In a further step towards achieving European passport-ability
for Cayman Funds, the Government of the Cayman Islands published
two draft bills (the "Bills") on Friday
10th July which make certain enhancements to the existing Cayman
Funds regime in order to provide a mechanism for compliance with
the provisions of the European Union's Directive 2011/61/EU on
Alternative Investment Fund Managers
The first amendment being proposed is to the Mutual Funds Law
and will result in the establishment of a new category of mutual
fund, being a 'Regulated EU Connected Fund'. This Regulated
EU Connected Fund will allow managers to opt-in to AIFMD style
reporting in respect of that fund. In line with AIFMD, this
amendment will be capable of being applied to both open and closed
end funds. A Regulated EU Connected Fund will be any type of
investment fund which (i) is either managed from or marketed in a
Member State of the European Economic Area
("EEA") as contemplated under AIFMD and
(ii) elects to fall within CIMA's new regulated EU Connected
The second amendment being proposed is to the Securities
Investment Business Law and will provide for the establishment of
new category of investment manager, being an "EU Connected
Manager". EU Connected Managers will be subject to regulatory
oversight and supervision that is consistent with the requirements
of AIFMD. An EU Connected Manager, will be a person who: (i) falls
within the existing scope of Securities Investment Business Law;
(ii) conducts management, marketing or depositary activities as
contemplated under AIFMD; and (iii) elects to fall within
CIMA's new EU Connected Manager regime.
These new provisions will in effect afford Cayman Islands based
funds and managers the option of electing for an additional layer
of regulatory supervision where they are targeting the European
market for distribution. The amendments to the Mutual Funds Law and
the Securities Investment Business Law provide that the existing
supervisory duties and powers of CIMA will extend to EU Connected
Funds and EU Connected Managers which opt in to the AIFMD Regimes.
Subject to the recommendation being issued by ESMA this month, (see
below) it is expected that these amendments to the Mutual Funds Law
and the Securities Investment Business Law be passed into law in
August 2015 and will be supplemented by substantive regulations
setting out the specific requirements which will apply in the event
of a fund or manager opting into the new regime.
ESMA Recommendation to the European Commission
The European Securities Markets Authority
("ESMA") is required to provide its
initial recommendation to the European Commission as to which
jurisdictions should be considered for a "third country
passport" under AIFMD by 22 July 2015. ESMA will issue
recommendations on a "country by country" basis, rather
than issuing a blanket opinion for all third countries. Once the
ESMA recommendation is issued, the European Commission will have 3
months to reach a decision with respect to the extension of the
passport to the relevant third countries based on the
recommendation from ESMA. Where a positive opinion is issued in
respect of the Cayman Islands, it is likely that steps, such as the
publication of the Bills, will be required to be taken by the
Cayman Islands government to demonstrate a level of supervision
over passporting Cayman Funds analogous to that being implemented
in the EU currently under the AIFMD regime.
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.
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On the 9 September 2016 the MFSA issued feedback to its consultation of the 1 April 2016 in relation to intra-group loans.
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