Regulation remains top of the list


Regulation remains top of the list

Cayman’s strength has always been the healthy dialogue between the authorities and industry, something the Cayman Islands Funds Administrators Association is keen to ensure endures the tests of time, says Timothy Rossiter, the body’s chair.

Regulation remains at the top of the agenda for the Cayman Islands Funds Administrators Association (CIFAA), the body that represents fund administrators on Cayman, according to Timothy Rossiter, the body’s chair. He says that as the number of regulations and their scope continue to increase, it is essential that CIFAA ensures the concerns of its members are heard.

“How to help our clients handle the increasing amount and scope of regulation, both locally and globally, remains top of our agenda,” Rossiter says.

The CIFAA represents its members in two ways: by facilitating a channel of communication between its members and the authorities—notably the Cayman government and the Cayman Islands Monetary Authority (CIMA)—and by providing a forum for the exchange of ideas between fund administrators while also promoting their work generally.

“We continue to work closely with the Cayman Islands government and CIMA to help ensure regulation is proportionate and appropriate. We think that a significant amount of success of the jurisdiction has been the collaboration between industry and government, as we all want Cayman to retain its status as the pre-eminent funds jurisdiction, and pragmatic regulation is a key part of that,” he adds.

“CIFAA works alongside other representative bodies to achieve these aims, including the Cayman Islands Chamber of Commerce, AIMA Cayman and Cayman Finance, to make working in fund administration industry as easy as possible and encourage our members to expand their employee footprint in Cayman.”

New rules

Some of the main issues on the agenda include the implementation of new economic substance requirements and revisions to anti-money laundering (AML) regulations. A new report by the Caribbean Financial Action Task Force (CFATF) has suggested that further changes may be required and the industry is waiting to see how the government responds to this.

“The industry is feeling its way through the implementation of these regulatory changes and the implications of the CFATF report. In fact, the CFATF report was not nearly as bad as some feared but dialogue is now needed to establish if any further regulatory changes will be made,” Rossiter explains.

In addition to these, further iterations are being made to the Securities Investment Business Law, which could have a knock-on effect to some of the other activities of fund administrators.

“For us, it is about monitoring the legislative programme and giving appropriate advice based on feedback from our members,” he says. “We want to ensure that what happens is proportionate and appropriate. We have a number of working groups and regular briefings so we can represent our members in the best way possible.

“That dialogue and close relationship between government, the regulator and industry has always been a strength of Cayman and is a big reason for its success. We need to ensure we never lose that.”

The talent pool

This has also helped create a vibrant and talented funds industry on Cayman. Rossiter argues that the quality of the fund administrators is as high as anywhere in the world and this is partly due to the pool of talent based there. What is more, advances in technology mean it is only set to get better.

“There are a large number of talented lawyers and accountants on Cayman across the financial services industry, and the high quality of the firms here have always provided a fertile training ground for fund administrators,” Rossiter says.

“The depth of talent locally means Cayman is well placed to provide high quality services to clients as we have the knowledge and experience here to answer all aspects of their business in one location, avoiding the need to call multiple jurisdictions and time zones.

“With the rapid improvement of technology and streamlining of information flows, there is also an opportunity to expand into other areas of administration that may have been inaccessible in the past.”

He explains that the sophistication of the sector is becoming ever more complex meaning the skills of his members will also be increasingly in demand. There has been a huge expansion of close-ended structures (private equity and credit) assets under management over the last decade, and an increased complexity of their corporate and fee structures.

“We are seeing institutional investors wanting those structures to adopt the ‘mutual oversight’ service provider structure more commonly seen in hedge funds: independent fund administrator, auditor and directors.
“Increasingly managers are seeing this as access to expertise and technology, not as something forced on them,” he says.

“Fund administration of these close-ended structures can provide managers with the technology to handle this complexity efficiently; in addition to the accounting, investor services and compliance service roles, this market also requires a more specialised type of portfolio operational support, often daily.

“While investor capital is locked up, private credit portfolios in particular are usually extremely active.”

Education and outreach

To facilitate the expansion of the industry the CIFAA continues to focus on education as well. Highlights include the Fund Administration course it runs twice a year (for 10+ years), supporting the National Workforce Development Agency Colour Accounting course.

It also provides scholarships to the Central Law Training Certificate and Diploma in Fund Administration and is working with other industry bodies on a video series that educates school students on the significance of financial services in the Cayman Islands.

Rossiter is also keen that the CIFAA engages more with members to ensure it has the resources to meet this agenda, and make sure it is aware of their issues and concerns on a timely basis. 

“We have expanded our sub-committees and their membership to cover each area of focus and increased the frequency of our meetings. We now have specialised sub-committees on education and training, AML, regulation & legislation, communication and membership, and events,” he says.

“A huge number of changes in the geopolitical landscape are expected in 2019. This means there is a lot of opportunity for active managers of all types, so we will keep an eye on the implications of those changes, and the opportunities for Cayman, and adapt accordingly.”

Regulation, Cayman Islands, CIFAA,

Cayman Funds