Master Fund Registration Amendments to the Cayman Islands Mutual Funds Law
INVESTMENT INDUSTRY INSIGHTS |
In June 2011, the Cayman Islands government announced its intention to amend the Mutual Funds Law (2009 Revision) (the "Mutual Funds Law") to introduce legislation requiring Cayman Islands master funds whose structure include one or more regulated feeder funds to register with the Cayman Islands Monetary Authority ("CIMA").
Following consultation by CIMA with industry experts, the Mutual Funds (Amendment) Bill 2011 (the "Amendment") was passed by the Legislative Assembly on Dec. 5, 2011 and became law on Dec. 22, 2011.
Effective Date and Time Lines
The Amendment requires that all new master funds be subject to the registration requirements prior to commencement of trading. Existing master funds (who commenced trading prior to Dec. 22, 2011) have a period of 90 days from the enactment of the Amendment to comply with the new provisions, up to March 21, 2012. There is opportunity for a short extension of this deadline for existing master funds caught by the amendment for a period not exceeding 60 days.
The 90 day extension therefore allows existing Master Funds to avoid immediate registration in 2011, thereby not incurring 2011 license fees as well as the local auditor sign-off requirement for the Dec. 31, 2011 audit cycle period end.
Definition of a Cayman Islands Master Fund
The Amendment applies to a "mutual fund that is incorporated or established in the islands that holds investments and conducts trading activities and has one or more regulated feeder funds."
A regulated feeder fund is defined as a "regulated mutual fund that conducts more than 51% of its investing through another mutual fund."
Not all master funds in Cayman will be affected by the Amendment. In essence, the legislation will apply to master funds that:
- Are domiciled in the Cayman Islands
- Issue equity interest redeemable at the option of the investors
- Have as shareholders at least one or more feeder funds which are registered with CIMA
Master Fund Registration Requirements and Obligations
In order to register with CIMA a master fund will be required to:
- Submit a registration form to provide CIMA with the prescribed details with respect to the master fund. This form is expected to be called MF4 upon release by CIMA.
- File the master fund's certificate of incorporation (or equivalent).
- Payment of an annual registration fee of CI$2,500 (US$3,048.79).
- File annual audited financial statements signed off by a CIMA approved auditor and a FAR Form within 6 months of the financial year end.
Impact on Audit of the Amendments to the Cayman Islands Mutual Funds Law regarding Master Fund Registration
For the purpose of the new legislation, existing master funds are required to appoint an auditor approved by CIMA.
Master funds currently audited by an overseas affiliate of the Cayman regulated feeder funds are expected to appoint the same auditor as the regulated feeder fund.
Newly registered master funds - funds launched from December 2011 onwards, will become subject to the obligation to file audited financial statements with CIMA at the completion of the next audit cycle.
For more information on RSM Cayman or Cayman Master Fund Registration Requirements and Obligations, please contact Alex Bodden, Assurance and Managing Partner, 345.743.3011, or your local RSM financial services representative.