Cayman Funds Update 2016

The Mutual Funds (EU Connected Fund (Alternative Investment Fund Managers Directive)) Regulations, 2016 and The Securities Investment Business (EU Connected Fund (Alternative Investment Managers Directive)) Regulations, 2016

The Mutual Funds (EU Connected Fund (Alternative Investment Fund Managers Directive)) Regulations, 2016 and The Securities Investment Business (EU Connected Fund (Alternative Investment Managers Directive)) Regulations, 2016 (together, the “AIFMD Regulations”) were published on 16 December 2016 and will come into force next year. The AIFMD Regulations are intended to provide a regulatory regime for “EU Connected Funds” which will be consistent with the regulatory requirements of the AIFMD and thus provide the basis for the Cayman Islands to be eligible for extension of the passport regime should passporting be extending by the European Securities and Markets Authority (“ESMA”) to non-EEA jurisdictions (i.e., “Third Countries”) which is being considered on a jurisdiction by jurisdiction bases. The concept of “EU Connected Funds” was introduced into Cayman Islands law pursuant to an amendment to the Mutual Funds Act last year and includes both open-ended and closed-ended funds which are either managed from or marketed in a member state of the EEA. Amendments to the Securities Investments Business Act in 2015 also provide similar changes to introduce the concept of an “EU Connected Manager”. The amendments to these laws provide an opt-in regime for funds which wish to be regulated as “EU Connected Funds”, and managers which wish to be regulated as “EU Connected Managers”, in accordance with standards consistent with the AIFMD and, in that regard, to extend the Cayman Islands Monetary Authority’s supervisory duties and powers to such EU Connected Funds and EU Connected Managers. The AIFMD Regulations provide the detailed regulatory requirements for those EU Connected Funds and EU Connected Managers that have opted-in to the regime including, for example that: EU Connected Funds will submit certain particulars to the Cayman Islands Monetary Authority (“CIMA”) (detailing, principally, the marketing of securities in relevant EEA member states) and notify CIMA of any changes to those particulars and when the marketing activity has ceased. As for EU Connected Managers the AIFMD Regulations generally mirror the requirements of the AIFMD. The implementation of the AIFMD Regulations will assist the Cayman Islands in its push for the extension of the passport regime to the Cayman Islands and ESMA has stated that it would complete its assessment of the Cayman Islands when the AIFMD Regulations and related actions had been implemented.

The Mutual Funds (Annual Returns) (Amendment) Regulations, 2016

The government has made amendments to the annual return fees for regulated mutual funds with the effect that whilst a regulated mutual fund is still required to pay a US$365.85 fee for filing the fund annual return (FAR) in respect of each financial year, a fund which has a large number of sub-funds – meaning 25 or more sub-funds – there will be an additional filing fee of US$9,146.34 and for this purpose “sub-fund”, of a regulated mutual fund, includes any or all of the following in the fund’s structure:

1. a segregated portfolio in a segregated portfolio company structure;
2. a sub-trust of a trust or in an umbrella or master unit trust structure; and
3. a class of shares, units or interests in a company, trust or partnership for which the fund maintains individually presented separate accounts.

The Companies (Amendment) Bill, 2016 and The Limited Liability Companies (Amendment) Bill, 2016

The Cayman Islands government has published The Companies (Amendment) Bill, 2016 and The Limited Liability Companies (Amendment) Bill, 2016 to provide a further period of public consultation on the proposed measures which will introduce a platform for establishing and maintaining a register of beneficial owners which may be searched by the designated competent authority in the Cayman Islands. The measures would provide access to company beneficial ownership registers by the competent authority designated by the Minister of Financial Services via a search platform to be established by that authority. Searches could only be performed in response to a request from a designated official in a jurisdiction that has entered into an agreement with the government to share beneficial ownership information or to a request from a specified law enforcement body if the request is in compliance with the legislation governing the affairs of such body. The proposed measures do not seek to establish a centralised public register of beneficial ownership information. We will be monitoring the developments of this legislation and will provide further updates in due course.