From the initial draft of the Alternative Investment Fund Managers Directive (AIFMD) back in April 2009, through to the adoption of the AIFMD on 21 July 2011 and the long awaited publication of the Level Two Regulations by the European Commission in December 2012, the Cayman Islands has been preparing for the impact of the AIFMD on its regulated funds regime. Working groups composed of members of Cayman Islands Government, the Cayman Islands Monetary Authority (CIMA) and the investment funds industry have assisted in the development of a strategy for the Cayman Islands in approaching the AIFMD.
The AIFMD provides a European Union (EU) framework for the regulation and oversight of alternative investment fund managers. Having been a major source of great uncertainty for several years, the Level Two Regulations provide the basis for the implementation of the AIFMD across Europe from July 2013.
Under the AIFMD certain conditions must be met by the Cayman Islands to allow the marketing of Cayman Islands regulated funds under the existing private placement regimes of EU member states after July 2013. The framework for this is now in place, namely:
- The Cayman Islands is required to be in compliance with standards promulgated by the Financial Action Task Force (FATF), the inter-governmental body which promotes policies to combat money laundering and terrorist financing. The Cayman Islands has achieved this. In addition, the Cayman Islands Government announced on 15 March 2013 its intention to enter into an intergovernmental agreement (IGA) with the United States for the implementation of FATCA, and that it proposes to adopt the Model 1 form of IGA. Under the Model 1 IGA, foreign financial institutions are required to report certain information to the Cayman Islands Government, which in turn will relay information to the IRS.
- The Cayman Islands is required to enter into tax information exchange agreements with EU member states. A number of these agreements have already been signed, and the Cayman Islands continues to negotiate with other EU member states.
- The Cayman Islands legislature took a further step forward in the ongoing process of preparing for the AIFMD on 15 March 2013, announced on 25 March, by passing The Monetary Authority (Amendment) Law, 2013. This will facilitate the marketing of Cayman Islands regulated funds in the EU under the private placement regimes of EU member states by allowing CIMA to enter into memoranda of understanding with their counterpart regulatory authorities in each EU member state using a model memorandum of understanding agreed and developed by the European Securities Markets Authority.
The Cayman Islands continues to demonstrate that, as a jurisdiction, it is determined to take the steps necessary for Cayman Islands regulated funds to continue to market in Europe under the private placement regimes of EU member states after July 2013.
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