Update on CIMA Regulatory Measures
The Cayman Islands Monetary Authority (“CIMA”) recently released an updated Statement of Guidance on Corporate Governance (“SOG”) effective April 2023 and a new Rule on Corporate Governance (“Rule”) effective October 2023.
The main difference between a SOG and a Rule is that a SOG makes recommendations and allows transparency for how CIMA will assess regulatory measures. The SOG and Rule covers both regulated Mutual Funds and Private Funds.
New Regulatory Measures effective October 2023
Rule – Corporate Governance for Regulated Entities
Updated Regulatory Measure in Effect from April 2023
Statement of Guidance – Corporate Governance for Mutual Funds and Private Funds
The Statement of Guidance
What Should You be Considering for Your Governance Structure?
The governance structure of a regulated fund must be appropriate and suitable to enable effective oversight. The size, complexity, structure, nature of business, and risk profile of the fund are all factors that determine the adequacy and suitability of its governance framework. Factors determining the size, complexity, structure, nature of business, and risk profile of the operations of a regulated fund could include, but are not limited to assets under management, number of investors, complexity of the structure, nature of investment strategy, or nature of the operations. CIMA has confirmed they will take a proportionate approach on these matters.
CIMA defines the Operator of the Fund as the governing body of a mutual fund and a private fund such as the Board of Directors or Manager of the LLC.
- Operators should monitor and regular take steps to satisfy itself, that the regulated fund is conducting its affairs in accordance with all applicable acts, regulations, and regulatory measures of the Cayman Islands and the authority including those jurisdictions where the regulated fund may operate.
- Operators hold ultimate responsibility for effectively overseeing and supervising the fund's activities and affairs. Despite certain key functions (e.g., AML, investment management and administration) being outsourced, operators retain ultimate responsibility.
- Operators should regularly take steps to satisfy themselves that the regulated fund’s service provider is monitoring compliance with applicable acts, regulations, and regulatory measures and should request appropriate information.
- Operators should have a written conflicts of interest policy and should suitably identify, disclose, monitor, and manage all its conflicts of interest. This could be included in a fund’s offering document or could be a separate internal document.
- Operators must constitute an appropriate number of individuals with expertise and skill to be competent to operate the fund. An annual self-assessment of the operator board with this in mind is highly recommended.
- Operators must exercise independent judgement, act in the best interests of the fund for which they are responsible, and make relevant inquiries when issues arise within their scope of responsibility.
- Operators should communicate adequate information to the regulated fund’s investors, including any material changes to the fund.
- Operators are responsible for approving the appointment and removal of the fund’s service providers and for overseeing any outsourced functions. The Operators are responsible for ensuring that its investors and CIMA are notified of any material changes to these appointments.
- The Operators retain ultimate responsibility for functions delegated to service providers and should regularly monitor and supervise delegated functions.
- Operators must regularly monitor whether the investment manager is performing in accordance with the defined investment criteria, strategy, and restrictions established in a fund’s offering or constitutional documents, and should review and approve the fund’s financial results and audited financial statements.
- Operators should regularly monitor the regulated fund’s net asset valuation policy and whether the calculation of its net asset value is being calculated in accordance with the said policy.
- Operators should meet at least annually, or more frequently if required by the fund's size, complexity, structure, and risk profile. Operators should record in their meeting minutes all disclosed conflicts. Service providers should attend the meetings where needed.
- Operators must ensure that full, accurate, and clear written records are kept of their meetings and determinations.
When thinking about your governance structure and how to ensure compliance, it is important to ensure you have a Board of Directors in place that understands and is willing to take on the responsibility of the oversight functions (and that it is appropriately documented and written in the minutes). Apex Group can assist with our team of highly experienced Non-Executive Directors and Corporate Secretarial team.