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Cayman Funds 2016

CAYMAN MANAGEMENT “There are more and more formal governance standards for all regulated entities including a growing number of guidelines and CAYMAN FUNDS | 2016 45 rules around how they should operate.” the Cayman Islands Monetary Authority (CIMA), after industry-wide consultation, to decide on the exact nature of any new legislation or regulation impacting the funds sector, says Roberts, but he anticipates that pressure will continue for greater accountability and transparency in a number of areas, requiring the directors of regulated entities to demonstrate a full understanding and performance of their responsibilities in these areas. He adds that he would understand if CIMA were to push for at least one person to be appointed as the responsible Cayman director for each regulated entity. “There are more and more formal governance standards for all regulated entities, including a growing number of guidelines and rules around how they should operate. You can imagine the benefi t for CIMA in having at least one person in the jurisdiction who is expected to have full knowledge of all operations of any regulated entity about which they may have a query or concern. “CIMA needs to be able to exercise its regulatory responsibilities and you can imagine that it could be diffi cult if the only contact in Cayman was the registered offi ce service provider.” Director data Roberts stresses that he is not aware of CIMA having indicated that this specifi c proposal is on its agenda as yet, but it will inevitably be part of a number of measures the regulator could look to consider, following on the heels of the introduction of the Directors Registration and Licensing Law last year. Now that CIMA has the means to gather data on the activities of directors of regulated entities, CIMA is no doubt pondering how that information might best be put to use. Two possible uses of that information are triggering debate in Cayman, the fi rst being the creation of a publicly searchable database that would allow anyone to check on the list of directorships of any director of a regulated entity, the second being to place some form of cap on the number of directorships an individual could have. Some sceptics have suggested that a public database could be abused by aggressive competition trying to ‘poach’ each other’s clients. Others have expressed the view that it would be wrong to put any form of cap on the number of directorships any one person should hold, appreciating that the time commitment in properly servicing director responsibilities will vary greatly dependent upon the type and complexity of each entity in question. Roberts says he has no objection to the public database but agrees that any sort of cap would likely serve little purpose, preferring instead to leave it to investors and professional users of Cayman funds to decide what is acceptable. “Personally, I don’t mind the world knowing how many directorships I have and what I am a director of, although I understand the arguments put up by those who oppose such a move,” Roberts says. “In terms of setting a number, that is more diffi cult. If you have a special relationship with a fi nance house with multiple identical ‘cookie cutter’ type funds, you can represent a lot more than if you were a director of larger, disparate funds, which require a lot more time and take more responsibility. “That being said, there is a limit beyond which, even with support, you cannot pay close attention, but it is very diffi cult to measure such a number and so this should perhaps best be left to interested parties such as investors to determine.” Finding middle ground Roberts says there are compromises. The regulator could simply mandate that directors must make relevant information available to investors when asked. He stresses that most directors would do this automatically but he has heard of instances where requests for directorship information have been refused. He says that some investors, notably the larger institutional investors, are taking a keener interest in all aspects of corporate governance. An international group representing institutional investors in Cayman funds visited Cayman in recent years and although they did not expect or seek an increased level of regulation they wished to see, among other things, increased disclosure by directors of funds. “Many investors are working to much more stringent standards and they have a whole slew of questions for the directors and the investment manager. They are very interested in the ability of individuals to do their jobs,” he says. “Personally, I think that there need be no secrets. If someone asks you for relevant information, you should be able to release it and the director service agreement should make specifi c provision for this, avoiding claims of potential breach of confi dentiality. It is a reasonable expectation on the part of the investor.” Roberts believes that there will be no knee-jerk reaction to any of these issues. A government-sponsored working group is actively considering the adequacy of the Cayman legal and regulatory regime in line with Financial Action Task Force guidelines, which include a wide range of topics in anticipation of various international assessments of the Cayman Islands regulatory regime in 2017 “These issues are not necessarily negative criticisms of Cayman but just part of the move towards increasing transparency and a need for everincreasing substance. It would not stop investments coming here but it would make governance better and easier to control and demonstrate. “I expect there will be more onus on directors to ensure a range of things, including the proper operation of all service agreements. One way or another, I can see the role of Cayman directors becoming increasingly key to the ongoing success of all regulated entities. “Cayman remains the primary offshore jurisdiction for fund registrations and—with the anticipated EU Alternative Investment Fund Managers Directive (AIFMD) approvals in the coming months—this will continue, with the government also solidly aligned and fully supportive.” David Roberts is the managing director of Cayman Management. He can be contacted at: droberts@caymanmangement.ky


Cayman Funds 2016
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