New Cayman Islands private funds law enhances opportunities for depositories
26 May 2020 Cayman Islands
Image: MattMurph/Shutterstock
The Cayman Islands Private Funds Law 2020 is set to extend the oversight role played by depositories for many Cayman investment funds, according to INDOS Financial, the independent depositary and oversight group.
The law commenced earlier this year on 7 February but will apply to all existing funds from 7 August.
INDOS Financial’s CEO Bill Prew noted that these new requirements are based on similar rules within the European AIFMD (Alternative Investment Fund Managers Directive) where they are required to be performed by a fund depositary.
The new law requires closed-ended investment funds domiciled in the Cayman Islands to register with the Cayman Islands Monetary Authority (CIMA) and to comply with a number of new operating requirements.
INDOS Financial explained that the new requirements include the implementation of appropriate and consistent valuation procedures, arranging custody of custodial assets, and verification of ownership and title of all other assets.
Additionally, monitoring cash flows including the checking of cash accounts and receipt of investor contributions is also listed in the new requirements.
According to Prew, while the Cayman Islands Private Funds Law permits these functions to be carried out by managers, they should be carried out independently of the investment management process and conflicts of interest need to be properly identified, managed, monitored and disclosed to investors.
“We expect many managers will choose to outsource these obligations to third parties that have a track record in this area,” Prew highlighted.
Prew added: “Many managers of Cayman funds that are marketed in Europe will be familiar with these requirements. INDOS already provides similar services for over 100 Cayman funds across a range of strategies and that are managed by European, US and Asian managers. We are therefore well placed to enable managers to meet these new requirements.”
The law commenced earlier this year on 7 February but will apply to all existing funds from 7 August.
INDOS Financial’s CEO Bill Prew noted that these new requirements are based on similar rules within the European AIFMD (Alternative Investment Fund Managers Directive) where they are required to be performed by a fund depositary.
The new law requires closed-ended investment funds domiciled in the Cayman Islands to register with the Cayman Islands Monetary Authority (CIMA) and to comply with a number of new operating requirements.
INDOS Financial explained that the new requirements include the implementation of appropriate and consistent valuation procedures, arranging custody of custodial assets, and verification of ownership and title of all other assets.
Additionally, monitoring cash flows including the checking of cash accounts and receipt of investor contributions is also listed in the new requirements.
According to Prew, while the Cayman Islands Private Funds Law permits these functions to be carried out by managers, they should be carried out independently of the investment management process and conflicts of interest need to be properly identified, managed, monitored and disclosed to investors.
“We expect many managers will choose to outsource these obligations to third parties that have a track record in this area,” Prew highlighted.
Prew added: “Many managers of Cayman funds that are marketed in Europe will be familiar with these requirements. INDOS already provides similar services for over 100 Cayman funds across a range of strategies and that are managed by European, US and Asian managers. We are therefore well placed to enable managers to meet these new requirements.”
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