You will recall that in November 2014 The Cayman Islands Monetary Authority (“CIMA” or the “Authority”) issued a consultation paper on the cancellation of licences and certificates of registration of mutual funds (copy attached).
The final version of the Rule and Regulatory Procedure (the “Rule”) was gazetted on March 30, 2015.
One area of possible concern regards an important change of practice by the Authority and/or a difference in interpretation between the industry and the Authority in regards to audit waivers for stub periods.
Prior to the introduction of the Rule, the Authority generally granted audit waiver requests to mutual funds in respect of “stub” financial periods. Following the introduction of the Rule, the Authority is now requiring mutual funds to procure and pay for an audit for any final stub period unless circumstances might fall within the provisions set out in section 4.3 of CIMA’s policy of audit waivers (also attached) and noted below:
4.3. In determining whether an exemption should be granted, the Authority shall assess each fund’s request on a case by case basis, and after such assessment may consider an exemption in the following circumstances:
- a) a fund has not launched but does not wish to be de-registered;
- b) a fund has not launched and is being liquidated or wound up;
- c) a fund has launched but has been unsuccessful in raising the appropriate seed capital for sustainability;
- d) a fund is unable to obtain audited accounts due to events such as bankruptcy proceedings, legal or regulatory enforcement actions; or
- e) a fund has been placed in compulsory liquidation and the Authority is satisfied with the appointment of the liquidator and the scope of review.
The circumstances set out in section 4.3 do not include the surrender of a licence or de-registration by a solvent formerly active mutual fund.
The CIDA Executive would be grateful to hear from our members on your thoughts and concerns or those raised by your clients on this matter.
Please provide any feedback by Wednesday, May 20th, 2015.
Cassandra Powell (President)