Mutual Funds (Amendment) Law, 2011

Mutual Funds (Amendment) Law, 2011 Further to our Client Update of 5 December 2011, the legislation aimed at registration of "master funds" in a "master/feeder" structure was passed by the Cayman Islands Legislative Assembly on 5 December 2011. It has not yet been brought into effect by being Gazetted, but we anticipate that this will happen in or around the first week of January 2012 (the "Effective Date"). This Client Update answers certain fundamental questions as to how your fund structures will be affected. However, the precise application of the new law will be fact specific for each fund structure. 1. Immediate application to new structures New structures with master funds launched from the Effective Date will need to comply with the new law from the outset where they fall within the scope of its provisions. 2. Registration period for existing structures We are conducting the necessary analysis on behalf of our existing clients, and will be reaching out to them to advise on the options available, but generally speaking: a) closed ended funds are not subject to the new regime; b) the registration obligation applies only to master funds which have a CIMA regulated feeder fund as part of the structure; c) the "master fund" definition applies to "a mutual fund that is incorporated or established in the Islands that holds investments and conducts trading activities and has one or more regulated feeder funds"; d) a "regulated feeder fund" is defined as a "regulated mutual fund that conducts more than 51% of its investing through another mutual fund"; There is a 90 day period, commencing on the Effective Date, for registration of existing master funds which fall within the scope of the new law. There is potential for the granting of an additional period of up to 60 days at Government`s discretion, but this should not be relied upon. 3. Which master funds are in scope of the new law? e) fund vehicles not formed or registered in the Cayman Islands (for example, onshore feeder funds) will not constitute "regulated feeder funds"; and f) the "not more than 15 investors" exception that master funds often used in the past remains in the Mutual Funds Law, but has been disapplied for "master funds" as defined. Not all funds that are called a "master fund" will necessarily fall within the scope of the new regime. A case by case analysis is required, and the exact fund structure(s) will determine whether registration of a particular vehicle as a master fund is necessary. 4. No master fund offering document required The new law does not require a separate offering document for a master fund. CVR//22461361v1 However, for master funds which already have a specific offering document, it will need to be filed on registration. For master funds with no offering document, certain additional details in relation to the master fund offering may need to be included in the filings made with CIMA on registration (see below). 5. Form MF4 CIMA has issued a consultation version of the MF4 which sets out the prescribed registration details for master funds. The consultation period runs until 23 December 2011. We understand that the Form MF4 is intended to be issued in final form before the end of December 2011 (and in any event prior to the Effective Date). A copy of the consultation version of the Form MF4 is attached. Particular points to note: a) very brief details of all feeder funds (whether registered in the Cayman Islands or not) must be included; b) the master fund must advise CIMA (on a "yes or no" basis) whether there are investors in the master fund other than the regulated feeder fund(s); c) where a master fund offering document does not already exist, the Form MF4 must "include a summary of the material terms of the master fund`s offering to the extent that (i) they differ from the comparable terms of the regulated feeder fund; and (ii) they are not already included in the offering document for the regulated feeder fund"; d) confirmation must be given as to which Cayman Islands based service provider will be responsible for the payment of annual fees and dealing with queries; and exempted limited partnership and a trustee for a unit trust). 6. Straightforward registration procedure The key filings required for a master fund will be: a) the completed and signed Form MF4; b) the fee of CI$2,500 (US$3,048.78); c) a copy of the certificate of registration or incorporation of the master fund; and d) the current offering document of the master fund, if any. 7. Updating for material changes Where a master fund has a specific offering document, it will need to be updated to take account of any change that materially affects the information included, and the update filed with CIMA (within 21 days of the relevant change). For master funds with no specific offering document, the Form MF4 will need to be updated to take account of any material change and filed with CIMA (again within 21 days of the relevant change). 