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Cayman Islands Government and CIMA announce plans for future regulation of Cayman Islands Master Funds

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The Cayman Islands government has announced a proposal to register "master funds" in a "master/feeder" structure. Registration will be with the Cayman Islands Monetary Authority (CIMA), the jurisdiction’s financial regulatory body. The proposal is subject to debate and approval by the Legislative Assembly of the Cayman Islands and no draft legislation has yet been presented.

 

It is expected that the registration obligation will apply only to "master funds" which already have an existing CIMA registered "feeder fund" as part of the structure. Therefore the procedure for registering the master fund is expected to be straightforward and there should be no onerous additional reporting requirements. Closed ended private equity funds will not be subject to this new regime.

The proposed fee for master fund registration is estimated to be USD1,500 per entity. There is currently no timetable for implementation of the new regulations, however, it is anticipated that CIMA will give funds a reasonable period in which to register existing master funds following implementation of the new policy.
As generally all of the assets of the fund structure are held at the master fund level, the authorities in the Cayman Islands considered it prudent to bring the master funds within their regulatory oversight. It was noted that whilst a number of reviews conducted post the financial crisis by various international bodies and regulatory authorities have been very positive on the Cayman Islands as a jurisdiction, it had been remarked that an area of potential improvement was to increase the regulatory status of these master funds.

This proposal is therefore aimed at plugging that small gap in the regulatory landscape of the jurisdiction.
The Cayman Islands is the world’s leading jurisdiction for hedge funds and continue to be at the forefront of developing appropriate regulation and governance policies in this area. Maples and Calder will issue a further update on the new regulations in due course.

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