature of License b. Date of Issue c. License/Registration No. d. Licensing Agency and Address 8. (a) If self-employed, describe each enterprise, including the name, address, license number, your percentage of ownership and the type of business which you own or control. (Control means ownership of 10% or more of the stock or ability to effectively control the management of the corporation or other entity). (b) List names, addresses and percentage of control and/or ownership of other incorporators, partners, directors, or officers of the entity or corporation referred to above. 9. Are you employed in any professional capacity, or do you perform any services for or have any business connections with any institution which is subject to the supervision of the Royal Monetary Authority of Bhutan, or any other authority of the Royal Government of Bhutan? If Yes, indicate the name of the institution, address and nature of your work. Yes No 10. Have you had, or do you now have, any financial interest, direct or indirect, in any financial institution in Bhutan. If Yes, give the name of the institution, address and nature of the financial interest. Yes No REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 19

21 11. Please tick whichever is relevant for the following questions below. Do you have more than 3 years experience in fund management/risk management/finance/ accounting/securities business/information technology Were you or company you worked/owned declared insolvent and adjudicated bankrupt Were you or company you worked/owned convicted by a court in any criminal offense or has been involved in any fraud/forgery, financial crime or other illegal activities Are any of your loan accounts with financial institutions classified as non-performing at any point of time (loan default by 90 days) No N/A Yes Yes Yes N/A Yes No No No 12. Answer Yes or No to any of the questions below if they apply to you as an individual, or a partner, director or officer of a corporation except for minor traffic violations. a. Are any arrests, indictments, criminal information or other criminal proceedings now pending against you? Yes No b. Were you ever convicted for any violations of the law? Yes No c. Have you or has any partnership of which you were a CEO or a major owner (more than or equal to 10% of the capital of the company) ever been liquidated or judged bankrupt? Yes No c. Has any business of which you were a director, officer, partner or major shareholder (10% or more of the voting shares) defaulted on his/her loan repayment? Yes No e. Has any enterprise in which you were a partner, director or officer been the subject of criminal indictment or other criminal proceedings? Yes No 13. Income tax clearance: Fiscal Year (Attach tax clearance certificate) REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 20

22 DECLARATION I certify that I am aware that it is an offence under Section 138 of the Financial Services Act of Bhutan 2011 to provide the Authority any information which is false or misleading in a material particular. I certify that the information given in the form above and accompanying documents is complete and accurate to the best of my knowledge, information and belief and that there are no other facts relevant to this application of which the Authority should be aware. I also undertake that as long as I continue to be a Applicant/Fund Manager/Director, I will notify the Director of the Financial Regulation and Supervision Department of the Authority of any material changes to, or affecting the completeness or accuracy of, the information given above as soon as possible, but in any event no later than 10 days from the day the changes come to my attention. Further, I would like to pledge that as long as I continue to be an Applicant/Principal Officer/Director of the company, I will not violate any laws and regulations of the Authority. Name: Position: Citizenship ID No: Signature (Affix Legal Stamp): Date: Witness: Name: Citizen ID No: REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 21

23 ANNEXURE IV SUBSCRIPTION/REDEMPTION FORM Sl. No Particulars 1 Name of the Fund 2 Name/Address of the Fund Manager 3 Terms & Conditions of the Investment fund 4 Acknowledgement of Terms & Conditions by the Investor (not applicable in case of Redemption) 5 Name & Address of the Investor 6 CID No. (if in case the investor is individual), and Company Registration No. ( in case of Corporate entities) 7 Subscription/Redemption Date 8 Amount of Subscription/Redemption 9 Mode of Payment/Receipt 10 Contract Date 11 Place of Subscription/Redemption 12 Signature (Subscriber/Redeemer) 13 Signature of the employee (who accepted the Subscription/Redemption) REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 22

