Modernization of the Mutual Fund Law in the Cayman Islands
The Cayman Islands mutual fund industry is proof of Darwin’s theory that evolution takes place over long periods of time. It is true that it is taking years rather than millennia, however, the process of modernizing the legislation that governs the mutual fund industry in the Cayman Islands appears to be a complex process.
The rapid growth of the Cayman Islands hedge fund industry is the backdrop against which the current review of the regulatory regime is taking place. The amount of funds registered or authorized by the Cayman Islands Monetary Authority (CIMA) has been growing at a barely credible rate.
CIMA established a working group of representatives from the Cayman Islands Association of Fund Administrators, the Cayman Islands Society of Professional Accountants, the Cayman Islands Bar Society and the Cayman Islands Bar Association to assess the recommendations from CIMA’s own Research and Policy Division, which has examined the regulation. of the mutual fund industry.
The objective of the working group is to further improve the regulation of the fund industry, with a view to achieving a balance between the demands of a competitive offshore financial center and the international standards required by a series of international organizations for a sophisticated offshore financial center. .
Four rather than two categories of funds are likely to be established. Likely categories are a standard retail Public Fund offered to the public (no minimum subscription); Private fund managed with a licensed Cayman fund manager providing the registered office (minimum subscription of US$10,000); Recognized Fund with shares in shares listed on a prescribed stock exchange or licensed/registered in a prescribed jurisdiction and Professional Fund offered only to professional investors, with a high minimum subscription.
The name of the Cayman “Mutual Funds Law” has caused confusion, so the working group proposes to call the amended Mutual Funds Law “Investment Funds Law”. Those who had trouble reconciling a hedge fund as a mutual fund should be able to agree that a hedge fund is a mutual fund.
Another working group proposal, while not intended to save market participants money, is likely to have that result, namely the proposal to give CIMA broader powers to waive audit requirements for authorized or registered funds. . Cases where a fund has not been launched or where a fund is liquidated with only a few investors are examples of cases where such an exemption may be desirable.
The above is only a sample of the changes that can be expected, it is not a complete list of all the possible reforms implemented. The timing of implementation is difficult to predict, however, the review process has been ongoing for years and may conclude soon, although new laws and regulations will need to be drafted and passed to allow time to prepare for the new regulatory regime.
Previously, Cayman regulators have been able to strike the delicate balance, striking the right balance between regulation and the needs of the fund industry and intend to further enhance an offshore jurisdiction that is already in high demand. His hope is that the Cayman Islands continue to be the natural selection for fund professionals.