Administrative Termination FAQs (2017-10-17)

Summary

This is a Cayman Islands Monetary Authority (CIMA) general industry notice from October 2017 presenting a set of FAQs about its administrative termination process for mutual funds. It explains how CIMA cancels Mutual Fund Licences or Certificates of Registration under section 30(16) of the Mutual Funds Law (2015 Revision) where funds have long-outstanding de-registration requirements, and clarifies the practical consequences of such cancellation.

• Outstanding fees after cancellation: A canceled fund is not liable for outstanding fees, since it is removed from regulatory supervision.
• Payment of annual fees alone: Payment of annual fees alone does not protect a fund from administrative termination if de-registration documents are still outstanding.
• Action against operators or service providers: Yes, separate regulatory action is possible if wrongdoing or fitness-and-propriety concerns arise.
• Reversal of cancellation decisions: Reversal is possible only in exceptional circumstances.

The notice also describes CIMA's process during the six-month period referenced in its September 2016 industry advisory: CIMA will contact funds in 'Licence Under Termination' (LUT) or 'Licence Under Liquidation' (LUL) status to seek outstanding documents/fees and progress updates, and funds are expected to proactively provide timely updates. It sets out the expectation that extension requests be made before the six-month period expires, with ongoing updates justifying the delay.

Finally, it confirms that funds in LUT/LUL status must still file audited accounts, unless an audit waiver applies, up to the commencement of winding up or the date of final distribution, per section 7.1 of the Regulatory Procedure - Cancellation of Licences.

Key obligations

• Funds in LUT or LUL status are expected to provide timely updates to CIMA on the progress of their termination/winding down during the six-month period referenced in the September 2016 Advisory.
• A fund seeking an extension of the six-month period must request the extension prior to its expiration, failing which CIMA will cancel the Certificate of Registration or Mutual Fund Licence as an administrative action.
• Extension requests must include ongoing updates with sufficient detail on valid reasons for delay, the status of outstanding requirements, and timelines for prompt closure of the termination.
• Unless a fund qualifies for an audit waiver, it must provide audited accounts from the date of its last filed financial year end through either the commencement of winding up (if a third-party liquidator has been appointed) or the date of final distribution (if no liquidator has been appointed).

Applies to

mutual funds, funds in Licence Under Termination (LUT) status, funds in Licence Under Liquidation (LUL) status, fund operators, service providers to funds

Deadlines

• six month period: CIMA contacts funds in LUT/LUL status during this period (per the September 2016 Advisory) to seek outstanding documents/fees and progress updates; funds are expected to provide timely updates throughout.
• prior to the expiration of the six month period: Deadline by which a fund must request an extension to avoid administrative cancellation of its Certificate of Registration or Mutual Fund Licence.