From Mourant Ozannes

The continuing obligations of Cayman Islands regulated funds are set out in the Companies Law and Mutual Funds Law (as amended).

Each Cayman Islands regulated  mutual fund must:

•          Pay an annual fee to the Cayman Islands

Registrar of Companies (the Registrar);

•          Pay an annual fee to the Cayman Islands

Monetary Authority (CIMA);

•          File audited financial statements and a Fund Annual Return Form (FAR Form) with CIMA;

•          Notify the Registrar and CIMA of any change to the funds directors or officers; and

•          Notify CIMA of any material changes to the information contained in any offering document or the relevant CIMA form containing prescribed particulars for the type of regulated mutual fund in question (CIMA Form).

Pay an annual fee to the Registrar

A regulated mutual fund must file an annual return and pay an annual fee to the Registrar. The annual fee is calculated by reference to the fund’s authorised share capital. The fund’s registered office in the Cayman Islands will file the annual return with the Registrar and when fees are received from the fund, pay the annual fee on the fund’s behalf. The fee is due in January of each year. Late fees will be assessed after 31 March of each year.

Pay an annual fee to CIMA

A regulated mutual fund must pay an annual fee to CIMA. The annual fee is currently US$4,270 (or US$3,050 in the case of a registered master fund). The fee is due by 15

January of each year. Late fees will be assessed after 15 January of each year. The registered office will pay the CIMA fees on the fund’s behalf when the fees are received from the fund.

File audited financial statements and FAR Form with CIMA

A regulated mutual fund must have its accounts audited annually and such accounts need to be signed-off by an auditor approved by CIMA. The audited accounts and FAR Form must be filed with CIMA within six months of the end of the fund’s financial year.

Notify the Registrar and CIMA of any change to the fund’s directors or officers

The Registrar must be notified of any change to the fund’s directors or officers. The

fund’s registered office must file an updated “Register of Directors and Officers” with the Registrar within 30 days of any change. Late fees will be assessed if the Registrar is not notified within 30 days of the change.

For regulated funds other than registered master funds, CIMA must  be notified of any change to the fund’s directors.  An updated CIMA Form and updated offering document must be filed with CIMA within 21 days of the change.

Notify CIMA of any material changes to the information contained in any offering document or the CIMA Form

An offering document in respect of equity interests in a mutual fund must describe the equity interests in all material respects, and contain such other information as is necessary to enable a prospective investor in the mutual fund to make an informed decision as to whether or not to subscribe for or purchase the equity interests. Registered master funds are not obliged to have an offering document. Any material changes to the information contained in the offering document or any changes to the relevant CIMA Form must be filed with CIMA within 21 days of the change.

The following is a non-exhaustive list of material changes requiring notification to CIMA:

•          Change to any of the offering terms

•          Change of Registered Office or Principal

Office

•          Change of Trustee

•          Change of Auditor

•          Change of Administrator

•          Change of Investment Manager

•          Change of Broker

•          Change of Custodian

•          Resignation or appointment of a director

•          Changes to any of the information contained in the CIMA Form

Pay an annual fee to CIMA pursuant to the

Securities Investment Business Law (SIBL)

If a mutual fund’s investment manager is a Cayman Islands entity (or is registered in the Cayman Islands) and carries on securities investment business, the investment manager must be registered under the SIBL as an “excluded person”. The investment manager must pay an annual fee of US$6,100 to CIMA and file an annual declaration. The fee is due by 15 January of each year. Late fees will be assessed after 15 January of each year.

CIMA’s supervisory powers

CIMA has various supervisory powers with respect to regulated mutual funds to ensure the direction and management of funds are conducted in a fit and proper manner and may at any time instruct a mutual fund to have its accounts audited and submitted to CIMA.

In addition, CIMA may request the directors, general partner or trustees of a fund to provide CIMA with such information or such explanation in respect of the fund as CIMA may reasonably require to enable it to carry out its duties under the Mutual Funds Law.

If CIMA is satisfied that a regulated fund is (or is likely to become) unable to meet its obligations as they fall due, is carrying on or attempting to carry on business or is winding up its business voluntarily in a manner which is prejudicial to its investors or creditors or it is a licensed mutual fund which does not comply with any commission of its licence, CIMA may:

•          revoke a mutual fund’s licence;

•          impose conditions or further conditions on a mutual fund’s licence;

•          require the substitution of any promoter or operator of a mutual fund;

•          appoint a person to advise the mutual fund on the proper conduct of its affairs; or

•          appoint a person to assume control of the affairs of the mutual fund.

In addition, operators of mutual funds are

liable on conviction to a fine of US$120,000 for carrying on business as a mutual fund contrary to the Mutual Funds Law.

CIMA Statement of Guidance

In January 2014, CIMA published a statement of guidance (the SOG) for regulated mutual fund governing bodies and operators to ensure that the management and direction of funds is conducted in the fit and proper manner expected by CIMA – the SOG sets

out the minimum requirements against which corporate governance should be measured1.

The SOG sets out key principles which should be interpreted and applied, including factors such as the fund’s structure, complexity and size. The SOG sets out that:

•          a fund’s governing body is required to effectively supervise and oversee a fund’s activities (as highlighted in the much publicised Weavering judgment2  as being absent in the case of the Weavering fund). This requirement underpins the other principles which the SOG establishes

and includes a requirement that the governing body of a regulated mutual fund should meet at least twice per year;

•          a fund’s operators must ensure internal documents  are maintained which fully record the proceedings of meetings of the fund’s governing body;

•          communication between the operators of a fund and its governing bodies should include appropriate reporting

on compliance and transparency with investors  where disclosure  is appropriate;

•          a fund’s risks should be appropriately managed and mitigated (and discussed at meetings of the funds governing body).

Contacts:

Neal Lomax, Managing Partner, Cayman Islands

+1 345 814 9131 [email protected]

 

James Wauchope, Partner, Cayman Islands

+1 345 814 9117 [email protected]

 

Julian Fletcher, Partner, Cayman Islands

+1 345 814 9122 [email protected]

 

Robert Duggan, Partner, Cayman Islands

Based in the London office

+44 20 7796 7622 [email protected]

 

Alex Last, Partner, Cayman Islands

Based in the Hong Kong office

+852 3995 5703 [email protected]

Hayden Isbister, Partner, Cayman Islands

+1 345 814 9125 [email protected]