Statement of Guidance - Licensing - Mutual Funds

Summary

This is a CIMA Statement of Guidance setting out the licensing criteria the Authority applies when assessing applications for licensed mutual funds in the Cayman Islands. It explains the standards CIMA expects funds and their operators to meet both at the application stage and on an ongoing basis, covering fitness and propriety of directors and management, ownership and control arrangements, internal systems and controls, record keeping, anti-money laundering compliance, adherence to industry standards, and supporting documentation such as auditor and administrator letters of consent.

The guidance applies to entities seeking or holding a mutual fund licence from CIMA, and by extension to the directors, investment managers, advisors, administrators and auditors associated with such funds. It reiterates that these entities must be controlled and managed by fit and proper persons, maintain adequate governance and internal controls, keep accessible and accurate records, and comply with money laundering regulations and relevant industry standards.

Practical Requirements

• Board composition: Funds must have appropriate board composition, generally at least two directors, with limited exceptions for approved corporate directors.
• Notification: Funds must notify CIMA of changes in directors and key service providers.
• Internal controls: Funds must have compliance manuals and internal controls in place.
• Audit: Annual accounts must be audited by a local auditor.
• Consent letters: Funds must supply consent letters from auditors and administrators as part of the licence application.
• Disclosure: Funds must disclose any stock exchange listing status.

Key obligations

• Applicants must demonstrate that the fund is controlled and managed by fit and proper persons (honesty, integrity and reputation; competence and capability; financial soundness).
• A minimum of two individuals must be named as directors for all funds, unless a corporate director is appointed; if a corporate director is used, it must be licensed by the Authority or otherwise acceptable, and a current register of directors must be filed with the licence application.
• Any change in directors must be approved by the Authority.
• Day-to-day operation of the fund should be conducted by at least two individuals.
• The Authority must be notified of any change in investment managers, advisors and other service providers within the fund structure.
• The fund structure must maintain compliance and procedural manuals and internal controls to ensure effective management and legal compliance.
• Management information and records must be timely, accurate and accessible to the Authority; prior Authority approval is required to locate records overseas.
• All licence holders must comply with the Money Laundering Regulations, 2000.
• Licensees are expected to comply with the professional/industry standards applicable to their sector.
• Licensees must have their accounts audited annually and signed off by a local auditor in accordance with the Local Audit Sign Off rule; applicants must supply an auditor's letter of consent.
• Applicants required to appoint an administrator must supply an Administrator's letter of consent naming the fund, confirming acceptance of appointment and summarising services to be provided.
• Applicants must include evidence of stock exchange listing where applicable, or provide confirmation once a pending listing is approved.

Applies to

mutual funds, licensed funds, fund directors, investment managers, advisors, fund administrators, auditors

Deadlines

• annually: Licensees must have their accounts audited and the audit report signed off by a local auditor each year.