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Changes for Mutual Funds

Changes for Mutual Funds

Posted by: Paul
Category: Hedge funds

Largely in response to EU and other international recommendations and to further demonstrates the Cayman Islands’ reputation as a co-operative jurisdiction at the forefront of international standards these changes affect open-ended funds which would previously have been exempt from CIMA registration, known as Section 4(4) Funds. Section 4(4) Funds are open-ended mutual funds whose equity interests are held by not more than 15 investors, a majority of whom could appoint or remove the operator of the fund. Master funds, feeder funds and standalone funds structured as Section 4(4) Funds will be affected by the MFL. Additional regulations and guidance is expected imminently.

What’s a changin’?

Registration – Section 4(4) Funds will now be required to register with the Cayman Islands Monetary Authority (‘CIMA’). Registration will include:

  • filing with CIMA a certified copy of their constitutional documents, and
  • payment to CIMA of a prescribed annual registration fee.

Registration is expected to be online via the existing CIMA registration portal for mutual funds, REEFS, and Section 4(4) Funds will not be required to have a prescribed minimum initial investment amount or file an offering document (or any amendments to such document) with CIMA.

Audit requirements – Section 4(4) Funds will also now be required to have their accounts audited annually by a CIMA-approved Cayman auditor. The audited accounts must then be filed with CIMA within six months of the end of each financial year, together with an annual return.

Director requirements – Section 4(4) Funds will be required to have at least two natural persons acting as, or for, the operators of the fund. The directors will also be required to register under the Directors Registration and Licensing Law and pay the annual fee.

How long do you have?

The MFL provides for a six month transitional period for existing Section 4(4) Funds from 7th February 2020 to register with CIMA and comply with the new requirements, ie by 7th August 2020.

Section 4(4) Funds created following commencement of the MFL are expected to be registered with CIMA and comply with the MFL requirements from launch.

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