CAYMAN 2012 - HFMWeek

CAYMAN 2012
LEGAL
THE MASTER-FEEDER FUND STRUCTURE IS
POPULAR FOR DRAWING IN INVESTMENTS FROM
DIFFERENT JURISDICTIONS AND CONSOLIDATING
THEM IN ONE CENTRAL PLATFORM
”
thority may direct any promoter or operator of a regulated
mutual fund to provide information or an explanation
concerning the fund and to provide access to
records relating to the fund.
• Power to cancel or revoke a licence: The Authority
has the power to cancel the licence of, or de-register
a mutual fund.
• Miscellaneous powers: The Law gives the Authority
extensive powers in relation to any regulated mutual
fund which:
– is or is likely to become unable to meet its obligations
as they fall due; or
– is carrying on or attempting to carry on business or
is winding-up its business voluntarily in a manner that is
prejudicial to its investors or creditors; or
– in the case of a licensed mutual fund, is carrying on or
attempting to carry on business without complying with
any condition of its mutual fund licence; or
– has not been managed or directed in a fit and proper
manner; or
– has as a director, manager or officer, a person who is
not fit and proper to hold the respective position.
The Authority has additional remedial powers with respect
to mutual funds and mutual fund administrators, as
well as general duties and powers to regularly review the
mutual fund business in the Cayman Islands.
TRANSITION PERIOD
New master funds being established after 22 December
2011 fall within the new regulatory regime from the
outset and must register with the Authority before commencing
operations as a mutual fund. Existing funds that
fall within the definition of master fund were initially
granted until 21 March 2012 to comply with the registration
requirements; however, this period has now been
extended for an additional 60 days within which master
funds must comply. Notably, the obligation to file audited
financial statements will arise with respect to the 2012
fiscal year and onwards.
IMPLICATIONS
For most fund operators, the additional form MF4 and
the requirement to pay a modest fee will not be perceived
as particularly onerous. Indeed, the additional regulation
of the master fund by the Authority should not have any
practical implications for a well-run structure. Furthermore,
local auditors will already be appointed for regulated
feeder funds, so extending their remit to the master
fund should not be costly or onerous, particularly since
Cayman’s auditing community appears dedicated to
keeping this cost down.
Existing regulated feeder funds, having already filed
their offering documents with the Authority, will likely
need to amend such documents to reference the registration
and regulation of the master fund. In many cases,
this can be accomplished quickly and efficiently by filing
a supplement to the offering document. In other cases,
fund operators may prefer to use this opportunity to undertake
a thorough review and amendment of their offering
documents.
CONCLUSION
The change in the Law occasioned by the Amendment
Law is another example of the Cayman Islands’ commitment
to maintaining its position at the forefront of the
global funds industry, balancing calls for increased investor
protection without hampering investment managers
with excessive costs or over regulation. The Cayman Islands
remains committed to striking the right balance between
oversight and flexibility, an attitude that bodes well
for the continued health of its hedge fund sector.
This article is not intended to be a substitute for legal advice or
a legal opinion. It deals in broad terms only and is intended to
merely provide a brief overview and give general information.
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