24 ANNEXURE V PROSPECTUS/MEMORANDUM Every Fund Management Company offering units of funds through Public offer or Private Placement, must include at least the following information in their Prospectus/Memorandum, which should be presented in a way that is easy for investors to understand. Disclosures must be presented in the sequence of the items set out in this document: 1. GENERAL: (i) Name of the investment fund. (ii) Address of the head office of the fund manager and any web site address for information about the Fund Management Company and/or its fund manager. (iii) Commencement date for accepting subscriptions. (iv) Date of the terms and conditions issued or last updated. (v) State the minimum entry level for investment in the fund, if any. (vi) State the currency of the fund and describe any procedures for converting subscriptions received in other currencies. 2. INVESTMENT FUND OBJECTIVES: State the description of the investment objectives and goals of the investment fund, including the category or type of fund. If the investment objective is to invest in a specific investable universe that is a sub-category of the issuers traded on the Exchange, the disclosure must include the criteria for inclusion in the investable universe. 3. PRINCIPAL INVESTMENT STRATEGIES: State a summary of the principal investment strategies the investment fund employs in order to achieve its objectives, including: REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 23

25 (i) The type or types of securities in which the Fund Management Company will principally invest; (ii) Any policy to concentrate investment in the securities of issuers/public listed Companies in a particular industry or group of industries, a particular country or geographic area; (iii) The types of transactions, techniques and instruments that may be used on behalf of the Fund Management Company and for the purpose of managing its portfolio of investments; (iv) The types of securities which may not be included in the portfolio of the Fund Management Company or the types of securities that may only be included. (v) Where the Fund Management Company has received an exemption from the Authority under these Regulations, a clear statement of the exemption provided. (vi) Any other restrictions on the type or types of securities or other assets in which the Fund Management Company may invest; (vii) The borrowing powers of the Fund Management Company and the fund manager s policy in relation to exercising those borrowing powers; (viii) Those securities markets on which the Fund Management Company is likely to buy and sell portfolio investments; (ix) The extent to which the assets of one Fund Management Company managed by a particular fund manager may be invested in the units of other Fund Management Company, managed by that fund manager or by other fund managers; and (x) To the extent the fund manager invests the assets of the Fund Management Company in a market or markets that use derivatives of securities, a description of the extent to which such derivatives will form part of the assets of or be used by the fund manager to manage the assets of the investment fund. 4. PRINCIPAL RISKS OF INVESTING IN THE INVESTMENT FUND. (i) A summary of the principal risks of investing in the Fund created by the Fund Management Company, including the risks to which the portfolio of investments is subject, and any circumstances reasonably likely to affect the Fund Management Company s net asset value, yield and/or total return adversely. REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 24

26 (ii) A disclosure that unit holders bear a risk of loss of money in investing in the Fund Management Company. (iii) A disclosure that an investment in an Fund Management Company is not a deposit with any local bank sponsoring, selling or otherwise affiliated with the Fund Management Company. 5. FEES AND EXPENSES. Disclosure of all types of fees and expenses payable by the unit holder or out of the assets of the Fund Management Company, and a cross-reference to the Summary Financial Disclosure for disclosure about the amount of fees and expenses. 6. DEALING COSTS: If the costs of dealing in securities (forming the assets of the Fund Management Company) are to be paid out of fund assets, a statement to this effect should be included in the terms and conditions. 7. WINDING-UP AND THE APPOINTMENT OF A LIQUIDATOR: A description of the circumstances in which a Fund Management Company may be wound-up or a replacement of fund manager appointed by the Authority, and the procedure to be followed on winding-up and that for appointing any liquidator. 8. FUND MANAGEMENT COMPANY BOARD: (i) The names and qualifications of the directors to the Fund Management Company and disclosure of which fund directors are independent; (ii) A description of the nature of the services to be provided by the directors of the Fund Management Company, and the term of the contract for services; and (iii) If applicable, in what capacity any director of the Fund Management Company acts in relation to any other Fund Management Company, and the name or names of any such other investment fund. 9. FUND MANAGER: (i) The name and address of the fund manager; (ii) Any other business activities or interests of the directors of the fund manager or of the fund manager that are of significance to or could potentially conflict with those of the Fund Management Company; REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 25

