Laven Partners, the consultancy on issues such as offshore financial issues, set out what it sees as the most important parts of the new guidance from the Cayman Islands’ financial regulator to the funds sector.

Laven Partners, the consultancy on issues such as offshore financial issues, set out what it sees as the most important parts of the new guidance from the Cayman Islands’ financial regulator to the funds sector. Meanwhile, it said recent developments are unlikely to hurt the Caribbean jurisdiction’s financial services business.

The firm issued a commentary on guidance issued in December last year by the Cayman Islands Monetary Authority, after the organisation consulted industry figures. CIMA’s guidance is targeted at managers, general partners, trustees and board of directors of Cayman mutual funds - a definition including hedge funds. The guidance became effective from 13 January.

Main principles in the guidance include oversight functions of the board of directors or the general partner, who must ensure that the fund or the fund’s service providers comply with applicable rules. This verification must be done on an ongoing basis based on reporting from the service providers, and the governing body must act to rectify any potential breach.

The document – only nine pages long, which is short in this industry – does not set out a prescriptive set of rules and does not claim to cover everything that a governing body does. Governing bodies, Laven Partners said, are expected to exercise their own judgment in determining the extent to which the SOG’s stipulated principles would apply, taking into consideration the size, nature and complexity of the fund and factoring in elements such as the assets under management, number of investors, nature of investment strategy and operations.

Among the requirements are that governing bodies must meet at least twice a year, or more often should the size, nature and complexity require, in person, via telephone or by video conference call; identify, disclose, monitor and manage all conflicts of interest, and ensure that offering documents contain sufficient information to enable prospective investors to make informed investment decisions.

This development happened around the same time that the Cayman Islands signed the FATCA Intergovernmental Agreement with the US as well as an agreement for the improvement of international tax compliance with the UK.

Laven Partners said these developments have led to people asking if the jurisdiction is still an attractive place to domicile a fund.

“Fortunately, commentators are in agreement that it is unlikely the short-term will see any immediate change in the Cayman - statistics show that 45 per cent of hedge funds managed by SEC-registered firms are still domiciled in the Cayman Islands, Laven added.

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