MOURANT OZANNES “Because the funds are not CIMA-registered, there will be no annual requirement to fi le audited fi nancial statements with CIMA or to fi le fund annual returns.” Jennifer Parsons is Counsel with Mourant Ozannes. She can be contacted at: firstname.lastname@example.org CAYMAN FUNDS | 2016 47 One must also consider ongoing compliance requirements for CIMA-registered funds. Under the Mutual Funds Law, a fund is required to fi le any material updates to its offering document and the prescribed details within the Form MF that it fi led on registration. In each case, these fi lings must be made within 21 days of the updates and separate fi ling fees are levied by CIMA for each type of fi ling. Rules for directors A further consideration in the case of funds that are companies is director registration and licensing. The Director Registration and Licensing Law (DRLL) requires any director that serves on a CIMA-registered company (be it a fund or a company caught under the Securities Investment Business Law) to register with CIMA. Professional directors serving on many CIMA-registered funds must be licensed under the DRLL. Frequently the board composition of a fund will include a director who is affi liated with the investment manager sponsoring and/or advising the fund. The introduction of the DRLL in June 2014 added another layer of compliance complexity, especially for these persons. While certainly persons who act as professional directors might expect a measure of regulation by CIMA in the jurisdiction in which they principally operate, the new regime proved especially challenging for those more ‘‘incidental directors’’, serving in such capacity incidental to their affi liation with an investment manager. CIMA fees apply on registration and annually as well as on the surrender of registration (resignation as a director or termination of the company). For CIMA-registered companies, registration must also be undertaken prior to appointment of any director as a director, or penalties may be levied under the DRLL. For a 4(4) fund, these director registration fees are effectively deferred until such time as the company CIMA registers. Registration of directors would then be undertaken concurrently with CIMA registration of the company. It is also noteworthy that a 4(4) fund technically falls outside the reach of the Statement of Guidance on Corporate Governance Shutterstock / Huguette Roe (SOG) issued by CIMA. The SOG applies to ‘‘regulated funds’’ and is intended to provide such funds with a framework for sound and prudent governance. Although most of the prescriptive measures within the SOG represent best practices, on its introduction in January 2014, some smaller funds and those with solely managerbased operators expressed concern regarding the recommendation to hold at least two annual board meetings and for rigorous recordkeeping to be maintained in connection with such meetings. Although 4(4) funds fall outside the ambit of regulated funds, it is diffi cult to see how their investors would not benefi t from sound corporate governance, so in most cases adherence to the SOG guidelines is still recommended and warranted. The cost savings associated with the foregoing deferrals can be signifi cant over the life of a fund. In the case of a fund that takes several years to reach, or perhaps never reaches, 15 investors it is impossible to argue with the math. There is also the undeniable lessening of what is perceived as an ever-increasing regulatory burden. Alternative structuring arrangements are certainly gaining attention in recent years as managers look to fi nd ways to lower entry costs and deliver cost savings to investors. While for some managers the possible savings associated with deferring CIMA registration may be short-lived and therefore not warranted, for others it can mean the difference in launching or not. It is therefore important to carefully assess the circumstances of a fund when fi rst structuring to ensure the best outcome for the fund and its investors.
Cayman Funds 2016
To see the actual publication please follow the link above