EFTA01123678.pdf

VIRGIN ISLANDS RULES AND REGULATIONS VIRGIN ISLANDS CODE TITLE 9- BANKING CHAPTER 25, SUBCHAPTER I- INTERNATIONAL BANKING ENTITIES TO IMPLEMENT THE PROVISIONS OF ACT NO. 7390, KNOWN AS "THE INTERNATIONAL BANKING CENTER REGULATORY ACT" SUBCHAPTER I: International Banking Entities SECTION 1. AMENDING OF TITLE 9 VIRGIN ISLANDS CODE Title 9, Virgin Islands Code, is amended in the following instances: (a) Chapter 1, section 4 is amended by: (1) striking "exempt"; and (2) striking "facility" and inserting in its place, "entity". (b) Chapter 25 is added, with the following Rules and Regulations attached thereto. SUBSECTION 715-1. SHORT TITLE These regulations shall be known and may be cited as the Rules and Regulations of the International Banking Center Regulatory Act" (hereinafter referred to as the "Rules and Regulations"). SUBSECTION 715-2. AUTHORITY These Rules and Regulations are promulgated pursuant to the authority granted to the U.S. EFTA01123678 Virgin Islands Office of the Lieutenant Governor, Division of Banking and Insurance, pursuant to the authority conferred by Bill No. 29-03-08, approved August 28, 2012 ("Act 7390"), known as "The International Banking Center Regulatory Act" (the "Act"). SUBSECTION 715-3. PURPOSE AND SCOPE OF THE RULES AND REGULATIONS These Rules and Regulations are adopted with the purpose of complementing and clarifying the provisions of the Act, and shall apply to all International Banking Entities (IBE) established or to be established in the future in the U.S. Virgin Islands under the Act. The Rules and Regulations supply the provisions required by law regarding the faculties and activities authorizing the international banking entities. SUBSECTION 715-4. AGENCY INTERPRETATIONS AND CONFORMITY TO INTERPRETATIONS (a) The Director is authorized to issue interpretations regarding the Act and related regulations. The courts are required to afford due deference to such interpretations. (b) An act or omission does not violate the Act if the act or omission conforms to an interpretation of the Act that is in effect at the time of the act or omission that was made by the Director, an appellate court of Virgin Islands, or an appellate court of the United States. SUBSECTION 716-1. DEFINITIONS For purposes of this Regulation: (a) "Act" means Act No. 7390: "The International Banking Center Regulatory Act." Page 2 of 104 EFTA01123679  (b) "Applicant" means any person, partnership, corporation, or any other juridical or business entity including trusts that has submitted an application for a license and benefits under this Program. (c) "Beneficiary" means any person, partnership, corporation, company, or other business entity possessing a valid certificate presently in effect. Where the context so requires, a member of a juridical entity shall be considered a Beneficiary. (d) "Benefits" means the tax exemptions and reductions in tax liability described (e) "Branch" means a staffed banking facility established by an IBE outside of the U.S. Virgin Islands where core banking functions are conducted including paying checks and lending money. An IBE facility that does not include these core banking activities is an Office and does not require the preapproval of the Division of Banking. (0 "Certificate" means the Certificate granted pursuant to the Act. (g) "Code" refers to the Virgin Islands Code. (h) "Director" means the Director of Banking and Insurance of the Office of the Lieutenant Governor of the U.S. Virgin Islands. (i) "Disciplinary Action" means any written warning, assessed fine, or other action undertaken by the Director in response to a failure to comply with these Rules and Regulations. (j) "Domestic Person" means any natural person who is a resident of the Virgin Islands or a person, trust or other juridical entity incorporated or organized under the laws of the Virgin Islands, or a person whose principal place of business is located in the Virgin Islands, or the Government or any political subdivision or agency of the Territory of the Virgin Islands. (k) "Economic Development Benefits", or "benefits" means the various tax exemptions and reductions in tax liability for which beneficiaries may qualify under the Code. (1) "Employee" means either a fulltime employee (minimum 32 hours per week) of the IBE or a Virgin Islands service provider that the IBE has paid in excess of thirty thousand dollars ($30,000.00) in any single calendar year. Such service providers shall be listed on the VIESA report. (m)"Foreign Person" means any person who is not a Virgin Islands resident. (n) "Governor" means the Governor of the United States Virgin Islands. (o) "International Banking Entity" (or "IBE") means any person, other than an individual, incorporated or organized under the laws of the Virgin Islands, the United States, or a Page 3 of 104 EFTA01123680 foreign country, or a unit of such person, to which a bank license has been issued pursuant to 9 VIC §721. (p) "Insolvency" means the financial condition in which an IBE may find itself or the person of which an IBE is a unit, when it is unable to pay its debts when they become due or when its paid-in capital has been reduced to less than one-third (1/3). (q) "Legislature" means the Legislature of the United States Virgin