If CIMA determines that a section 4(4) fund is (i) or is likely to become insolvent, (ii) carrying on its business fraudulently, (iii) winding up its business in a manner that is prejudicial to its investors or creditors, (iv) not in compliance with the Mutual Funds Law or the Anti-Money Laundering Regulations (Revised), (v) being managed in a manner which is not “fit and proper” or (vi) operated or managed by a person who is not “fit or proper” to hold the position of operator, manager or officer, CIMA may take various punitive actions; including, canceling the section 4(4) fund’s registration, imposing conditions on the fund, appointing a person to advise the fund on proper conduct and requiring removal and replacement of the promoter, directors, general partner or, manager of the fund. Any operator appointed by CIMA will have all the powers necessary to conduct the business and affairs of the fund in the best interests of the fund’s investors and creditors. The Grand Court may also grant CIMA authority to take such other action deemed necessary to protect the interests of the fund’s investors and creditors. CIMA may communicate directly with the investors of a section 4(4) fund. Costs associated with enforcement, including appointment of advisors and operators, are expenses of the section 4(4) fund. General Partners, managers and other operators are responsible for compliance by the section 4(4) fund with the Mutual Funds Law.
In addition to the requirements set out under the Mutual Funds Law, a section 4(4) fund is subject to the general regulatory oversight of CIMA which includes the requirement to comply with CIMA’s rules, statements of guidance, policies and procedures. Of note, section 4(4) funds must comply with the Statements of Guidance on Corporate Governance and Nature, accessibility and retention of records each of which can be accessed by clicking on the relevant link.