New York, Jan 6, 2021

The Cayman Islands Monetary Authority (CIMA) recently published rules regarding the contents of offering documents, the segregation of assets and the calculation of net asset values for regulated mutual funds. The rules were first published in May 2020, were amended in July and again in September.

The segregation of assets rule is a significant new step for Cayman funds and will cause funds to consider whether a new service provider will be required to carry out this function.

They impact funds in the following ways:

1. Disclosure Rules for Offering Documents

Any offering document used by a regulated mutual fund must comply with the CIMA MF Offering Document Rules which are now more prescriptive and detailed than previous guidelines. Every fund in scope for the new rules must incorporate a mandatory statement regarding CIMA using prescribed wording for new or updated offering documents.

2. Rules on the Segregation of Assets

The primary aim of this rule is to ensure that all financial assets and liabilities of a fund must be segregated and accounted for separately from any assets of any of its service providers. In a letter dated 30 June 2020 CIMA confirmed that the segregation rules are not intended to prohibit rehypothecation or sub-custodial arrangements. The new rules:

• Require that a regulated mutual fund appoint a service provider to ensure the safekeeping of the fund's portfolio.
• Require that a regulated mutual fund's portfolio be segregated and accounted for separately from the assets of any service provider, and also require the fund to ensure that none of its service providers use the fund's portfolio to finance their own or any other operations.
• Requires the operators (board of directors, GP or similar governing body) of a regulated mutual fund to establish, implement and maintain strategies, policies, controls and procedures to ensure compliance with the segregation of assets rules. The asset title verification function must be independent from the portfolio management function or potential conflicts of interest must be identified, managed, monitored and disclosed to investors.

3. Rules on the Calculation of Asset Values

Under the Rules on the Calculation of Assets Value for regulated mutual funds, a fund must establish, implement and maintain a NAV Calculation Policy (as defined in the NAV Rules) that ensures a Fund’s net asset value is fair, complete, neutral, free from material error and verifiable. The NAV Calculation Policy must be based on International Financial Reporting Standards or US, Japanese or Swiss GAAP or GAAP of a non-high-risk jurisdiction and disclosed in the fund's offering document. In addition, the policy must provide that the NAV is calculated regularly (at least quarterly) and must define the role and responsibilities of the fund’s service providers in the valuation process, identify pricing sources and incorporate internal controls.

How Centaur can help implement the New Rules

Centaur’s comprehensive range of administration and fiduciary services enable our clients to enjoy independent, professional services that ensure they navigate successfully through regulatory and investor requirements and best practice.

We have extensive experience in fiduciary services including segregation of fund assets in compliance with AIFMD. Our corporate services team has the strength and depth of experience required to draft detailed bespoke minutes of scheduled board meetings of the quality required to document adherence to a NAV Calculation Policy.

For more information, contact:

North America:                 Richard Johnson: richard.johnson@centaurfs.com

Europe:                              Gavan McGuire:  gavan.mcguire@centaurfs.com