Cayman Islands Law Requires Registration
On February 7, the Cayman Islands Government passed sweeping legislation to enhance oversight of investment funds to boost best practices and strengthen investor confidence. The Private Funds Law, 2020 requires private funds formed in Cayman to register with the Cayman Islands Monetary Authority (CIMA) within the next six months. The Mutual Funds Law, 2020 removed the small fund exemption (those with fewer than 15 investors) thereby subjecting substantially all private open ended and closed ended funds formed in Cayman to register with CIMA. (For more insight, please see EisnerAmper’s previous report on the Cayman Islands’ enactment of legislative changes to enhance oversight of investment funds to boost best practices and strengthen investor confidence.)
Under the new laws:
- All impacted funds will be required to register by August 7, 2020;
- Any new funds launched from the effective date will require immediate registration.
- The registration fee for the initial registration of affected funds during the transition period will be waived; and
- The first audited accounts for registered funds will not be required to be filed with CIMA until six months following the first full financial year after registration. Unlike other offshore jurisdictions that do not require local auditors, these audited financial statements must be submitted by a CIMA approved local auditor.
As always, for further instruction, please speak to your legal advisors.
By Elana Margulies-Snyderman
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Cayman Islands Enacts Legislative Changes to Enhance the Oversight of Investment Funds
The Cayman Islands Government has drafted two bills to enhance regulation for all Cayman-domiciled hedge funds and also impact private equity funds for the first time, in an effort to boost best practices, strengthen investor confidence and ensure the Islands remains the preeminent jurisdiction for investment funds formation.
Mutual Funds (Amendment) Bill, 2020 and the Private Funds Bill, 2020 would require both hedge funds and private equity funds to have annual audits issued or undertaken by a Cayman Islands Monetary Authority (CIMA)-approved local auditor.
Under the new Mutual Funds Bill, funds with fewer than 15 investors would now be required to register with CIMA, comply with annual return requirements, retain accessible records and have annual audits done by a CIMA-approved local auditor.
According to the Private Funds Bill, all private funds would have to comply with above. In addition, they would have requirements for valuation, safekeeping, title verification and cash monitoring. The bill also allows private funds the flexibility to choose the service provider(s) who would provide any required valuation, safekeeping, title verification and cash monitoring services; provided that any administrator, custodian or other independent third party appointed is independent from the fund’s manager or operator or, where any of the manager or operator or their affiliates is appointed, they identify and disclose any conflicts of interest.
The Government is planning a series of briefings and releases in the coming months with the first briefing to be held January 10.
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