Private Funds Law FAQs Update (2020-05-07)

Summary

This is a set of FAQs issued by CIMA on 7 May 2020 to explain how it will interpret and apply the Private Funds Law, 2020 (PFL), particularly the definition of "private fund" and CIMA's expectations for registration, audit, valuation and cash monitoring obligations. It clarifies concepts such as "collective investment scheme," "offering and issuing of investment interests," "pooling of investor funds," and "spreading of investment risks," and gives examples (e.g. single-investor segregated portfolios, SPCs, AIVs) of how these concepts should or should not be treated as bringing an entity within the private fund definition.

Registration Matters Covered

• Submission: How and where to submit applications, via CIMA's REEFS portal.
• Requirements: What documents and fees are required.
• Auditor appointments: How incomplete auditor appointments are handled.
• Fee structure: The fee structure during and after the transition period, which ends 7 August 2020.

Ongoing Obligations Once Registered

• Audits and filings: Annual audits, filing of audited accounts and the Fund Annual Return (FAR).
• Valuation: Annual asset valuation.
• Cash monitoring: Cash monitoring procedures.
• AIVs and liquidation: Treatment of Alternative Investment Vehicles (AIVs) and funds already in liquidation before the transition period ends.

The document applies to closed-ended and other collective investment vehicles (companies, unit trusts, partnerships) that meet the PFL's private fund definition, including segregated portfolio companies and their underlying portfolios, and AIV structures. It is guidance only -- it does not alter the PFL itself but explains CIMA's expected approach to registration, supervision and enforcement under it.

Key obligations

• Private funds meeting the PFL definition must register with CIMA via the REEFS electronic portal, submitting the REEFS Application Form, certificate of incorporation/registration, constitutive documents (or offering document/summary of terms/marketing materials where applicable), auditor's letter of consent, administrator's letter of consent (if applicable), structure chart, and application fee.
• If a fund's CIMA-approved local auditor has not been finalized at registration, the auditor's letter of consent must still be submitted to CIMA prior to the filing of the fund's first set of audited accounts.
• Funds registering during the transition period (ending 7 August 2020) must pay a $300 application fee with no annual registration fee; funds registering after the transition period must pay the $300 application fee plus a $3,500 annual registration fee.
• A Private Fund must have its accounts audited annually by a CIMA-approved auditor and must submit the audited accounts together with the Fund Annual Return (FAR) to CIMA within six months of the end of each financial year, including for the 2020 financial year (or within any extension CIMA allows).
• A Private Fund must value its assets in accordance with its valuation policy, with valuations carried out at least annually.
• A Private Fund must ensure cash monitoring is conducted, either internally by the investment manager (with independent third-party verification, e.g. by the auditor) or by an appointed third-party service provider such as an administrator or custodian.
• Companies applying as Private Funds (and general partners/corporate directors that are companies) must have a minimum of two natural person directors.
• Investment compartments that are separate legal entities meeting the private fund definition must be separately registered under the PFL; changes to AIV information collected at registration must be reported to CIMA as part of the fund's ongoing obligations.
• A Cayman AIV under a non-Cayman main private fund that meets the private fund definition must be registered under the PFL (group registration option available).

Applies to

private funds (companies, unit trusts, partnerships), segregated portfolio companies and segregated portfolios, Alternative Investment Vehicles (AIVs), fund operators/investment managers, auditors approved by CIMA, fund administrators

Deadlines

• 7 August 2020: End of the transition period; funds registering during this period pay only a $300 application fee with no annual registration fee, while funds registering afterward pay the $300 application fee plus a $3,500 annual registration fee.
• within six months of the end of each financial year: Private Funds must submit audited accounts together with the Fund Annual Return (FAR) to CIMA, including for the 2020 financial year, unless CIMA grants an extension.
• prior to the filing of the fund's first set of audited accounts: If a fund's auditor appointment was not finalized at registration, the auditor's letter of consent must be submitted to CIMA by this point.