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02/24/2020
Cayman Islands passes legislation making registration mandatory for most open-ended and close-ended funds
Effective Feb. 7, 2020, the Cayman Islands Government has passed legislative changes in the form of two new laws, the Mutual Funds (Amendment) Law, 2020, and the Private Funds Law, 2020, to enhance the regulatory framework for both open-ended funds and close-ended funds. Based on the laws, both mutual funds and private funds that are domiciled in the Cayman Islands are now required to register with the Cayman Islands Monetary Authority (CIMA).
Pursuant to the Mutual Funds (Amendment) Law, 2020, funds that were previously exempt from registration under Section 4(4) of the Mutual Funds Law now have up to 6 months to register with CIMA. Funds launching after Feb. 7, 2020, that would have been exempt under Section 4(4) of the previous Mutual Funds Law now must register immediately. (See our earlier alert for details regarding the previous law.)
In accordance with the Private Funds Law, 2020, it is now mandatory for all private funds to register with CIMA. Along with the passing of the law, CIMA issued the Private Funds (Savings and Transitional Provisions) Regulations, 2020. Under these regulations existing private funds have until Aug. 7, 2020, to register with CIMA and comply with the law. After the transition period, newly established private funds have up to 21 days to register subsequent to accepting a capital commitment from investors. They can market the fund or solicit investors prior to being registered, but they cannot accept contributions from investors unless they are registered with CIMA.
As part of ongoing obligations, private funds are now also required to appoint an administrator, a custodian, or another independent third party for the purposes of cash monitoring. The fund’s manager or operator, or a person who has a control relationship with the manager, may also be appointed for the purposes of cash monitoring if that function is independent from the portfolio management function, or if potential conflicts of interest are properly identified and disclosed to the investors.
There are monetary fines associated with providing false or misleading information in the offering document. Funds are required to conduct annual audits by CIMA-approved auditors as well as pay an annual registration fee.
Contact
William Pidgeon, CPA, Partner, Financial Services Industry Co-leader
786.687.7504
Marc Wolf, CPA, Partner, Financial Services Industry Co-leader
310.843.8274
Gary Berger, CPA, Partner, Financial Services Industry Leader – Northeast
646.625.5733
Joshua Blumenthal, CPA, Partner
646.448.5411
John Stomper, CPA, Partner
312.854.1165
Raza Ashfaq, CPA, Senior Manager
973.618.6226
Subject matter expertise
Gary Berger
CPA, Partner, Financial Services Industry Leader – Northeast
William Pidgeon
CPA, Partner, Leader- Financial Services Industry
Marc Wolf
CPA, Partner, Financial Services Industry Leader – South/West
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Cayman Islands Moving Toward Mandatory Registration For All Open-Ended & Close-Ended Funds
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.