Cayman 2007 - HFMWeek

asia-pacific DIRECTORSHIP special SERVices report CAYMAN special report 2007Allison B. Nolan, managing director of Athena discusses the new key service providersfor hedge fundsInvestor comfortAllison B. Nolan is themanaging directorof Athena and leadsthe provision ofdirectorship servicesfor the company, withparticular emphasison services to theinvestment fundsindustry.From her background as a partner in aleading offshore law firm and her transactionmanagement experience, Allison hasdeveloped a wealth of expertise in the internationalfinancial services arena and has extensive knowledgeof the legal and regulatory framework in theCayman Islands and other offshore jurisdictions.This experience and her commercial approachmeans that she is able to offer an unparalleledexcellence of service as an independent director.Cayman’s dominanceThe Cayman Islands continue to maintain theirdominance in the offshore hedge fund world andan intrinsic part of this is the high quality of serviceproviders available to meet the needs of thisburgeoning industry. Legal and accounting firmsof the highest calibre have been entrenched inCayman for a number of years as have a growingnumber of fund administrators. However, thepast couple of years have seen the inaugurationof firms and individuals providing the service ofindependent directors to hedge funds and tooffshore investment management companies in anunprecedented spurt of growth in this field.The provision of independent non-executivedirectorship services is somewhat voluntarily regulatedin Cayman. If an individual acts as a directorfor a hedge fund, he or she does not have tobe licensed or regulated by the Cayman IslandsMonetary Authority (CIMA) just for providingthis service. However, under the Cayman IslandsCompanies Management Law, a firm providing theservices of independent directors can apply for aCompanies Management Licence to regulate theprovision of these services.The number of hedge funds has increased dramaticallyin the past three years but the number ofCompany Management Licences has also increasedand, assuming that a portion of these representdirectorship services rather than the provision ofregistered office/corporate maintenance services,this growth shows the importance that hedge fundmanagers are now placing on this role.So, who are these independent directors andwhy the increase in demand for this service?One of the most interesting aspects is theprestigious nature of the individuals comingforward. From backgrounds in fund managementand administration, legal, accounting and otherrelevant spheres, the latest professional independentdirectors are very much a force to be reckonedwith. These director service providers have comefrom high level positions from managing directorsof Cayman Banks to the former chief Caymanregulator in the industry, the former head ofCIMA’s Investment Services Division. The ‘raisingof the bar’ in the standard of professionalsproviding this service is extremely encouraging andadds credence to the role of independent director.Increasing awarenessThe increase in demand is partly fuelled by a risingawareness of the issues involved in soundcorporate governance rather than the traditionalrationale behind appointing a non-executive funddirector – such as tax issues. In practical terms,independent non-executive directors are custodiansof the governance process in a hedge fund.The US has adopted a legislative approach tocorporate governance which is reflected in theSarbanes-Oxley legislation and new listing rulesand which looks to achieve greater transparencyand a larger degree of independence in the compositionof the board of directors. This has filteredthrough to the US fund managers who select themembers of the board of an offshore fund.The UK has a relatively advanced approach tocorporate governance in comparison to manyjurisdictions and issues of accountability andtransparency have been evolving for over adecade. Similarly, the importance of sound corporategovernance has been recognised in the CaymanIslands for many years and applied byprofessionals in the Cayman hedge fund industry.Collectively as the hedge fund industry becomesmore sophisticated, the expectations on nonexecutivedirectors have risen and there is a greaterwww.hfmweek.com HFMWEEK | 45