Islands. (r) "Office" means the IBE site in the Virgin Islands on which all permitted activities under 9 VIC § 726 are allowed to take place. IBEs may also establish offices outside the Virgin Islands without approval of the Division of Banking. However, if core banking functions are conducted in offices outside the Virgin Islands then the non Virgin Islands offices are considered bank branches and the IBE must first obtain approval from the Division of Banking. See definition of "Branch" in this section. Pursuant to 9 VIC 726 (a)(20)(b), IBEs are authorized to establish a Virgin Islands office or service unit where all banking activities authorized by 9 VIC 726 are permitted without the necessity of approval by the Division of Banking. This Virgin Islands office or service unit is not considered a branch of the IBE as 9 VIC 726 (b) prohibits the IBEs from conducting banking activities with Virgin Islands residents except as specified in 9 VIC 726 (a)(6), 726 (a)( I 5), 726 (a)(19) and 744(c). Activities permitted by the aforementioned sections may be conducted in the IBE's office or service unit. (s) "Parent Company" means any person or entity who directly or indirectly controls twenty five percent (25%) or more of the interest in the capital of an IBE or who controls in any manner the election of the majority of the ruling body of such IBE. (t) "Person" means an individual, corporation, partnership, company, association, unit, trust or estate, syndicate or enterprise of any kind, government or political subdivision or agency thereof. (u) "Principal Office" means the site where the offices in which the IBE carries out its business are located, and where operational and administrative policies are set forth. (v) "Recipient" means an enterprise, the owner of which is a Beneficiary. (w)"Regulations of the Director" means the regulations adopted by the Director, under 9 VIC §717. (x) "Related Retail Customer" means either a company that has a longstanding Page 4 of 104 EFTA01123681 relationship with the owner of the IBE in which mutuality of ownership in both entities exists, or customers who are themselves accredited investors. (y) "Resident of the Virgin Islands" has the meaning that appears in title 26 U.S.C. 932 and subsequent regulations enacted by the U.S. Department of the Treasury. A Virgin Islands juridical entity (including Virgin Islands trusts) is a resident of the Virgin Islands for the purposes of Act 7390 and these rules and regulations. (z) "Service Unit" has the same definition as a Virgin Islands IBE "office" as defined in these definitions. (aa) "Subsidiary" means any IBE whereby twenty five percent (25%) or more of its capital is controlled by another person or any IBE in which the election of the majority of the ruling body is controlled by another person. (bb) "The United States" means the United States of America, any state of the United States, the District of Columbia, and every possession, territory, political subdivision, and agency thereof, excluding the Virgin Islands. (cc) "Trust" means either a revocable or irrevocable trust. An IBE may be owned by a Trust. A Virgin Islands Trust is a United States Trust and a United States Trust is a Virgin Islands Trust. (dd) "Unit" means a subdivision or branch of any person other than an individual, whose business and operations are segregated from the other business and operations of such person, as required by this chapter. (ee) "Virgin Islands" means the territory of the United States as defined in section 2 of the Revised Organic Act and each of its political subdivisions and agencies. SUBSECTION 717-1. AUTHORITIES AND DUTIES OF THE DIRECTOR (a) The Director shall: (1) adopt, and may thereafter, from time to time, repeal, amend, or supplement regulations in order to comply with the provisions of this chapter; (2) collect fees for examinations and audits, receive monies and make disbursements according to its budget or as otherwise provided by law or regulations; Page 5 of 104 EFTA01123682  (3) open and maintain such bank accounts as may be necessary and appropriate to carry out the purposes of this chapter; (4) review and carry out investigations with regard to all applications for licenses to operate international banking entities; (5) approve, grant conditional approval, or deny applications for permits and licenses to operate international banking entities; provided, that any person whose applications has been denied or conditionally approved may request a hearing pursuant to the regulations provided in §749 of this title; (6) supervise, inspect, and audit international banking entities and require from them periodic reports and other information specified in the regulations of the Director; (7) require periodic auditing of the accounts of each IBE at least once a year, which must include an audit of the financial condition of each IBE, its compliance with the requirements of this chapter and the regulations of the Director, and such other matters as the Director may consider appropriate; (8) ascertain the financial security and operating soundness of IBEs and ensure that they comply with applicable laws and regulations and with any other provision or requirement that the Director may require by order or regulation; (9) revoke or suspend a license