CAYMAN ISLANDS Law and Practice Contributed by: Sailaja Alla, Matt Mulry, Maree Martin and James Mossetto, Appleby
Unless a mutual fund falls within one of the other categories described above, it must obtain a mutual fund licence, which involves a prior approval process requiring CIMA to be satisfied that the promoter is of sound reputation, and that the administration of the fund will be undertaken by persons with sufficient expertise and who are fit and proper to act in their respective positions. All licensed mutual funds must have a registered office in the Cayman Islands or, in the case of a unit trust, must have a locally licensed trustee. A limited investor fund, a registered mutual fund or an administered mutual fund can voluntarily choose Any Cayman Islands investment vehicle that issues equity interests and has a feeder fund regulated by CIMA investing in it must register as a master fund. The registration requirements are less onerous and do not require a master fund to file an offering document. The PFA A “private fund” is defined as a company, unit trust or partnership that offers or issues (or has issued) investment interests, the purpose or effect of which is the pooling of investor funds with the aim of ena - bling investors to receive profit or gains from such entity’s acquisition, holding, management or disposal of investments, where: • the holders of investment interests do not have day-to-day control over the acquisition, holding, management or disposal of the investments; and • the investments are managed as a whole by or on behalf of the operator of the private fund, directly or indirectly. As the definition of “private fund” is so broad, the PFA includes a list of “non-fund arrangements” that would not be considered private funds and that are therefore outside the scope of the PFA. A private fund must do the following (among other things). to be licensed. Master funds
• Have its accounts audited annually by an approved auditor, and signed off and filed by a local audi - tor with CIMA, within six months of its financial year end, along with an annual return in prescribed form. • Have appropriate and consistent valuation pro - cedures, to be carried out at a frequency that is appropriate to the assets held – and, in any event, at least annually. • Unless otherwise notified to CIMA (where it is nei - ther practical nor proportionate to appoint a cus - todian, having regard to the nature of the fund and the type of assets held), appoint a custodian to: (a) hold custodial fund assets in custody, in segre - gated accounts in the name or for the account of the fund; and (b) verify, based on information provided by the fund and available external information, that the fund holds title to any other fund assets, and maintain a record of those assets. • Monitor the cash flows of the fund, ensure that all cash has been booked in cash accounts opened in the name or for the account of the fund, and ensure that all payments made by investors to the fund in respect of investment interests have been received. • Maintain a record of the identification codes of the securities it trades and holds if the private fund regularly trades securities or holds them on a con - sistent basis. 2.3 Disclosure/Reporting Requirements The MFA Registered funds, administered funds and licensed funds are required to file an offering document with CIMA. The MFA requires such offering document to describe the equity interests in all material respects, and to contain such other information as is necessary to enable a prospective investor to make an informed decision as to whether or not to subscribe for such equity interests. In addition, CIMA has issued a Rule on Contents of Offering Documents – Regulated Mutual Funds, which sets out the information that must be included in offer - ing documents issued by mutual funds. Such informa - tion includes details regarding:
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