Passed in February 2020, the PFA requires that all closed-end funds be registered with the CIMA by August 7th (same year). There were further amendments in July whereby:
- the definition of private funds was broadened;
- any conflicts related to funds’ assets be strictly controlled;
- strips the government of its right to exempt legal entities & individuals from compliance with the PFA.
Who Will be Affected?
As mentioned earlier, the amended PFA introduces the broadened definition of private funds. Those interested in setting up a mutual fund in the Caymans (or establishing a partnership in the Caymans) should keep in mind that the amended PFA applies to companies:
- that offer or issues investment tokens entitling their holders to a share in the funds’ profits;
- whose investors are incapable of controlling the way their investments are managed;
- whose investments are managed by operators (either directly or indirectly).
Those looking to start investment activities in the Cayman Islands should keep in mind that the amended PFA makes an exception for:
- licensed, managed or registered mutual funds;
- issuers of debt obligations or AFIs;
- non-financial mechanisms;
- registered persons.
Caymans: Closed-Ended Funds
Those interested in establishing a closed-end fund in the Caymans should keep in mind that it:
- can conduct a core business that doesn’t involve offering & issuing investment interests;
- can’t offer its investment interests, including fixed assets with more than one source;
- can only have one investment;
- are managed for remuneration that’s independent of the assets or profits of the fund.
Private funds are required to:
- do financial estimates;
- manage their cash reserves;
- identify & keep track of certain securities.
Please keep in mind that funds having one investor & funds issuing investment interests only to their operators, their manager's affiliates & managers themselves aren’t targeted by the amended PFA.
Need more info or advice on establishment of closed-ended funds in the Cayman Islands? Why not reach out to IQ Decision UK?