to operate an IBE or impose any sanctions the Director may consider necessary and convenient pursuant to regulations, subject to the requirements of section 749; and (10) carry out such other activities incidental to the performance of duties under this chapter. (b) The Director may summon witnesses and request the production of such documents as the Director considers necessary to carry out any investigation under this chapter. The information obtained through this process must be kept confidential. (c) If a person fails to comply with a summons issued by the Director, the Director may seek whatever remedy may be legally applicable, from the Superior Court of the Virgin Islands; and the court may order such person to comply with the summons of the Director, under admonition of contempt of court. Page 6 of 104 EFTA01123683  (d) Within the term of 90 days after the closing of each fiscal year of the Virgin Islands, the Director shall remit to the Department of Finance, to be covered into the Tap Roots Program, described in §756, Five (5) percent of the net income obtained from his functions related to this chapter for such fiscal year and ten (10) percent to the Cancer Care Fund administered by the Department of Human Services. SUBSECTION 718-1. INTEREST RATES AND RESERVES (a) IBE's may never bear interest at an interest rate of less than five percentage points above the Federal Home Loan Mortgage Corporation's posted yield on the last business day of the month on thirty-year standard conventional fixed-rate mortgages committed for delivery within sixty days, rounded to the nearest one-fourth percent, which rate shall take effect (a) on the first day of the immediately subsequent month and continue in effect for the remainder of the month, and (b) apply to all commitments made by a beneficiary during such month. If for any reason, the Federal Home Loan Mortgage Corporation ceases its auction, temporarily or permanently, the index in the preceding sentence must be based on the Federal Home Loan Bank Board's average monthly contract rate. (b) The Director may not establish interest rates to be paid or charged by an IBE. SUBSECTION 719-1. ORGANIZATION Every IBE must meet the following requirements in its organization: (a) An IBE may be: (1) any person, other than an individual, incorporated or organized under the laws of Virgin Islands, of the United States, or of any other country, or (2) constituted as a unit of another person, other than an individual, incorporated or organized under the laws of Virgin Islands, of the United States, or of any other Page 7 of 104 EFTA01123684  country. (b) The name of the IBE must include one of the following words or phrases: "International", "Foreign", "Overseas", or "Limited Purpose Bank", "Venture Capital Bank", "Family Office Bank", or other similar words which connote that it is not a full service depository bank. (c) An IBE must occupy an acceptable office location in the U.S. Virgin Islands wherein it will conduct its business with the required personnel and will maintain the necessary records, documents and equipment. (d) The articles of incorporation, the partnership agreement or any other written document establishing an IBE must specify: (1) The name by which it is to be known. (2) The street, number and town where its principal place of business is to be established in the Virgin Islands. (3)(A) In the case of a corporation: (i) the amount of its authorized capital stock, which must not be less than 5,000,000 and of which at least $250,000 must be fully paid at the time the license is issued in accordance with 9 VIC § 721, but the Director may authorize a lesser authorized or paid-in capital, by request of the interested party, when the type of business or power that the IBE intends to exercise or other circumstances thus merits it, in the criterion of the Director; (ii) the number of shares into which it is to be divided and the par value of each share. If the shares are to be issued in series, the date of issue of each series, as well as the manner and term in which payment thereof is to be made. (B) In the case of a person other than an individual or a corporation: (i) the amount of the proposed capital, which must not be less than $5,000,000 and of which at least $250,000 must have been fully paid at the time the license is issued in accordance section 721, but the Director may authorize a lesser proposed or paid-in capital, by request of the interested party, when the Page 8 of 104 EFTA01123685  type of business or power that the IBE intends to exercise or other circumstances merits it, in the criterion of the Director; and (ii) the name and address of its partners and other owners. (iii) Upon request of a party, the Director may approve an authorized and/or paid capital smaller than the above amount. (4) The term of its existence, which in the case of a corporation may be perpetual. (5) The purposes for which it is organized. (6) Any other provisions required by the regulations of the Director. (e) An IBE that intends to operate as a unit shall provide certification executed by the person of which it is a unit in the form prescribed by the regulations of the Director, which must specify: (1) The name by which the unit is to be known. (2) The street, number, and