CAYMAN 2012 - HFMWeek

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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. 50 HFMWEEK.COM
For Audit, Tax and Advisory Services in the Cayman Islands Turn to the Professionals Serving Cayman Mutual Funds, Captive Insurance Companies, Banks and Trusts > Comprehensive Audit and Tax Services > Advisory Services, including Regulatory and Compliance Consulting Ben Leung, Managing Director bleung@pkfcayman.com PKF (Cayman) Ltd. Century Yard, Cricket Square 171 Elgin Avenue, George Town, CI P.O. Box 1782, Grand Cayman, KY1-1109 345-945-5889 | www.pkfcayman.com A Division of EisnerAmper LLP PKF Cayman is affiliated with EisnerAmper (Cayman) Ltd. providing audit, NAV calculation, tax and advisory services to Cayman Island Mutual Funds. PKF Cayman and EisnerAmper (Cayman) Ltd. are independent members of PKF International.
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