Updated Funds Regulation in the Caymans

Earlier this year, the Cayman Islands authorities implemented an amendment to the Private Foundations Act. Its action is aimed at increasing the number and categories of closed investment instruments required for registration with CIMA, which is the main financial regulator in the Islands. In this blog post, we will look at the main changes in the regulation of financial activities in the Caymans, which will affect all entrepreneurs who are already conducting operations or just intending to register an investment fund in the Caymans.

What does it mean

The updated legislation provides a new interpretation of the definition of a "private fund". Now this term is understood as registered in the Caymans mutual funds, partnerships, any form of companies that issue non-refundable investment shares to ensure that investors receive profit from the acquisition of such assets.

The amendment covers funds where:

• investment share holders do not have permanent control over the acquisition, ownership or management of investments;
• the investment is managed by a private fund manager.

The definition of a private fund registered in the Caymans does not include:

1. Open hedge funds;
2. Legal entities, whose interests belong only to the founders or management;
3. Special instruments for securitization;
4. Structured finance instruments;
5. Instruments for issuing debt obligations;
6. Welfare funds;
7. Joint ventures,
8. Holdings;
9. Schemes of incentives, participation or compensation for officials, managers or employees.
10. Individual investment management schemes;
11. Arrangements outside of business.

If you intend to start financial activities in the Caymans, it should be borne in mind that some investment schemes will need to register with CIMA as private funds. 

These may include schemes:

• For one-time investment only;
• Joint investments;
• Fixed assets, etc.