Alternative Investment Funds 2022: Cayman Islands

• Published date: 05 August 2022
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Financial Services, Fund Management/ REITs, Corporate and Company Law
• Law Firm: Maples Group
• Author: Mr Grant Dixon, Andrew Keast and Stephen Watler

1 Regulatory Framework

1.1 What legislation governs the establishment and operation of Alternative Investment Funds?

The Mutual Funds Act (As Revised) (the "MF Act") provides for the regulation of open-ended investment funds and mutual fund administrators. Responsibility for regulation under the MF Act rests with the Cayman Islands Monetary Authority ("CIMA").

The Private Funds Act (As Revised) (the "PF Act") provides for the regulation of closed-ended investment funds. Responsibility for regulation under the PF Act rests with CIMA.

In addition, the Retail Mutual Funds (Japan) Regulations (As Revised) (the "Japan Regulations") provide a regulatory regime for retail mutual funds that are marketed to the public in Japan

CIMA has also published rules and guidance regarding certain operational requirements for CIMA registered mutual funds and private funds, including in respect of the valuation of assets, safekeeping of fund assets, cash monitoring and identification of securities.

Although not Cayman Islands law, the broad scope and extra-territorial effect of the EU Directive on Alternative Investment Fund Managers ("AIFMD") will capture most types of Cayman Alternative Investment Funds, regardless of whether they are open-ended or closed-ended and regardless of their legal structure and investment strategy, with very few exceptions, to the extent that they are being marketed or managed in Europe (as such terms are defined for the purposes of the AIFMD). Legislation for AIFMD consistent regimes for Cayman Islands funds and their managers was introduced in 2019, which enable Cayman Islands AIFs and AIFMs to "opt in" to take full advantage of the AIFMD if and when the AIFMD passport is extended to the Cayman Islands. The legislation also contemplates a CIMA notification regime for CIMA licensed managers and any fund managed by a manager registered in an EU Member State or being marketed to investors in an EU Member State.

1.2 Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?

Generally, there is no local restriction on or regulation of a manager or adviser from another jurisdiction managing an Alternative Investment Fund established as a Cayman Islands vehicle. However, a manager or adviser which is itself established or, in the case of a foreign company, registered in the Cayman Islands and which conducts "securities investment business" ("SIB"), whether or not that securities...