The scope of regulatory requirements in the Cayman Islands has increased significantly in recent years and requires Cayman-domiciled entities to meet ongoing regulatory filing requirements, in addition to other obligations as set out by the regulatory...
There are six types of mutual funds and two types of private funds that are subject to regulation and supervision under the Mutual Funds Act (Revised) or the Private Funds Act, 2020, as amended (the “Private Funds Act”) by the Cayman Islands Monetary Authority (“CIMA”): -
1. Registered Mutual Funds
Streamlined registration procedures are available for mutual funds where:
- (i) the initial minimum equity interest purchasable by an investor is US$100,000; or
- (ii) whose equity interests are listed on an approved stock exchange such as the CSX.
Registration requires filing the appropriate forms with CIMA together with a copy of the current offering document, consent letters from the auditors and the administrators and payment of the registration fee.
Where the fund is not a registered mutual fund and is not excluded from regulation, it must either apply for a mutual fund licence or apply to be regulated as an administered mutual fund.
2. Licensed Mutual Funds
A mutual funds licence is suitable for retail funds with a large and reputable promoter who does not intend to appoint a Cayman Islands administrator. In order to obtain a mutual fund licence, the fund is required to: (i) file and keep on file with CIMA a current copy of the fund’s offering document;
- (ii) maintain a registered office in the Cayman Islands (or if a trust, a licensed trust company acting as trustee);
- (iii) appoint a reputable administrator which need not be a Cayman Islands administrator; and
- (iv) submit evidence to CIMA showing the soundness of the promoter, the expertise of the administrator and that the directors are fit and proper persons.
CIMA provides maintains principal supervisory oversight of the fund.
3. Administered Mutual Funds
To be regulated as an administered mutual fund, the fund must appoint a Cayman Islands licensed Mutual Fund Administrator to provide its principal office in the Cayman Islands.
Although a majority of the supervisory functions which are performed by CIMA for licensed mutual funds such as verifying the reputation and suitability of the promoter and the administrator and ensuring compliance with the Mutual Funds Act is carried out by the Cayman Islands administrator, CIMA maintains a general supervisory and enforcement role with respect to administered mutual funds.
4. Non-Cayman Islands Funds
Funds that are established or incorporated outside of the Cayman Islands but whose management or administration is provided in the Cayman Islands may be required to be registered with CIMA in the Cayman Islands. If a corporate mutual fund is subject to regulation under the Mutual Funds Act, it must first register as a foreign company under the Companies Act (as Revised) before it can be licensed or registered as a mutual fund.
5. Master Funds
Master funds of regulated feeder funds which issue equitable interests which are redeemable at the option of the feeder fund must register with CIMA in accordance with the Mutual Funds Act.
6. Limited Investor Funds
Open-ended funds with 15 or fewer investors who have the ability to appoint or remove the operator of the fund referred to as “limited investor funds” are required to register with CIMA in accordance with the Mutual Funds Act.
7. Private Funds
Closed-ended private funds which fall under the definition of “private fund” pursuant to the Private Funds Act are registered to register with CIMA. The Private Funds Act also provides for ‘alternative investment vehicles’ and ‘restricted scope private funds’.
8. Private Funds (Restricted Scope)
A restricted scope private fund is a private fund that is an exempted limited partnership that is managed or advised by a person who is licensed or registered by CIMA or authorised or registered by a recognised overseas regulatory authority and in which all of the investors are non-retail in nature, being either high net worth persons or sophisticated persons. Registration and ongoing requirements for this new category of funds are yet to be released.