The Cayman Islands Private Funds Law 2020, which commenced on 7 February 2020 but will apply to all existing funds from 7 August, will extend the oversight role played by depositaries for many Cayman investment funds, according to INDOS Financial, an independent depositary and oversight group.
The new law requires closed-ended investment funds domiciled in the Cayman Islands to register with the Cayman Islands Monetary Authority (CIMA) and to comply with a number of new operating requirements.
These include: Implementation of appropriate and consistent valuation procedure; arranging custody of custodial assets; verification of ownership and title of all other assets; and monitoring cash flows including the checking of cash accounts and receipt of investor contributions.
“These new requirements are based on similar rules within the European AIFMD (Alternative Investment Fund Managers Directive) where they are required to be performed by a fund depositary,” said Bill Prew, CEO of INDOS Financial. “While the Cayman Islands Private Funds Law permits these functions to be carried out by managers, they should be carried out independently of the investment management process and conflicts of interest need to be properly identified, managed, monitored and disclosed to investors. We expect many managers will choose to outsource these obligations to third parties that have a track record in this area.
“Many managers of Cayman funds that are marketed in Europe will be familiar with these requirements. INDOS already provides similar services for over 100 Cayman funds across a range of strategies and that are managed by European, USA and Asian managers. We are therefore well placed to enable managers to meet these new requirements.”
INDOS Financial, CIMA, Private Funds Law, Bill Prew, Cayman Islands