Minister: Cayman funds ready to compete in European Union

The Cayman Islands is readying its regulatory status to enable Cayman-based investment funds and fund managers to qualify for a “third country passport,” allowing them to more easily compete in the European Union market, Financial Services Minister Wayne Panton said last week. 

Mr. Panton said the Legislative Assembly, during its Aug. 12 meeting, is expected to consider amending local legislation that will facilitate the extension of the EU Alternative Investment Fund Managers Directive passport to non-EU countries. 

The European Securities and Markets Authority has already assessed six non-EU countries in relation to the passport extension, including the competing jurisdictions of Guernsey and Jersey, to which the passport has been extended. A total of 40 countries, including Cayman, will be evaluated in the process. 

The European authority will assess Cayman’s regulatory regime and its supervisory cooperation with EU regulators to provide advice to the European Commission on which jurisdictions should be considered for the “third country passport.” 

Obtaining the passport would allow Cayman funds to be marketed to professional investors across the EU, rather than through private placement in each EU member state individually. 

Those private placement regimes, called NPPRs, are expected to expire by 2018, when they will be replaced by the third country passport regime. 

Mr. Panton said it is crucial for Cayman’s financial services industry to strengthen and expand its EU presence, and obtaining the third country passport is a key step in doing so. 

“We are a global leader in investment funds and we intend to build on our market dominance with our new Alternative Investment Fund Managers Directive regime as the platform upon which Cayman will pursue further growth in our share of the EU’s investment funds sector,” Mr. Panton said. 

In a July 10 advisory, Cayman’s government outlined two amendment bills aimed at establishing an “opt-in” regime for the regulation of Cayman-domiciled investment funds and fund managers who are connected to the EU. 

The bills, if passed, will enable Cayman-based funds and managers connected with the European Union to elect a regime of prudential regulation consistent with the EU Alternative Investment Fund Managers Directive. 

The proposed amendments of the Mutual Funds Law introduce the concept of a “regulated EU connected fund,” which is either managed from or marketed in a member state of the European Economic Area and elects to fall within the Cayman Islands Monetary Authority’s regulated EU connected fund regime. 

The bill amending the Securities Investment Business Law creates the “EU connected manager” designation for individuals who fall within the existing scope of the law, who conduct management, marketing or depositary activities as defined by the EU directive and who voluntarily decide to fall within CIMA’s new EU connected manager regime. 

“Cayman Finance is fully supportive of the Cayman Islands government and the Cayman Islands Monetary Authority in their development of Cayman’s Alternative Investment Fund Managers Directive regimes,” said Cayman Finance Chief Executive Jude Scott. 

“We all recognize Cayman’s important role in the global investment funds market, and these new regimes are the latest example of the jurisdiction continuing to carefully evolve its legislation and regulation in a balanced and robust manner to meet the needs of investors and managers around the world, without any disruption to our world-class services.” 

Mr. Panton

Mr. Panton