Changes proposed by the government to the laws governing the registration and supervision of mutual funds and private funds, together with bills amending beneficial-ownership rules for companies and partnerships received the support of the opposition during a debate in the Legislative Assembly on Thursday, 30 Jan.
The Private Funds Bill requires private, closed-ended funds, namely private equity funds, to register with the Cayman Islands Monetary Authority. The funds will have to be audited annually by a CIMA-approved auditor in line with international standards. Private funds must also have appropriate valuation procedures for their assets as well as proper custody and cash-management processes. At the same time, the regulator’s enforcement powers over the funds are broadened.
During the debate, Minister for Financial Services Tara Rivers said the bill “modernises funds regulation in the Cayman Islands by providing additional surety and transparency for investors and managers of Cayman Islands investment funds while upgrading our position in line with best practices around anti-money laundering and other key regulatory standards”.
The changes to the oversight of closed-ended funds “are taking into account commercial realities in terms of operations for fund managers and Cayman service providers and the bill has been drafted with these realities in mind”, she added.
Citing statements made by Warren Buffett at Berkshire Hathaway’s annual general meeting, the minister said the private funds bill was also responding to calls made by private equity investors for fully independent asset verification, valuation and audits.
The Mutual Funds Bill introduces a registration requirement for mutual funds with 15 or fewer investors, which were until now exempt from registration, and require the operators of those funds to file annual financial returns with CIMA.
The bills also incorporate guidance on fund oversight by the EU Code of Conduct Group for Business Taxation. It is part of Cayman’s commitment to address the EU’s remaining concerns that Cayman’s domestic framework for funds should be ‘sufficiently robust’ as a part of the EU’s tax blacklist process.
Three other bills amending the laws for companies, limited liability companies and limited liability partnerships make changes to the beneficial-ownership regime for these entities. The amendments further refine the responsibilities of corporate service providers and empower the Registrar of Companies as the relevant authority to request additional information from them as well as from companies.
Opposition leader Arden McLean said, “The opposition does not have significant concerns about the bills because we understand the need to put these things in place because of the external forces.”
Bodden Town West MLA Chris Saunders added that the opposition had carried out its own private sector consultation and reached out to industry practitioners. The feedback received was mixed, with some concerns raised about increased costs and the level of red tape that is created by the legislative amendments.
However, Saunders expressed understanding for the changes, saying, “We need to know who we are doing business with,” adding, “we cannot do business in the dark anymore”.
Most of the bills underwent last-minute changes at the committee stage to incorporate feedback received during the public consultation and all the bills were passed.