completed underlying regulations, they were submitted to the
European Securities and Markets Authority (ESMA) in draft form
at the beginning of 2016 and in their opinion released in July 2016
they basically said they were hesitant to give us a full compliance
assessment until they knew that the regulations were final.
We took a few additional months to put some finishing touches on our
draft regulations and at the end of last year, December 16, both sets
of regulations were completed: the Mutual Funds (EU Connected
Fund AIFMD) Regulations, 2016 and the Securities Investment
Business (EU Connected Fund AIFMD) Regulations, 2016. They set
out the detail, the procedures and the substantive provisions of how
it’s all meant to work.
As far as we can see, we have a consistent AIFMD regime and
are now working on the two other bits ESMA noted in their July
2016 opinion that they would like the jurisdiction to complete. One
is the ability for CIMA to impose administrative fines for regulatory
breaches, which would, however, impact not just funds but also
every other regulated sector.
It’s going to require more than just the folks sitting at this table, it’s
everybody: bankers, insurance, the money services managers, the
trust companies are all going to have to take a look at the regulations,
and understand the procedure which CIMA will conduct in order to
impose an administrative fine.
I’m sure there will be lots of pleasant meetings to go over the
regulations before they get finalised. They’re not just being prepared
for the purpose of the AIFMD, they’re being prepared to enhance the
overall regulatory framework.
The last point was for us to have a macro prudential policy in place—
the ministry and CIMA are now looking to put in place at least an
initial framework for this. Hopefully that will suffice for AIFMD
purposes while we continue to develop it further over time. We
now await further contact from ESMA. We understand that every
jurisdiction that was in the second wave queue will continue to be
assessed. No-one has fallen behind.
Scott: With Brexit coming about, there’s significant uncertainty as to
what is actually going to happen with regard to extension of passports.
What we’re seeing in many cases is that investment managers outside
Europe who have access to the national private placement regimes
(NPPRs) are quite happy with the status quo. They’re able to access the
jurisdictions they’d like to market to and in many cases they find that
the additional oversight burden and cost would actually be far greater
if they have to move to an actual AIFMD passport regime and that
the current regime allows them to target the countries they have an
interest in efficiently and effectively with their current structures.
Ebanks: There is talk in the EU that the NPPR won’t last forever, so
if that really shuts down that’s more of a reason why Cayman has
to go out and try to get the passports for those who are interested
in European investors. If you have a fund that has no interest in
European investors it is business as usual, nothing has changed.
I agree that post the Brexit vote, people have taken a step back to
wonder whether they want the passport, but as a jurisdiction since
we’ve come this far we might as well finish the process so that
the product is there for those who need it, particularly if NPPRs are cut off.
Windsor: Any time there are changes in regulations, such as AIFMD,
it’s an opportunity for us as a jurisdiction and for service providers to
demonstrate how we add value to our investment managers.
The investment in terms of people, technology, resources and data
management is sometimes sizeable, but I sincerely believe that
there is definite added value to our clients and their investors, as
well as the jurisdiction.
MacKay: This is probably the single largest issue facing the
management community and will be for the next couple of years.
For managers who are managing US-based assets or non-EU assets
and looking for non-EU investment opportunities it is a non-issue
but increasingly more managers do have an exposure to a European
investor base or European investments. Some influential people have
warned London not to seek to become ‘the Singapore of Europe’;
don’t go for low tax, don’t go for tax-free aggregation vehicles, that
warning is pretty clear.
Cayman has a tremendous opportunity to attract an inflow not just of
additional capital to the jurisdiction through aggregation vehicles but to
attract managers to the jurisdiction. From the point of view of long-term
stability for the local economy getting more managers on the ground
here with functionality would be a huge step forward for us. We’re
working in an environment with some of the best and brightest minds
in the industry and it’s a natural place for the management community
to come; the more we can do from a government perspective, but also
from a regulatory perspective, to encourage that the better.
Cook: If nothing else it helps with perception, in that you’ve jumped
through all these hurdles and you’re at the same level as everybody
else, if not above.
Nicol: There are issues of perception and credibility, but the more
we are at the table and actively engaged the better our reputation
becomes. In terms of the smaller jurisdictions Cayman probably
stands out and I think that’s as a result of our engagement. Following
through with a lot of these initiatives—whether or not they are of
immediate direct benefit—is worthwhile because in the long term,
the reputational framework is much better.
“We’ve got a good process in
place, and a good partnership
with the government and
Cayman Finance.” Dan Allard
CAYMAN FUNDS | 2017