8. Local auditor sign off and consent letters We understand that local auditor sign off will be required for master funds registered with CIMA. The Form MF4 provides that there will be no need to file an auditor consent letter for a master fund, provided the auditor is the same for the regulated feeder fund(s) and the master fund. Clients will need to discuss audit arrangements with the auditors of the vehicles in their structure to assess any impact the new law may have. For example, there may be a need to adjust existing auditor contractual arrangements for master funds affected. e) as for the existing Form MF1, the Form MF4 must be signed by an "operator" (being a director for an exempted company, a general partner for an The Form MF4 also provides that there will be no need to file an administrator consent letter for a master fund provided the administrator is the CVR//22461361v1 same for the regulated feeder fund(s) and the master fund. 9. Existing registered master funds Existing structures may well involve master funds which have registered with CIMA voluntarily for marketing, onshore regulatory or client preference reasons. Client preference and commercial concerns, including the need to meet investor due diligence requirements, may see some of these master funds wanting to switch to the new master fund registration regime. 10. Action Points Where you are contemplating a launch in the immediate future, on which Maples is advising, your usual Maples contact can guide you through the analysis and any required steps (including any adjustments to relevant disclosure). Where you have master funds in your existing structures and you are a Maples client, your usual Maples contact will be in touch shortly to advise on whether or not particular entities need to be registered and, if so, to assist with the registration process. If you are not an existing Maples client, you are welcome to contact one of our Global Funds Group partners to discuss registration requirements for any of your Cayman Islands funds. Cayman Islands Jon Fowler +345 814 5526 jon.fowler@maplesandcalder.com Iain McMurdo +345 814 5378 iain.mcmurdo@maplesandcalder.com David Brooks +345 814 5534 david.brooks@maplesandcalder.com London Paul Govier +44 20 7466 1631 paul.govier@maplesandcalder.com Hong Kong Spencer Privett +852 2971 3045 spencer.privett@maplesandcalder.com Dubai Philip Ireland +971 4 360 4073 philip.ireland@maplesandcalder.com December 2011 © Maples and Calder This update is intended to provide only general information for the clients and professional contacts of Maples and Calder. It does not purport to be comprehensive or to render legal advice. CVR//22461361v1 FORM MF4 APPLICATION FOR REGISTRATION OF A MASTER FUND UNDER SECTION 4(3)(a)(iii) OF THE MUTUAL FUNDS LAW (2009 REVISION) (AS AMENDED) NOTES: 1. Funds must be registered with the Authority in the prescribed manner before carrying on business in or from the Islands. 2. In order for a Master Fund to be registered, the documents and information prescribed below must be submitted to the Authority:  Completed and signed Form MF4 o The Form must be completed in full. o The declaration on this form must be signed by an “operator(s)” as defined in the Law. The contact information must include the actual business address and the phone and fax numbers at which the operator(s) can be contacted.  If different from that of the regulated Feeder Fund(s) an Auditor’s letter of consent (must be a local approved auditor) o The letter must include:  the name of the Master Fund;  the date of the Fund’s financial year end;  the accounting principles that will be used to prepare the accounts;  the first reporting period; and  confirmation that the auditor is aware of and agrees to fulfil their obligations pursuant to Section 35 of the Mutual Funds Law.  If different from that of the regulated Feeder Fund(s) an Administrator letter of consent o The letter must include the name of the Master Fund, acceptance of appointment as administrator and a summary of the services to be provided. o Where administration functions are delegated or functions are provided by different service providers, please provide details of such arrangements.  Current Offering Document (date/version) o Applicable if:  Separate Offering Document has been prepared for the Master Fund  Proof of Incorporation/Registration o Company: Certificate of Incorporation certified by the Registrar of Companies o Unit Trusts: Trust Deed o Exempt Unit Trusts: Certificate of Registration certified by the Registrar of Trusts o Partnerships: Certificate of Registration certified by the Registrar of Partnerships  Prescribed Fee as required by the Mutual Funds (Fees) Regulations (2011 Revision) When submitting the form, please advise who will be responsible for dealing with queries and the payment of annual fees, i.e. the registered office or (if applicable) the local administrator. Page 1 FORM MF4 Notes continued: 3. The above documents and fee must be submitted to the attention of: The Managing Director Cayman Islands Monetary Authority P.O. Box 10052 George Town, Grand Cayman KY1-1001 Telephone: (345) 949-7089 Fax: (345) 949-2532 4. Questions regarding this Form or any of the requirements of the Mutual Funds Law (2009 Revision) (as amended) should be addressed to ContactInvestments@cimoney.com.ky or: The Investments & Securities Division Cayman Islands Monetary Authority P.O. Box 10052 George Town, Grand Cayman KY1-1001 Telephone: (345) 949-7089 Fax: (345) 949-2532 5. Additional information regarding setting up requirements and regulatory requirements is available on our website: www.cimoney.com.ky. Page 2 ... - --nqh--