As demand continues to increase for independent directors to be appointed to hedge funds domiciled in the Cayman Islands, there has been considerable discussion about how or if this activity should be regulated.
The Cayman Chapter of the Alternative Investment Management Association is hosting a special interactive debate on the matter on 3 April at the Hollywood Theatres at Camana Bay. Featuring Tim Ridley, chairman of the Cayman Islands Monetary Authority and Gary Linford, the former head of CIMA’s Investments and Securities Division and moderated by Mark Lewis, the debate will examine whether CIMA should oversee the provision of directorship services, or if a Code of Conduct for directors should be promoted with greater self regulation from a Director’s Association.
The huge growth in the provision of independent directorship services by Cayman Islands companies to hedge funds has prompted the need for debate on this issue. Attorneys are leaving law firms and accountants are leaving banks and accounting firms to set up company management firms specifically to provide these services.
Independent directors are appointed to ensure that hedge funds operate in the best interests of their shareholders and that the decisions of investment managers are not influenced by conflicts of interests.
‘Good corporate governance helps to protect investors’ interests and promotes greater confidence in Cayman domiciled investment vehicles,’ says Andy Stepaniuk, Chairman of the local Chapter of AIMA.
‘While it is difficult to regulate ethics, those charged with corporate stewardship must recognize the increasing global expectations for the highest possible governance standards. The trick is to find the right balance and be a leader in best practice.’
The actions and behaviour of independent directors, therefore, can have a major impact on the reputation of the Cayman Islands as a first class international financial centre, hence the discussion on how the sector should be regulated.
The forum coincides with the formation of the Cayman Islands Directors Association last week, organized by a group of members of the Cayman Islands Company Managers Association who specialize in providing director services to Cayman Islands companies.
CIDA said its focus will be to promote and safeguard the interests of directors of Cayman Islands registered companies and to define a code of conduct and best practice for its members which will ensure corporate governance of the highest standard thereby further strengthening the integrity of the Cayman Islands financial centre.
‘I would like to see those local residents who serve as independent directors becoming more proactive in raising the profile and credibility of their role. For starters, this could usefully be done through a professional association, codes of conduct and ethics and other professional standards,’ Mr. Ridley noted this past January.
CIDA has stated that in the absence of a self regulating directors association CIMA could be faced with regulating Cayman directors individually – a daunting task and more or less unprecedented in most jurisdictions.
CIDA say whether or not there is going to be legislation and regulation affecting the services of directors or whether an Association such CIDA is going to be relied upon to provide self regulation, such matters will affect all directors on the Island whether fund directors, insurance directors, bank directors, or even directors of private companies.
One of the first tasks of CIDA will be to draw up a Code of Practice for Cayman directors so that both they and the public know what is expected from them. There may be supplemental codes for specialized areas of the financial industry and CIDA intends to closely liaise with other associations in this regard.
For more info on the forum contact Judy Scott at [email protected].
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