The requirement to file a separate fund annual return for each sub-fund of a Cayman regulated mutual fund has recently been codified by the approval of the Mutual Funds (Annual Returns) (Amendment) Regulations, 2016 (the Regulations). The Regulations confirm the previous policy of the Cayman Islands Monetary Authority (CIMA) that for each financial year a regulated fund with sub-funds in its structure must file a fund annual return (FAR) for each sub-fund, within six months of the financial year end. For regulated funds with a financial year ending on 31 December 2016, FARs will need to be submitted to CIMA by the fund’s auditor by 30 June 2017.
What is a sub-fund? Under the Regulations, a FAR must be submitted for each “sub-fund”, which includes any or all of the following in a fund’s structure:
- A segregated portfolio in a segregated portfolio company
- A sub-trust of a trust or in an umbrella or master unit trust
- A class of shares, units or interests in a company, trust or partnership for which the fund maintains individually presented separate accounts
How much is the FAR fee? The Regulations confirm that the fee for submitting a FAR is CI$300 (US$366) and introduce a cap on the maximum annual FAR fee payable by a regulated fund of CI$7,500 (US$9,150), for funds with 25 or more sub-funds.
Are there any other changes? CIMA also recently confirmed by notice to the funds industry that it has improved the FAR notification process so that, once a FAR has been filed, a confirmation of filing and notification that the FAR fee is due will be sent to the auditor that made the filing, all current directors of the fund, the fund’s registered office and the service provider identified by the fund as responsible for paying fees. The intention is to make sure that all relevant parties are aware that the FAR fee is due for payment to CIMA.
This is a welcome change and should significantly reduce or even eliminate the chances of the service provider responsible for paying the FAR fee making payment before the FAR has been filed by the auditor, leading to it being rejected by CIMA. Note that the auditor does not pay the FAR fee.
The Regulations can be seen as part of an ongoing tightening of enforcement and reporting provisions under Cayman Islands financial services law. Please see our recent client alerts on amendments to the Common Reporting Standards regulations, proposals to introduce beneficial ownership registers, and amendments to the Monetary Authority Law for further details.