27 (iii) Any material conflicts of interest on the part of the fund manager that may potentially affect its performance of its obligations to the Fund Management Company. (iv) Any functions in relation to the Fund Management Company that the fund manager has delegated to a third party, and the identity of the third party; and (v) A statement that the fund manager is an authorized person under the regulations of the authority, including the registration/license number granted by the Authority to the fund manager. 10. DEPOSITORY: The name and address of the custodian of securities to the Fund Management Company. 11. AUDITOR: The name and address of the auditor to the Fund Management Company. 12. ANNUAL AUDITED FINANCIAL STATEMENTS: A statement that the Fund Management Company s annual audited financial statements are available, without charge, upon request and an explanation of how unit holders and prospective investors may request copies. For a new Fund Management Company, a statement that the first audited financial statements will be available as at the fund s year end and give the date of that year end. 13. INITIAL OFFERS: If the fund manager specifies a minimum amount that must be raised through investor contributions before a particular fund may be launched, this minimum must be stated. If the subscription monies are to be invested in money market funds or bank deposits, pending such a minimum amount being achieved, this must also be stated. 14. INVESTMENT BY THE FUND MANAGER IN A FUND: Disclose whether or not the fund manager invests in the units of the Fund Management Company and the total amount of any such interests as at the most recent financial year end. 15. SUBSCRIPTION AND REDEMPTION PROCEDURES: (i) The dealing days on which units of the fund will be sold and redeemed; REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 26

28 (ii) The deadline on any given dealing day for the submission of instructions for purchases or redemptions of units; (iii) The maximum period of time that may elapse between subscription and investment in the fund and any other applicable restrictions. (iv) The procedures for submitting instructions to purchase or redeem units; (v) The maximum period of time that may elapse between redemption and payment to the unit holder of the proceeds of redemption, and any other applicable restrictions; (vi) Any minimum number or value of units that a unit holder must hold or seek to sell or redeem; and (vii) Any entitlement of the fund manager and the circumstances in which he may suspend, defer or refuse subscriptions or redemptions. 16. VALUATION OF THE ASSETS OF THE INVESTMENT FUND: (i) A description of how the value of the assets of the investment fund is to be determined; (ii) Where and how frequently the price of units will be published. 17. DILUTION. If a fund manager intends to impose a dilution charge under Article 48 on a unit holder who is requesting to redeem units within 30 days of their purchase, a statement setting out: (i) The fact that a dilution charge will be imposed and the amount of such a charge; (ii) The basis on which the amount of the charge will be calculated, including the method for identifying the units being redeemed. 18. TERMINATION: Statement of the procedures by which the Fund of the Fund Management Company may be terminated. 19. REPORTING TO UNIT HOLDERS: Describe those periodic reports that will be provided to unit holders and the annual financial statements of the fund, and how such reports or statements will be provided to Unit holders. 20. VOTING RIGHTS: Statement of Voting rights policy in a fund 21. CHANGES TO THE TERMS AND CONDITIONS: The procedure to be employed on notifying changes to the terms and conditions REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 27

29 22. COMPLAINTS PROCEDURE: Set out a statement that the procedure for the handling complaints will be made available. 23. GOVERNING LAW: State that the offer documents are subject to the Regulations for Fund Management Company in Bhutan, 2011 REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 28

30 STATUTORY DECLARATION We hereby declare that all the relevant provisions of the Regulations for Fund Management Company in Bhutan, 2011 and the related laws, regulations of the Authority have been complied with. Also, no statement made in prospectus is contrary to the provisions of the Regulations for Fund Management Company, Place: Dated: Signatures of Fund Manager Signatures of Director(s) REGULATIONS FOR FUND MANAGEMENT COMPANY 2011 Page 29