CAYMAN ISLANDS Law and Practice Contributed by: Christie Walton, Patrick Rosenfeld and Philip Dickinson, Maples Group
risks and enabling investors to receive profits or gains from investments. Mutual funds that issue debt are excluded from regulation, even if the bonds or notes are convertible or have warrants attached. There are four types of regulated mutual funds. • The “licensed mutual fund” – A fund may obtain a licence from CIMA if CIMA consid - ers that each promoter is of sound reputation, that the administration of the fund will be undertaken by persons who have sufficient expertise and are fit and proper to be direc - tors (or, as the case may be, managers or officers in their respective positions), and that the business of the fund will be carried out in a proper way. The licensing process can take a few months and a fund must not com - mence operations until the licence has been granted. No regulatory minimum initial invest - ment amount applies to this type of fund. • The “administered mutual fund” – These funds are required to designate a principal office in the Cayman Islands at the office of a licensed mutual fund administrator (MFA). Instead of CIMA doing so, it is the MFA that is required to be satisfied that the promoter is of sound reputation, that the administration of the fund will be undertaken by persons who have sufficient expertise to administer the fund and are of sound reputation, and that the business of the mutual fund and the offer of equity interests will be carried out in a proper way. No regulatory minimum initial investment amount applies to this type of fund. • The “registered mutual fund” –This type of fund is not subject to licensing, nor is it required to have a principal office provided by an MFA. However, it must have either (i) a minimum initial investment amount of at least KYD80,000 (or its equivalent in another
currency) per investor, thus making it suit - able only for sophisticated investors, or (ii) its equity interests listed on a recognised stock exchange, making it therefore subject to addi - tional regulation by such stock exchange. • The “limited investor fund” – This type of fund must have no more than 15 investors, who must be capable of appointing and remov - ing the operator(s). Prior to the admission of a sixteenth investor, a limited investor fund will be required to re-register with CIMA under one of the other heads of regulation described above. Unlike a registered mutual fund, a limited investor fund is not subject to any minimum initial investment amount. A “master fund” is defined under the Mutual Funds Act as a company, partnership or unit trust (established or registered in the Cayman Islands) that issues equity interests that are redeemable at the option of the holder to one or more investors, one of which must be another fund regulated by CIMA that conducts more than 51% of its investing in the “master fund” direct - ly or indirectly (a “regulated feeder fund”). The “master fund” must hold investments or con - duct trading activities for the principal purpose of implementing the overall investment strategy of the regulated feeder fund. Each fund that falls within the definition of a “master fund” is required to register as a “master fund” under the registered mutual fund category and is subject to the same minimum initial investment amount as a registered mutual fund. All mutual funds regulated by CIMA (other than “master funds”) are required to file offering docu - ments or a summary of terms upon registration, and they must notify CIMA within 21 days of any material changes to service providers or the terms of the offering. In addition, all CIMA-reg - ulated mutual funds must file audited accounts
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