AIFMD Consistent Regimes for the Cayman Islands
The Mutual Funds (EU Connected Fund (Alternative Investment Fund Managers Directive)) Regulations, 2016 ("Fund Regulations") and The Securities Investment Business (EU Connected Fund (Alternative Investment Fund Managers Directive)) Regulations, 2016 (the "Manager Regulations" and together with the Fund Regulations, the "New AIFMD Regulations") were published on 16 December 2016. The New AIFMD Regulations will be brought into force by way of a separate commencement order, which is anticipated to be published and take effect sometime next year.
Clients may recall that in August 2015 the necessary amendments to the Cayman Islands Mutual Funds Law and the Securities Investment Business Law required to implement AIFMD1 consistent regulatory regimes (the "AIFMD Consistent Regimes") were passed. The New AIFMD Regulations set out the detail and the substantive provisions of the Cayman Islands AIFMD Consistent Regimes.
These AIFMD Consistent Regimes will be of particular interest to managers and funds looking to access European investors, whether using existing national private placement regimes or looking to keep open the option of using an AIFMD passport at some point in the future.
For all other Cayman Islands based funds, and their managers, the current Cayman Islands regulatory framework will not be affected by the introduction of the AIFMD Consistent Regimes and it will be business as usual.
New AIFMD Regulations - Funds
The amendments to the Mutual Funds Law in connection with the introduction of the AIFMD Consistent Regimes introduced the concept of an "EU Connected Fund". An "EU Connected Fund" is any type of investment fund (whether open-ended or closed-ended) which is either managed from, or marketed in, a Member State of the EEA as contemplated under the AIFMD. When the Fund Regulations come into force, EU Connected Funds will be required to:
- submit certain particulars to the Cayman Islands Monetary Authority ("CIMA") upon commencement of marketing in a Member State of the EEA;
- (notify CIMA of any changes to the particulars previously submitted to CIMA and to notify CIMA when it has ceased marketing in all Member States of the EEA; and
- provide written confirmation to CIMA on an annual basis that there has been no change to the particulars previously submitted to CIMA.
The Fund Regulations will also introduce a formal procedure for EU Connected Funds to request attestations or confirmations of status from CIMA (where required to be submitted to regulators of particular Member States in which it is proposed to market the EU Connected Fund) upon the submission of certain details and payment of a fee to CIMA.
New AIFMD Regulations - Managers
The amendments to the Securities Investment Business Law in connection with the introduction of the AIFMD Consistent Regimes introduced the concept of "EU Connected Manager", with the ability for managers of EU Connected Funds to elect to be licensed as "EU Connected Managers". The Manager Regulations set out the substantive provisions which will apply to managers who: (i) conduct marketing or management activities in respect of EU Connected Funds as contemplated under the AIFMD; and (ii) elect to be licensed under the Securities Investment Business Law as an EU Connected Manager.
The Manager Regulations generally mirror the requirements of the AIFMD and delegated regulations supplementing the AIFMD. The Manager Regulations will also introduce a formal procedure for EU Connected Managers to request attestations or confirmations of status from CIMA. Notably, the Manager Regulations will permit managers who conduct marketing or management activities in respect of EU Connected Funds but that have not elected to be fully licensed under the Securities Investment Business Law (because they are exempt from the requirement to obtain a licence or are registered as an "excluded person" under the Securities Investment Business Law) to request such attestations or confirmations from CIMA upon the submission of certain documents and the prescribed fee.
ESMA Assessment and Passport Extension
As noted in our previous client update, on 19 July 2016, the European Securities and Markets Authority ("ESMA") delivered its latest advice (the "Advice") to the EC2 as to whether the AIFMD passport should be extended to non-EEA jurisdictions ("Third Countries").
With respect to its Advice in relation to the Cayman Islands, ESMA had stated it would complete its assessment of the Cayman Islands when the AIFMD Consistent Regimes and related steps had been implemented. The enactment of the New AIFMD Regulations will pave the way for the application of the AIFMD passport to the Cayman Islands if and when it is activated for Third Countries.
Is there action to be taken immediately?
Although there is no action to be taken now, clients with Cayman Islands funds and/or managers with an EEA nexus should look out for further Maples and Calder updates once the commencement order to bring the Regulations into force has been published.
For further information, please liaise with your usual Maples and Calder contact or any of the above contacts.
1 Alternative Investment Fund Managers Directive (2011/61/EU)
2 European Parliament, Council and Commission