town where its principal place of business in the Virgin Islands is to be established. (3) The amount of the authorized or proposed paid-in capital of the person of whom the IBE is to be a unit, whose capital must not be less than $5,000,000, of which at least $250,000 must have been fully paid at the time the license is issued, but the Director may authorize a lesser authorized, proposed, or paid-in capital, by petition of the interested party, when the type of business or power that the IBE intends to exercise or other circumstances thus merits it, in the criterion of the Director; (4) The purposes for which the unit is organized, including a specific limitation of its operations to carry out only those services authorized in §726; and (5) Such other provisions as may be required by the regulations of the Director. SUBSECTION 719-2. GENERAL REQUIREMENTS AND PROCEDURES (a). Asset requirements. An IBE shall possess and maintain in the U.S. Virgin Islands at least three hundred thousand dollars (US $300,000) in unencumbered assets or financial guarantees acceptable to the Director. Such guarantees may consist of deposits in Page 9 of 104 EFTA01123686 banks authorized to conduct business in the U.S. Virgin Islands, subject to withdrawal with the written consent of the Director, or bonds and obligations of the Government of the U.S. Virgin Islands, its municipalities or instrumentalities. The Director may establish other financial instruments, terms and conditions for compliance with this requirement. Upon request of a party, the Director may approve the withholding of unencumbered assets or guarantees in the U.S. Virgin Islands for an amount less than $300,000. (b) Procedure to request an authorized capital of less than five million dollars (US $5,000,000) and/or paid capital of less than two hundred and fifty thousand dollars (US $250,000): Every IBE may request the Director, and he, upon his sole discretion, may approve or deny, the commencement of operations with an authorized or proposed capital of less than five million dollars (US $5,000,000) and/or paid capital of less than two hundred and fifty thousand dollars (US $250,000), as provided by this Section. (c) General Requirements to Apply for an Authorized Capital of an Amount Less Than Five Million Dollars (US $5,000,000) and/or Paid Capital of less than Two Hundred and Fifty Thousand Dollars (US $250,000). Every IBE that is interested in commencing operations with an authorized capital of less than five million dollars and/or paid capital of less than two hundred and fifty thousand dollars, shall file a written application before the Director, in the forms prepared by him, which shall be sworn by the applicant before a notary public authorized to practice in The U.S. Virgin Islands. Such application must contain the information which is required by the Director in the forms. (d) Period to Approve or Deny an Application. Every application for an authorized capital of an amount less than five million dollars and/or paid capital of less than two hundred and fifty thousand dollars shall be approved or denied by the Director, upon his sole discretion, as part of the determination he may make regarding the IBE's request to organize, according to the provisions of Section 9(4) of this Regulation. (e) Procedure to apply for withholding of unencumbered assets or guarantees Page 10 of 104 EFTA01123687 in the U.S. Virgin Islands for an amount less than three hundred thousand dollars (US $300,000). Every IBE may apply, to the Director, and he, upon his sole discretion, may approve or deny, the withholding of unencumbered assets or guarantees in the U.S. Virgin Islands for an amount less than $300,000. Such application shall be filed as provided in this SUBSECTION. (0 General Requirements. Every IBE that applies for the withholding of unencumbered assets or guarantees in the U.S. Virgin Islands for an amount less than $300,000 shall file a written application before the Director, in the forms prepared by him, which shall be sworn by the applicant before a notary public authorized to practice in the U.S. Virgin Islands. Such application shall include the information required by the Director in the forms. (g) Period to Approve or Deny an Application. Every application for the reduction of the amount of unencumbered assets or guarantees to be physically withheld in the U.S. Virgin Islands shall be approved or denied by the Director, upon his sole discretion, as part of the determination he may make regarding the application of an IBE of a permit to organize, pursuant to the provisions of Section 720-1 of these Rules and Regulation. (h) Procedure to hire less than three full-time employees in the U.S. Virgin Islands. Every IBE may apply to the Director, and he, upon his sole discretion, may approve or deny any application to hire less than three full-time employees in its offices in the U.S. Virgin Islands. Such application shall be filed pursuant to this Section. (1) Every IBE which requests to hire less than three (3) full-time employees in its offices in the U.S. Virgin Islands shall file a written application before the Director, in the forms prepared by him, which shall be sworn by the applicant before a notary public authorized to practice in the U.S. Virgin