{{ languageVal }}
  • English
  • French (Canada)
 

Industry Updates

Cayman Islands Mutual Funds (Amendment) Bill, 2020

10 Jan 2020

On 8 January 2020, the Cayman Islands Government published a draft Mutual Funds (Amendment) Bill, 2020 (the "Bill"), which provides for the registration of previously exempted mutual funds with the Cayman Islands Monetary Authority ("CIMA") as well as certain other amendments to the Mutual Funds Law (2019 Revision) (the "Law"). 


The Bill, reflecting the Cayman Islands' commitment as a co-operative jurisdiction, is responsive to EU and other international recommendations and covers similar ground to existing or proposed legislation in a number of other jurisdictions.

Registration and Local Audit Requirement for Section 4(4) Funds

Mutual funds that were previously exempted from registration under Section 4(4) of the Law on the basis of having 15 or fewer investors, a majority of whom could appoint or remove the operator of the fund ("Section 4(4) funds"), will now be required to register with CIMA and become subject to certain regulatory obligations.
This requirement will apply to all standalone funds, feeder funds and master funds that are structured as Section 4(4) funds.

In addition to registration, a Section 4(4) fund will need to pay an annual fee to CIMA and file a certified copy of an extract of its constitutional documents with CIMA showing that a majority in number of its investors are capable of appointing or removing the operator of the fund.  A Section 4(4) fund will not, however, be required to file an offering document (or any amendments) with CIMA.
 
Local Audit Requirement
 
The Bill provides that the same annual audit and annual return requirements that currently apply to regulated mutual funds under the Law ("regulated mutual funds") will apply to Section 4(4) funds.  As such, each Section 4(4) fund will need to have its accounts audited annually by a Cayman Islands-based auditor and to file such audited accounts with CIMA within six months of the end of each financial year, together with an annual return in CIMA's prescribed form.

Timing for Registration

The Bill provides that existing Section 4(4) funds will have six months from the date on which the Bill is passed into law to register with CIMA and to comply with the new requirements.
 
An existing Section 4(4) fund that registers with CIMA in 2020 will not need to file its audited accounts in respect of any prior financial year, but will be required to appoint a Cayman Islands-based auditor to conduct the audit of its accounts for all financial years ending after the date of its registration with CIMA.

CIMA Oversight

The Bill extends many of CIMA's enforcement powers in respect of regulated funds to cover Section 4(4) funds following their registration.

Benefits of Registration

On registration of a Section 4(4) fund, CIMA will issue a certificate of registration, which may assist in (i) providing a broader distribution channel for those funds and / or investors that are required to demonstrate registration or supervision by a regulator; and (ii) evidencing a fund's regulated status to counterparties in connection with anti-money laundering compliance checks.

Accounting Principles and Auditing Principles for all Mutual Funds

The Bill provides that the accounts of all regulated mutual funds and Section 4(4) funds must be prepared in accordance with International Financial Reporting Standards or the generally accepted accounting principles of the United States of America, Japan or Switzerland or any non-high risk jurisdiction.
 
In addition, the Bill provides that the accounts of all regulated mutual funds and Section 4(4) funds must be audited in accordance with the International Standards on Auditing or the generally accepted auditing standards of the United States of America, Japan, Switzerland or any non-high risk jurisdiction.

For such purposes, a non-high risk jurisdiction means any jurisdiction that is not on the list of high risk jurisdictions issued by the Financial Action Task Force. 

If you would like further information, please contact your regular Maples Group contact or any of the contacts listed below. 

Related Services

Accounting Tax and Agency Services

Our dedicated accounting team, drawn from top tier firms and investment banks, provide a timely and accurate service to meet the accounting requirements of funds and structured finance vehicles.

Hedge Funds

Our hedge fund capability spans precision accounting services across strategies and asset classes, to sophisticated and transparent investor reporting, alongside the full range of middle office functions.

Directorship Services

As independent oversight requirements dominate the investment world, our directors bring unmatched technical expertise and an understanding of legal and compliance burdens to add value to the governance process.

Corporate

Advising on the laws of the BVI, the Cayman Islands, Ireland, Jersey and Luxembourg, our global corporate team provides expert legal advice to corporate clients on all corporate commercial matters.  Our clients include major banks, multinationals and institutional investment firms, leading law and accountancy firms and a number of state / government entities across all industry sectors. 

Finance

Advising on the laws of the BVI, the Cayman Islands, Ireland, Jersey and Luxembourg, our global Finance team provides expert legal advice on even the most complex financial transactions under intense time pressure. Clients repeatedly return to our qualified finance lawyers to handle a variety of complex matters relating to acquisition and leveraged financing, asset finance, banking, debt capital markets, derivatives, fund finance, insurance linked products, Islamic finance, repackaging and structured finance. 

Funds & Investment Management

Advising on the laws of the BVI, the Cayman Islands, Ireland, Jersey and Luxembourg, our global Funds & Investment Management team provides expert legal advice on every aspect of the life cycle of an investment fund including set up, management and investment across a broad range of fund structures and management entities.  

Regulatory & Financial Services Advisory 

Our global team of regulatory lawyers provides expert legal advice to BVI, Cayman Islands, Irish, Jersey and Luxembourg entities regarding AML and CTF compliance including development and assessment of AML / CTF and risk management systems, KYC and customer due diligence best practices, conduct of money laundering and fraud proceedings and provision of expert evidence on AML / CTF and regulatory obligations. 

Tax

Our market leading Tax team is at the forefront of innovation in developing new structures and strategies for international and Irish clients on cross-border tax matters.