CAYMAN 2012 - HFMWeek

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CAYMAN 2012 FINANCIAL SERVICES SOME COMMENTATORS SAY IF THE SYSTEM IS NOT BROKEN, THEN NO ATTEMPT SHOULD BE MADE TO FIX IT ” For the aforementioned reasons and due to stakeholder concerns, the purported mass model is inappropriate for Cayman directorship service providers. Instead, the more thorough, corporate governance rich approach adopted by Alric Lindsay is the appropriate method to follow. If such a yardstick was adopted by all Cayman service providers, it could lead to a further strengthening of the Cayman Islands as a global hedge fund hub. WORKING ON CAYMAN’S CURRENT IMAGE Some commentators say if the system is not broken, then no attempt should be made to fix it. However, the summer 2011 judgment in the Cayman Weavering case was a reminder to stakeholders of the importance of having good corporate governance practices in place and that directors may be subject to liability where they fail to properly discharge their duties to a Cayman fund. While the persons in that case were not Cayman resident directors and it is unclear what director model was employed by the directors, the lessons are still generally applicable to all persons who act as directors on Cayman funds. The message is also being emphasised by Cayman regulators. Speaking at the Campbells Fund Focus Conference in November 2011, Langston Sibblies, QC JP, deputy managing director and General Counsel for the Cayman Islands Monetary Authority (CIMA) stated the following: 1. “CIMA has been conducting a detailed review of the regulatory framework for corporate governance.” 2. “We have been examining areas such as: the ‘fit and proper’ framework, how directors exercise their responsibilities, the extent to which legislation codifies these responsibilities and issues of transparency.” 3. “We have...taken into account the recent enhancement of international standards and requirements that are being promoted.” 4. “It is anticipated that there will be some adjustments to the regulatory framework as a result of this work. We expect that these will begin to be rolled out by 2012 after the necessary consultative and government review process.” 5. “One of the initiatives in the pipeline relates to CIMA’s Statement of Guidance (SOG) on Corporate Governance. The SOG currently applies to licensed entities including licensed funds. We shortly expect to begin industry consultation on a proposal to formally extend the SOG to registered entities, which would include registered funds.” Adding to this discourse, Yolanda McCoy, head of the Investments and Securities Division at CIMA, highlighted that “the role and responsibilities of the board of directors and the number of directorships one person holds are undoubtedly key issues for careful deliberation.” She also indicated there were “other issues such as the fitness and propriety framework… a director’s disqualification regime… issues of transparency and public disclosure… and enforcement action for non-compliance of a director’s fiduciary and regulatory obligations must also be examined...” The statements by Cayman regulators cannot be ignored; their focus on the strengthening of regulation and corporate governance standards will inevitably lead to the elimination of weak governance models practiced by some directors. Those who do not wish to comply may be penalised under the terms of new regulations or legislation. A NEW REGIME The introduction of tough penalties should lead Cayman director service providers to adopt even more robust corporate governance models. Evidence of the transition will be the expansion of risk-based, ‘executive’ type approaches. The move will require directors to know more about the hedge funds on whose boards they sit and to increase oversight of administrators, investment managers and other service providers. This new regime means the ‘mass model’ can no longer be maintained. The risk is too high for a hedge fund and for the jurisdiction in the event that the hedge fund fails because a director is unable to understand or follow the strategies of hundreds of funds on whose boards he sits. The next sweeping change for regulators must therefore be a reduction of the mass director appointments held by some persons. Upon inspection, investors will note that Alric Lindsay’s superior model stands apart from other service providers. It is built on international standards, it makes directors accountable to the fund and regulators, directors are required to make continuous adjustments to meet industry best practices, transparency is promoted and, overall, the model fosters investor protection. n 24 HFMWEEK.COM
Until you have the competitive edge you deserve. It’s not our leading-edge technology platforms that will give you the edge. (Although obviously they’ll help.) Nor is it our fifty years of experience. (Although that too is pretty important.) So is it our extensive expertise in asset servicing No. It’s none of these things. It’s one thing. Our commitment to relationships. At UBS, we listen. And we listen hard. You may manage traditional or alternative investments. Your needs may be simple or complex. But no one will work harder, shoulder to shoulder, to find a solution. No one will give you a more competitive edge. Enough of our words. We want to hear yours. E-mail us at fundservices@ubs.com or go to www.ubs.com/fundservices Top rated 2009–2011 in Global Custodian Hedge Fund Administration Survey We will not rest © UBS 2012. All rights reserved.
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