Islands. Such application shall include the information required by the Director in the forms. (2) Period to Approve or Deny the Application. Every application to hire less than three (3) full-time employees in the offices of the IBE in the U.S. Virgin Islands shall be approved or denied by the Director, upon his whole discretion, as part of the determination he may make regarding the application of the Page 11 of 104 EFTA01123688  IBE for a permit to organize, pursuant to the provisions of SUBSECTION 720-1 of these Rules and Regulations. (i) The securities or other financial instruments held by an IBE, shall have, at all times, an aggregate market value equal to or greater than the amount of unencumbered assets that the IBE shall be physically held in the U.S. Virgin Islands. The books of the IBE shall reflect, at all times, the marked to market value of such securities or financial instruments. In case of detriment or loss of value of such instruments, the IBE shall immediately provide for this deficiency. (j) Within one year of commencement of operations, every IBE earning one million dollars or less of net income shall employ in its offices a minimum of three (3) full- time residents of the U.S. Virgin Islands. Upon request by a party, the Director may approve a lesser number of full- time employees. Each IBE earning at least two million dollars of net income shall employ in its offices a minimum of four (4) full-time residents of the U.S. Virgin Islands. Each IBE earning at least three million dollars of net income shall employ in its offices a minimum of five (5) full-time residents of the U.S. Virgin Islands. Each IBE earning at least four million dollars of net income shall employ in its offices a minimum of six (6) full-time residents of the U.S. Virgin Islands. Each IBE earning at least five million dollars of net income shall employ in its offices a minimum of seven (7) full-time residents of the U.S. Virgin Islands. In no event shall an IBE be required to hire more than seven full-time employees. In the event that an IBE's income goes to less than one million dollars of net income in a calendar year, the IBE must maintain three full-time employees in that year. SUBSECTION 719-3. OPERATIONAL AND MANAGERIAL STANDARDS (a) An IBE shall establish and maintain operational and managerial standards as set forth in this Subsection as amended from time to time. Page 12 of 104 EFTA01123689  (b) Internal controls and information systems. Each IBE should have internal controls and information systems that are appropriate to the size of the institution and the nature, scope and risk of its activities and that provide for: (1) An organizational structure that establishes clear lines of authority and responsibility for monitoring adherence to established policies; (2) Effective risk assessment; (3) Timely and accurate financial, operational and regulatory reports; (4) Adequate procedures to safeguard and manage assets; and (5) Compliance with applicable laws and regulations. (c) Internal audit system. Each IBE should have an internal audit system that is appropriate to the size of the institution and the nature and scope of its activities and that provides for: (1) Adequate monitoring of the system of internal controls through an internal audit function. For an institution whose size, complexity or scope of operations does not warrant a full scale internal audit function, a system of independent reviews of key internal controls may be used; (2) Independence and objectivity; (3) Qualified persons; (4) Adequate testing and review of information systems; (5) Adequate documentation of tests and findings and any corrective actions; (6) Verification and review of management actions to address material weaknesses; and (7) Review by the institution's audit committee or board of directors of the effectiveness of the internal audit systems. SUBSECTION 720-1. APPLICATION PROCEDURE AND GRANTING OF PERMIT (a) Application for a Permit. Every application for a permit to organize an IBE shall be in Page 13 of 104 EFTA01123690 writing in the forms prescribed by the Director and shall be sworn by the applicant before a notary public authorized to practice in the U.S. Virgin Islands. Said application shall be submitted together with the additional documents required in the Application Form and a ten thousand dollars ($10,000) non-refundable fee in the form of a money order, official check or certified check payable to Government of the U.S. Virgin Islands. (b) Investigation. The Director shall investigate all the data and information furnished in the application and all other additional information which he may deem relevant, such as, the financial capacity and experience of the applicant, as well as the character, integrity and experience in, or knowledge of, banking or international business of applicant's management. In every application, the Director shall investigate any natural or juridical person who holds or controls or intends to hold or control ten percent (10%) or more of the interest in the capital of the IBE without this being understood as a limitation to the investigative power of the Director. (c) Investigation Expenses. The expenses that the Director may incur due to an investigation provided herein shall be paid for