CIMA commissions corporate governance survey

The Cayman Islands Monetary Authority (CIMA) announced on 14 January 2013 that it was undertaking a formal consultation with all Cayman Islands financial industry associations and other interested stakeholders on proposals by the CIMA to develop specific corporate governance requirements and to provide greater transparency for stakeholders in the financial services industry on the Islands.

In its consultation, the CIMA will be inviting comments from and discussion with all sectors of the Cayman Islands financial services industry and alongside this process the CIMA has commissioned Ernst & Young to conduct a formal survey with both written and oral submissions being gathered.

The CIMA in its formal release noted that it had “…undertaken extensive research into corporate governance practices, developments and standards, both locally and internationally. As a consequence of this research, CIMA’s Board resolved to complement this research by canvassing industry for their views on certain corporate governance considerations relating to the mutual funds sector.” CIMA went on to say that “[t]he feedback received from this survey, together with the feedback received from the consultation, will form an integral component of our considerations when finalising future corporate governance standards and policy.”

The commissioned survey will seek views from the mutual funds industry on the current corporate governance standards, practices and the regulatory framework pertaining specifically to the Cayman Islands mutual funds sector.

CXS proposes rule changes; upgrades trading platform

The Cayman Islands Stock Exchange consultation period on proposed amendments to its Rules will come to a close on the 25th of January. The Exchange is then expected to publish the amendments in March 2013. The proposed changes can be summarised as follows:

Investment Funds – to be rebranded from ‘mutual funds’, with separate rules for retail funds; new rules for exchange traded funds and forestry funds; new provisions for directors; and other changes to reflect recent market and regulatory developments;

Equity Securities – new rules increasing the investment threshold for start-up and mineral companies and raising the suitability and disclosure requirements for equity issuers;

Listing Agents – expansion of eligibility provisions and new requirements for corporate advisers to act for equity issuers;
Eurobonds – to be rebranded as ‘corporate and sovereign debt securities’, with changes to waiver provisions for financial statements;

All Issuers – updating of general listing requirements and procedures; eligibility for electronic clearing and settlement; new rules regarding de-listing.

Further, in August 2012 the Exchange announced that it had signed an agreement with Deutsche Borse to use its XETRA trading platform, which at that time was expected to go live at the CSX in early 2013. The XETRA platform and its core technology is considered by many to be “state of the art” and is already in use at several exchanges including the Frankfurt, Irish and Shanghai stock exchanges and Eurex AG.  Approximately 400 banks and brokerage firms in 20 countries connect to Deutsche Borse’s XETRA Network. The CSX intends to use the platform to develop its secondary trading market for equities, debt and other securities. At the date of publication of this release the platform had yet to go live but was expected to do so in the second half of March 2013.

Legislative news: Master funds and fee increases

Changes to the Mutual Funds Law were introduced in December 2011 requiring certain Cayman Islands master funds within open-ended master/feeder structures to register with the Cayman Islands Monetary Authority (CIMA). However, to be subject to the registration requirement, the master fund had to fall within the definition of a mutual fund, which, in effect, excluded master funds that only had one feeder fund from the ambit of the legislation.

CIMA confirmed some time ago that the intention was always that all master funds which had one or more regulated feeder funds should be registered and that amending legislation would be introduced to clarify the position. The Mutual Funds (Amendment) Law which came into effect on 10 January 2013 provides that clarification by amending the definition of master fund. CIMA have issued an industry advisory advising that master funds will have until 1 March 2013 to register and pay the requisite fee (currently US$3,049).

In addition, the CIMA registration fee for a fund other than a master fund has been increased from US$3,660 to US$4,268. CIMA has advised that the difference between the 2012 fee and the 2013 fee must be paid by 15 February 2013 to avoid any penalties.

From Jonathan Law & Lisa Pearce, Harney Westwood & Riegels