“A one-stop shop solution ensures that managers and financial institutions have the resources and expertise necessary to adhere to the necessary standards of corporate governance and address ongoing compliance requirements.” Ramona Bowry is head of Maples Fiduciary’s in-house operational due diligence (ODD) service offering. She can be contacted at: ramona. email@example.com Michael Richardson is a partner in the investment funds group at Maples and Calder in the Cayman Islands. He can be contacted at: firstname.lastname@example.org Anna Goubault is an associate in the investment funds group at Maples and Calder in the Cayman Islands. She can be contacted at: email@example.com master/feeder structure where there is independent oversight at the feeder level but not at the master level which is controlled by the investment manager and where the investment and the majority of other crucial decisions will be made. As a result, investors have specifically stated that they want an advisory board in place. While not yet commonplace, it does indicate recognition by investors and managers of the existence of asymmetry between onshore and offshore fund structures and a desire to rebalance it. It will be of great interest to see whether the advent of the forthcoming Cayman LLC structure will result in an increase in the establishment of advisory committees. In an effort to further mitigate conflicts and increase the independence of boards, there has been a strong preference from some investors for split boards comprised of individual directors from different fiduciary service providers. While the risk of groupthink is present, each of the directors on a fund board is well aware of his or her fiduciary duty and the requirement on each of them individually to apply themselves to the issues at hand. Thus it is more important to seek to establish a well-balanced board of directors with varying and complementary skillsets who can provide appropriate guidance and oversight into the operational functions of the fund’s business and affairs. The institutionalisation of the industry post-financial crisis has driven demand for enhanced due diligence on boards. This has led to the prevalence of more detailed due diligence questionnaires and on-site visits to understand who is responsible for governance of the fund. It also ensures that all stakeholders have a clear understanding of what investors expect from the board and how they can work with the fund manager and service providers to best meet their needs. Similarly, directors are seeking to gain a better understanding of a fund’s infrastructure and processes to enhance their level of oversight. In response, Maples Fiduciary established a dedicated operational due diligence function to provide the board with an objective evaluation of a fund manager, key service providers and the fund’s overall operations to assist the firm’s individual directors in fulfilling their duties. Not only does this help mitigate risk at the director level but also provides a value-added, no-fee service to promote and distil best practices and sets a new standard for the industry. Adapting to regulatory change The spate of new regulations in recent years has, unsurprisingly, had a significant impact on the way investment funds operate. As a result, managers and institutions have demonstrated a strong preference for outsourced solutions. In turn, service providers have morphed from solely offering specific services to seeking to understand and assess their clients’ needs and to provide bespoke solutions for them. The Maples group now offers comprehensive regulatory and compliance solutions to the European Alternative Investment Fund Managers Directive, the US Foreign Account Tax Compliance Act, Volker Rule, commodity pool operator and anti-money laundering requirements, among others. Maples and Calder has been at the forefront of advising on regulatory developments and is one of the only offshore law firms to have a dedicated regulatory financial services group. In addition to providing general governance solutions, Maples Fiduciary has taken an active role in establishing best practice policies and procedures around structuring and entity setup and working with managers and institutions on implementation to ensure they are meeting their obligations and complying with all relevant regulatory 56 CAYMAN FUNDS | 2016 requirements. For example, many boards of funds now require much more secretarial support in organising board meetings with proper materials to demonstrate good governance practices and oversight. While regulation has certainly prompted action in the industry, it is yet to be determined what the overall impact will be and the Maples group remains well placed to assist its clients in meeting the ongoing challenges the evolving regulatory environment presents. Providing a one-stop shop solution ensures that managers and financial institutions have the resources and expertise necessary to adhere to the necessary standards of corporate governance and address ongoing compliance requirements. Conclusion Following the global trend of institutionalisation and adapting its regulatory and legal system to meet the demands of the financial sector, the Cayman Islands continues to be the pre-eminent jurisdiction for the offshore alternative investment funds industry. The jurisdiction is recognised for its established reputation for attentiveness and responsiveness to developing international trends and commitment to high standards of professionalism and client service and continues to evolve to ensure it meets the requirements of governmental and regulatory authorities, as well as financial sector participants. As the demand for an inexpensive, tax-neutral and secure method of pooling capital from multiple jurisdictions, and of transmitting that capital to where it can best be employed, continues to grow, the Cayman Islands will be well placed to maintain its position as the premier jurisdiction for offshore investment funds and will undoubtedly solidify its role as a pre-eminent international financial centre in 2016 and beyond.
Cayman Funds 2016
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