by the applicants, including but not limited to: $3000.00 for the Due Diligence Investigator and $1000.00 for the Division of Banking's Tax Counsel. In such cases that the Director deems that such expenses exceed the amount of ten thousand dollars ($10,000), the applicant shall be so notified. The Director shall make such claim for investigation expenses by the filing of a duly filed Requisition for Reimbursement in the form that the Director may design for such purposes. (d) Approval or Denial of Permit. After the required investigation and the payment of the costs of investigation as set forth in the aforementioned subsection (c), the Director shall approve or deny the permit to organize an IBE, which permit, if approved, shall contain the permitted activities in which a proposed IBE may engage in once the license is issued and may include any conditions which the Director may deem necessary. If the Director declines to issue a permit to organize the IBE, the applicant has an immediate right to appeal the decision to the Lt. Governor, who shall issue a decision within 30 days of the appeal. Page 14 of 104 EFTA01123691  (e) Non-transferability of Permit. The permit cannot be sold, transferred, assigned, encumbered or in any way pledged in favor of another person. The granting of a permit pursuant to this section does not give a right to commence operations until a license is issued under Section 10 of these Rules and Regulations. (0 Term of the Permit. Every permit granted by the Director shall be in effect for a period of eighteen (18) months from the date it was granted, during which time the IBE shall be organized and the application for the corresponding license filed. Upon request of a party, in meritorious or exceptional cases, the permit may be renewed at the Director's discretion. (g) Continuous Obligation to Inform. The holder of the permit shall have the continuous obligation to inform the Director of any material change in the information submitted with the application for a permit. Failure to notify any material change shall constitute just cause to revoke the permit. (h) Suspension or Revocation. The Director may suspend or revoke a permit for just cause. If suspended or revoked, the applicant may apply for an adjudicative hearing, which shall take place pursuant to the federal Administrative Procedure Act, 5 U.S.C. § 551 et seq. SUBSECTION 721-1. GRANTING OF A LICENSE TO OPERATE AN IBE (a) Filing of Documents. Once the permit is granted to organize an IBE, the applicant shall file the following documents with the Division of Banking and Insurance, Office of the Lieutenant Governor of the U.S. Virgin Islands. (1) The Sections of incorporation, the partnership agreement or any other written document which establishes the legal status of the IBE or of the person of which the IBE will be a unit, together in the latter case, with the certification specified in Section 5(c) of the Act. (2) Copy of the permit to organize an IBE granted by the Director. The Page 15 of 104 EFTA01123692  Lieutenant Governor's Office of the U.S. Virgin Islands shall issue, under its official seal, a certification specifying that such documents have been filed. It is the responsibility of the applicant to submit such certification to the Director before the license is granted. (b) Approval or Denial of the License. The Director may grant (or if deemed pertinent, conditionally grant) or deny the requested license after receiving and approving the following documents and evidences: (1) The certification from the Division of Corporations and Trademarks, referred to in 9 V.I.C. § 720; (2) Evidence of payment of the annual license fee in the amount of five thousand dollars (US $5,000). An additional annual fee of $10,000 shall be paid by the IBE once the IBE has exceeded $1,00,000 in annual net income. (3) Copy of all the documents filed at the Division of Banking and Insurance, Office of the Lieutenant Governor of the U.S. Virgin Islands, in compliance with SUBSECTION 721-1(a) of these Rules and Regulations; (4) Copy of the internal company resolutions, operating agreement or other necessary entity documents approved by the manager, owners, or Board of Directors; (5) Evidence that the capital of the IBE has been subscribed, issued and paid or assigned in the case of a unit, and that the IBE complies with the minimum requirement of unencumbered assets in accordance with the provisions of SUBSECTION 719-2 of these Rules and Regulations, as the case may be; (6) Evidence that the person of which the IBE is a unit or a subsidiary has complied with all the requirements of any regulatory agency responsible for supervising the activities of such person in the jurisdiction of its origin with respect to the establishment of a branch or subsidiary outside of said jurisdiction. Such evidence may consist of a certification issued by the regulatory agency or a legal opinion acceptable to the Director; (7) A statement authenticated before a notary public, by the Secretary of the Board of Directors, or the ruling body, or the person who acts in a similar capacity, of the IBE or of the person of which the IBE is a unit, to the Page 16 of 104 EFTA01123693  effect that the IBE has complied with all the terms and conditions of the Act and these