November 25, 2020

Master funds need to register

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The Cayman Islands Monetary Authority (CIMA) now requires master funds to register by the end of the first quarter 2012. These funds previously fell outside the jurisdiction’s regulatory framework.

The Cayman Islands Monetary Authority (CIMA) is introducing requirements for master fund registration under the Mutual Funds (Amendment) Bill 2011.

The master fund in a traditional master/feeder hedge fund structure will be required to register before beginning activity. This is expected to be effective by the end of December. Existing master funds will have a period of 90 days to comply.

A short extension may be granted, according to KPMG, but it is likely that all existing master funds caught by the new regulation will need to register by the end of the first quarter of 2012.

In a traditional Cayman master/feeder structure, the majority of the assets are usually held at the master fund level. The move to bring master funds under CIMA’s regulatory frameworks comes as a response to suggestions from various international bodies, according to law firm Appleby.

Master funds subject to this requirement are those that issue equity interests redeemable at the option of the investor, have more than one investor and have one or more feeder funds registered with CIMA.

Registered master funds will have to meet several obligations, including payment of an annual fee of around $3,000, which is less than the current fee for registered funds. Master funds will also be required to file audited financial statements signed off by a Cayman-approved auditor and a fund annual report form within six months of the financial year end.

In addition master funds will need to adopt or file an offering document, or file a new registration form (Form MF4), which discloses certain required information.

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