CIMA Practice Updates: Mutual Fund Deregistrations and Filings
16 Jul 2015
Earlier this year the Cayman Islands Monetary Authority ("CIMA") published a new Rule and Regulatory Procedure relating to the cancellation of a licence or certificate of registration of a Cayman Islands regulated mutual fund (a "Fund").
The principal effect of the new Rule is to introduce a deadline for making an application for deregistration when a Fund intends to or has ceased carrying on business pursuant to the Mutual Funds Law (2013 Revision) (the "MFL"). Specifically, the Rule will require an application to be made on the earlier of:
(a) 21 days from the date the Fund ceases to carry on business; or
(b) before 31 December of the year the Fund ceases to carry on business.
The Rule deems a Fund to have ceased carrying on business on the date so stated in resolutions of the operators of or investors in the Fund to that effect, unless CIMA has grounds to believe that the relevant date is otherwise than as indicated in the resolutions. Further, a Fund to which a liquidator has been appointed is deemed to have ceased to carry on business.
CIMA will be able to impose penalties for a breach of the Rule.
The principal effect of the new Regulatory Procedure is to consolidate into one document CIMA's requirements for deregistration of Funds in various circumstances, including ceasing to carry on business, voluntary liquidation, continuation as an exempted mutual fund, transfer to another jurisdiction and merger.
The Regulatory Procedure also states that unless a Fund qualifies for an audit waiver it must provide audited accounts from the date of the last financial year end ("FYE") (for which audited statements have been filed) either to the date of commencement of the winding up where a third party liquidator has been appointed or the date of the final distribution if no third party liquidator has been appointed. Current practice has been for Funds seeking to deregister to apply for an audit waiver pursuant to the MFL, but CIMA has indicated it may restrict the circumstances in which a waiver will be granted going forward. This has led to some uncertainty regarding treatment of applications made this year. However, CIMA has now confirmed that there will be a transition period to 1 October 2015 before the new Rule and Regulatory Procedure comes into effect.
Accordingly, we recommend that where a Fund has ceased to carry on business or intends to cease to carry on business that an application is made for deregistration on a timely basis and in any event in advance of 1 October 2015.
Operators of Funds should consider whether they are able to bring forward deregistration applications which they may have otherwise deferred to later in the year to coincide with the 1 October 2015 deadline. All CIMA's customary documentary requirements will still need to be adhered to and an application for a part year audit waiver will need to be made and the prescribed fee of US$609.76 paid.
Should you wish to take steps to deregister your Fund in the coming weeks, please speak to your usual Maples and Calder contact.
Filing of Accounts and FAR Form
All Funds must ordinarily file the following within six months of the Fund's FYE:
(a) audited annual accounts;
(b) the Fund Annual Return (referred to as the FAR Form); and
(c) the FAR Form filing fee of US$365.85 (the "Fee").
However, CIMA has announced that Funds with a FYE of 31 December 2014 will have a one month extension to this year's filing deadline, from 30 June 2015 to 31 July 2015. If a Fund has paid a fee for a one month extension to the previous 30 June 2015 filing deadline, CIMA will reimburse that fee. Funds with a FYE subsequent to 31 December 2014 will still need to file within six months of the end of that FYE.
Annual audited accounts and the FAR Form must be filed with CIMA by the Fund's auditors. The Fee becomes due and payable at the time the FAR Form is submitted. To assist clients with the payment of the Fee, where requested to do so, Maples and Calder now includes the Fee in the annual return invoice sent to clients in December (which invoices clients for all annual fees). Once the auditors have filed the audited accounts and the FAR Form, Maples and Calder is able to pay the Fee to CIMA. However, for largely administrative reasons, CIMA will not accept payment of the Fee until the audited accounts and FAR Form have been filed. It is therefore important that Maples and Calder is informed as soon as the auditors have filed the annual audited accounts and the FAR Form with CIMA; we will then be able to pay the Fee to CIMA, provided that we have been put in funds to do so.
Failure to pay the Fee could result in the fund not being in good standing with CIMA.
It may be helpful to discuss this with the Fund's auditors, to ensure that someone is responsible, at the auditors or the Fund, for notifying your usual Maples and Calder contact once the filings have been made.
CIMA's New Web-Portal
CIMA has announced a new web-portal for filing FAR Forms.
The new "REEFS" Portal (Regulatory Enhanced Electronic Forms Submission) will be used to file FAR Forms for funds with a FYE of 31 December 2014 or later, and a "new" version of the FAR Form should be used.
For funds with a FYE prior to 31 December 2014, the filing process remains unchanged and the "old" FAR Form and "old" E-Reporting Portal will continue to be used.
The E-Reporting Portal and the REEFS Portal will run concurrently for the time being.
There are links to both the "old" and "new" FAR Forms on the CIMA website.
Is it important to note that there are no material differences between the content of the "old" and "new" FAR Forms at present (the changes are mainly minor formatting adjustments, to better fit with processing via the new REEFS Portal, and some minor clarifications).
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