Rules and Regulation and that it is ready to commence operations; and (c) Effective date. Once the license is granted, it shall be effective on the date of its issue by the Director until the expiration thereof, unless the same is suspended, revoked or renounced. A copy of the license shall be filed in the Division of Banking and Insurance, Office of the Lieutenant Governor of the U.S. Virgin Islands, by the IBE no later than ten (10) days after it has been granted. A license issued to operate an IRE may not be sold, assigned, transferred, pledged, used as a guarantee or in any other way encumbered. (d) Denial review. Every denial made by the Director shall be subject to review pursuant to the provisions of the federal Administrative Procedure Act, 5 U.S.C. § 551 et seq. (e) Suspension, Revocation, or Denial of a License. The license issue under this SUBSECTION is subject to revocation or suspension by the Director, or subject to fines, upon previous notice and hearing pursuant to these Rules and Regulations, if: (1) An IBE submits false evidence, documents or information during the application process (2) An IBE or the person of which the IBE is a unit, contravenes or fails to comply with any of the provisions of this chapter, any regulation of the Director, or any of the terms or conditions of the license to operate and IBE. (3) An IBE fails to pay the annual license fee. (0 Burden of proof In all hearings commenced under these Rules and Regulations, the IBE has the burden of proof, and the standard of proof is by clear and convincing evidence. The Director may not undertake any arbitrary or discriminatory enforcement action. (g) Surrender. Any IBE or the person of which the IBE is a unit, may surrender its license by filing with the Director a statement sworn before a notary public clearly expressing its decision to surrender such license no later than forty-five (45) days prior to the date in which it intends to cease operations and surrender the license. After receipt of the license by the Page 17 of 104 EFTA01123694 Director or by the designated official, the Office of the Lieutenant Governor will proceed to perform the investigations, audits and examinations which may be deemed necessary or convenient to authorize the cessation of operations of said IBE. After the investigations have been completed, the Director may postpone or authorize the cease of operations of the IBE with or without conditions. Any IBE which surrenders its license shall comply with each and every one of the conditions imposed by the Director to cease operations. (h) Dissolution. If deemed necessary or convenient, the Director shall order the dissolution and/or liquidation of the IBE whose license has been suspended, revoked or surrendered pursuant to Section 731 of the Act. (1) The Director may appoint a receiver and order the dissolution of an IBE if the license of the IBE or of the person of which the IBE is a unit, is revoked or surrendered under this SUBSECTION. (2) The receiver appointed must be a person of recognized moral qualities, with vast experience in the field of banking or finance, and the receiver's performance with the IBE must be secured by an adequate bond, to be paid by the IBE itself. (3) The receiver shall manage the IBE in accordance with the provisions of the Act and shall: (A) take possession of the assets and liabilities, books, records, documents and files which belong to the IBE; (B) collect all loans, charges and fees owed to the IBE; (C) pay all obligations and debts of the IBE, after having paid the necessary costs of the receivership; and (D) supervise the dissolution and liquidation of the IBE. SUBSECTION 722-1. AMENDMENTS TO ARTICLES OF INCORPORATION (a) Amendments to documents establishing an IBE after granting of license. The articles of incorporation, partnership agreement or other written document establishing an IBE or to any Page 18 of 104 EFTA01123695 license executed in accordance with this SUBSECTION may not be amended, unless the amendment has been previously approved, in writing, by the Director, which approval will not be unreasonably withheld. (b) Filing with Division of Corporations and Trademarks. After the adoption of any amendment to the articles of incorporation, partnership agreement or other written document establishing an IBE or to any certification executed in accordance with SUBSECTION 722-1(a) of these Rules and Regulations, the amended document must be filed with the Division of Corporations and Trademarks. SUBSECTION 723-1. UNENCUMBERED ASSETS, CAPITAL Every IBE shall possess not less than $300,000 of unencumbered assets or acceptable financial securities, or that lesser sum that, by request of the interested party, the Director authorizes, when the type of business or power that the IBE intends to exercise or other circumstances thus merits it, in the judgments of the Director. The unencumbered assets must be physically located in the Virgin Islands. SUBSECTION 723-2. ISSUANCE OF ADDITIONAL CAPITAL/SHARES (a) Any issuance of additional shares of capital stock or issuance of additional capital by an IBE not made directly to the stockholders or owners identified in the application for a permit originally filed with the Director, shall require the Director's prior written