In June 2011, the Cayman Islands Government announced a proposal to require registration of new and existing 'master funds' in a traditional 'master/feeder' structure. The relevant legislation was passed by the Legislative Assembly on 5 December 2011 and, as expected by Cayman industry professionals, the registration and ongoing reporting requirements are not onerous.
In a typical 'master/feeder' structure, most of the assets are held at the master fund level and the Cayman Islands authorities have sought to respond to suggestions from various international bodies to bring master funds under the aegis of the Cayman Islands Monetary Authority's (CIMA) regulatory framework.
Closed-ended funds and master funds that do not have Cayman Islands regulated feeder funds investing in them are not subject to the new registration requirements.
When does this take effect?
The legislation is currently awaiting approval by the Governor but is expected to come into effect before the end of 2011.
New master funds (ie those set up after the law comes into effect) will need to be registered straight away. Existing master funds will have 90 days from the commencement date of the legislation to make the necessary filing. This 90 day period might be extended, but we recommend that registration be done before the end of Q1 2012.
What needs to be done to register? There will be no requirement for a master fund to have an offering document but if a master fund does have an offering document, that will need to be filed with CIMA along with a form containing prescribed details (expected to be called an MF4 Form) and a registration fee of CI$2,500/US$3,048. For those that do not have an offering document, registration will be achieved simply by filing the MF4 Form and the registration fee. CIMA has not yet issued guidance on what prescribed details will need to be included in the MF4 Form, but we expect them to be similar to those that are required to be filed in relation to regulated feeder funds. We hope that CIMA will issue this guidance shortly.
What are a regulated master fund's ongoing obligations?
Each regulated master fund will be required to comply with the same filing requirements that currently apply to regulated feeder funds, (i) to pay an annual fee, (ii) to file audited financials and a Financial Annual Return with CIMA within six months of its financial year end and (iii) to notify CIMA of any changes to the prescribed details.
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