Any operator1 or liquidator of a regulated mutual fund placed in Licence Under Liquidation ("LUL") or Licence Under Termination ("LUT") will need to be mindful of the Fund's continuing notification and filing obligations to the Cayman Islands Monetary Authority ("CIMA").
In a notice published on 29 September 2016 (the "Notice"2), CIMA set out the duties of operators and liquidators of funds in LUL or LUT, and outlined certain of CIMA's powers under the Mutual Funds Law (as amended) ("MFL").
Obligations for operators and liquidators
During the six months following a fund being placed into LUL or LUT, the operator or liquidator will need to provide CIMA comprehensive and ongoing updates on the status and progress of the winding down/liquidation of the fund. Failure to do so will result in CIMA cancelling the Certificate of Registration or Mutual Fund Licence under Section 30(16) of the MFL (a "Section 30(16) Cancellation").
After this initial six month period, CIMA will contact funds which remain in LUL or LUT through their Registered or Principal Office to request outstanding documents and/or fees. Extensions can be granted by CIMA where warranted. Where such documents and/or fees are not provided to CIMA within the time stipulated in its request, CIMA will effect a Section 30(16) Cancellation.
Implications for funds, operators and liquidators
Administrative matters
It is expected that CIMA will give adequate notice of a Section 30(16) Cancellation. However, if the fund does not comply with the obligations outlined above, CIMA may not confirm when Section 30(16) Cancellation has taken place and a fund will not subsequently be able to obtain a regular de-registration or cancellation letter from CIMA.
Regulatory impact
CIMA may take action under any relevant regulatory law where it determines the fund in LUL or LUT is the subject of wrongdoing or where there are questions about the fitness and propriety of a service provide or operator3. In addition, where a Mutual Fund Licence or Certificate of Registration was subject to a Section 30(16) Cancellation, CIMA may take this into account when assessing the fitness and propriety of the fund's operators.
Footnotes
1 An operator in respect of a mutual fund, means-
(a) where the mutual fund is a unit trust, a trustee of that trust;
(b) where the mutual fund is a partnership, a general partner in that partnership;
(c) where the mutual fund is a company, a director of that company; or
(d) where the mutual fund is a limited liability company, a manager of that company.
2 The notice can be found here: http://www.cimoney.com.ky/WorkArea/DownloadAsset.aspx?id=2147485358
3 Please note that amendments to the Monetary Authority Law have been proposed which would give CIMA new powers to impose fines on individuals and entities for breaches of prescribed provisions of regulatory laws. A Client Advisory with further information on the proposed changes will be published shortly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