approval. Such approval shall be requested from the Director at least thirty (30) days prior to the proposed issuance. (b) Every issuance of additional shares of capital stock or issuance of additional capital made directly to the shareholders or owners of an IBE previously identified in the application for permit shall be notified to the Director within ten Page 19 of104 EFTA01123696 (10) business day from the date of such issuance. SUBSECTION 724-1. CHANGE IN CONTROL (a) Transactions which involve 10% or more of the stock (to a single entity). Every IBE, except those organized as a unit of another person, shall obtain the prior written approval of the Director for any sale, encumbrance, assignment, merger, barter, exchange or other transfer of ten percent (10%) or more of the stock, interest or participation in the capital of said [BE, to a person or group of persons acting in concert, in a single transaction or a series of transactions for that purpose, or which results in the ownership or control by any person or group of persons acting in concert, of ten percent (10%) or more of the stock, interest or participation in the capital of said IBE. Said authorization shall be requested at least thirty (30) days prior to the proposed date of such transaction. (b) Transactions among affiliated entities. A parent company may sell, transfer, encumber, merge, exchange or otherwise negotiate all or any of its stock, interest or capital participation in such IBE to any other person, that is not an individual, that is owned by, owns, or is under common ownership or control with such parent company with prior notification to the Director. The IBE shall notify the Director no less than twenty (20) days prior to the date of the proposed transaction. Such notification shall contain the details of the proposed transaction. If the Director does not object to the proposed transaction within the term of 20 days, it may be carried out in the way it was notified to the Director. (c) Any sale, encumbrance, assignment, merger, barter, exchange or other transfer made in violation of this Section, shall be cause for disciplinary action. Page 20 of 104 EFTA01123697 SUBSECTION 725-1. NO TRANSFER OF LICENSE No licenses issued in accordance with this Act may be sold, assigned, transferred, pledged, used as security, or otherwise encumbered, except under the provisions of subsection 748. SUBSECTION 726-1. PERMITTED ACTIVITIES AND TRANSACTIONS (a) Upon receipt of a license to operate an IBE under section 721, an IBE may: (1) accept transaction-related funds from foreign persons in accounts as well as demand or fixed term deposits and interbank deposit of funds. For purposes of this chapter, 'transaction-related funds' means monies, funds, credits, securities or properties accepted by an IBE in connection with a loan or other transaction, good or service provided by the IBE under the Act. An IBE is authorized to take "transaction-related deposits" under § 726(a)(1) of the Act. Though this deposit-taking activity is limited in scope, an IBE is a "state bank" under the Federal Deposit Insurance Act, 12 U.S.C. § 1813(a)(2), and eligible for FDIC insurance as receiving deposits other than trust funds. 12 U.S.0 § 1813(1) and § 1815(a)(1). At the same time, since an IBE is a foreign bank for purposes of the International Banking Act of 1978, 12 U.S.C. § 3107(7), an IBE is not required to obtain FDIC insurance unless the IBE accepts retail deposits at domestic branches in the 50 states or the District of Columbia, 12 C.F.R. § 347.202(e). "Branch" (only for purposes of the International Banking Act of 1978) means "any office or any place of business of a foreign bank located in any State of the United States at which deposits are received." 12 U.S.C. § 3101(3). (2) accept or provide wholesale or retail repurchase agreements, or otherwise borrow money from IBE's and from any foreign persons, subject to any regulations adopted by the Director. (3) make, procure, place, arrange guarantee, secure, bond, or service, loans or other financial undertakings; provided, that none of such loans or financial undertakings may be granted to a domestic person, except as provided in paragraph 3 of this Page 21 of 104 EFTA01123698 subsection, and in the case of financial securities for debt, issue transactions in the Virgin Islands; (4) (A) issue, confirm, give notice, negotiate or refinance letters of credit; if the client (other than a dual situs trust) and the beneficiary requesting the letter of credit is not a domestic person, or (B) issue, confirm, give notice, negotiate, or refinance letters of credit in transactions for the financing of exports, even if the beneficiary is a domestic person. (5) engage in money services, money transmission, payment services, bill- payment services, payment systems, check cashing, sale of instruments or other payment devices, currency exchange, or other financial and business management services, including, without limitation, providing, discounting, rediscounting, dealing or otherwise trading in money orders, stored value, bills of exchange, drafts, or other instruments or payment devices, provided that the purchaser, payee, or beneficiary is not a domestic person. An IBE engaged in money transmission must maintain at all time