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On Friday, 7 February 2020, the Private Funds Law (PFL) went into force in the Cayman Islands, introducing new requirements for Private Funds to register with the Cayman Islands Monetary Authority (CIMA or the Authority).
Such funds will also be subject to supervision by CIMA and will need to comply with various governance and filing requirements. The initial transitional period for registration and compliance with the PFL will last until Friday, 7 August 2020.
Both private funds incorporated or established in the Cayman Islands and those seeking commitments from Cayman investors are in scope. A private fund is defined as a company, unit trust or partnership whose principal business is:
The following entities are excluded from the scope of the PFL:
CIMA has included a sub-category of private funds called restricted scope private funds.
These are defined as a private fund under the below conditions:
Section 2 of the Securities Investment Business Law (SIBL) defines a "sophisticated person" as a person who:
An application for registration, along with a US $366 (CI$300) fee, must be submitted within 21 days after acceptance of capital commitments (for the purpose of investments) from investors.
Registration access is limited to CIMA’s REEFS portal and requires the following documents:
The below table shows some of the main requirements of private funds.
Specific requirements surrounding these funds have not yet been published by CIMA. It is expected that guidance will be issued shortly after which an update to this commentary will be provided.
Requirement | Detail |
Annual audits | All audited financial statements require a Cayman Islands auditor’s sign-off and must be submitted to CIMA within six months of fund financial year end. A list of CIMA approved auditors is in the “useful links” section. |
Annual returns | Submission to CIMA of a Fund Annual Return (FAR) within six months of a private fund financial year end. |
Annual fee | US $4,268 (CI$3,500) and US $305 (CI$250) for each alternative investment vehicle setup, up to a maximum of 25 vehicles. Annual fee for 2020 will be waived if the registration application is submitted before Friday, 7 August 2020; first annual registration fee falling due thereafter in January 2021. |
Valuations | Funds must have appropriate and consistent valuation procedures. Assets must be valued at least annually. Valuations to be carried out by:
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Cash monitoring | Appointment of a monitor to verify fund cash flows. Those qualified for this obligation can be:
N.B. to the extent the manager/operator choses to fulfil this role, potential conflicts of interest must be identified, managed, monitored and disclosed to investors. |
Safekeeping of assets (Custodial Assets) | Appointment of a custodian to:
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Safekeeping of assets (Other Assets) | Where the private fund notifies that it is neither practical nor proportionate to appoint a custodian, having regarded the nature of the private fund and the type of asset it holds, the private fund shall appoint the following:
N.B. As with cash monitoring, the manager or operator can act as safekeeper provided title verification function is independent from the portfolio management function; potential conflicts of interest must be properly identified, managed, monitored and disclosed to the investors of the private fund. |
It must be noted that such requirements shall not apply to an alternative investment vehicle, which is defined as a company, unit trust, partnership or other similar vehicle:
Through the acquisition of Inbhear, a leading CIMA licenced Cayman fund services business, SANNE now offers a fully integrated ‘one-stop-shop’ solution in an ever-changing Cayman environment. This acquisition will further enhance our ability to deliver fully integrated solutions to our clients, continuing the SANNE tradition of providing services which add value to our clients' offerings and building partnerships over the long term.
Our newly placed office ensures local capability and on-site expertise to assist you in dealing with your requirements under the PFL. Please do not hesitate to contact your relationship manager or one of our experts below to discuss how we can help prepare your fund entities for these changes in regulation.
[1] Full list provided in Appendix 1
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