Regulatory Policy - Exemption from Audit Requirement for a Private Fund (March 2022)

Summary

This is a CIMA Regulatory Policy (March 2022) that sets out the criteria and process for a registered Private Fund to obtain an exemption (waiver) from the statutory requirement to have its accounts audited annually under section 13(1) of the Private Funds Act. It applies only to Private Funds that have actually received capital contributions from investors and are therefore subject to the audit requirement; funds that have never received capital contributions are outside Part 3 of the PFA and do not need to apply for an audit waiver, though they must still file a declaration confirming no capital contributions have been received.

CIMA will only grant audit exemptions in exceptional circumstances, since funds that have launched (i.e., received investor capital) are expected to comply with the audit requirement. The policy lists specific scenarios where an exemption may be considered, and for each scenario it specifies the supporting documents or information required, such as an operator's affidavit, liquidators' reports, a third-party liquidator's report covering specified matters, or deregistration-related information.

• Unsuccessful capital raising leading to fund unwind.
• Inability to obtain audited accounts due to bankruptcy/legal/regulatory proceedings.
• Compulsory liquidation.
• Voluntary liquidation with a qualifying third-party liquidator.
• Transfer to another jurisdiction within six months of the last audited financial year end.
• Dissolution by merger within six months of the last audited financial year end.

On process mechanics: an application fee under the Monetary Authority Act is payable on submission. CIMA may extend a fund's first audit period up to 18 months from registration, or its last audit period up to 18 months from the last audited year end, and may request additional information if a fund seeks exemption for two consecutive years. The document does not itself state a formal legal status or effective date beyond its March 2022 issuance and is informational/procedural guidance rather than a binding rule with a compliance deadline.

Key obligations

• Private Funds seeking an audit waiver must submit an application with a written confirmation from an operator that the exemption will not contravene the fund's constitutive documents or marketing materials, or prejudice investors/creditors.
• The prescribed Monetary Authority Act application fee must be paid upon submission of the audit waiver application.
• Private Funds relying on the no-capital-contributions exemption (rather than an audit waiver) must file a declaration with the Authority attesting that they have not received capital contributions, as required by the Private Funds (Amendment) Regulations, 2021.
• A fund seeking exemption due to unsuccessful capital raising must submit an operator's affidavit confirming insufficient capital raised, no further contributions being accepted, and return of all contribution monies to investors.
• A fund unable to obtain audited accounts due to bankruptcy, legal/regulatory enforcement, or compulsory liquidation must submit agreed-upon procedures reports and liquidators' reports in lieu of audited accounts.
• A fund in voluntary liquidation with a third-party liquidator must submit a liquidator's report covering contributions/withdrawals review, bank reconciliations, shareholder register agreement with NAV, fee recalculations, creditor/accrual review, solvency review, and compliance reporting.
• A fund transferring to another jurisdiction within six months of its last audited financial year end must provide the information required under CIMA's deregistration guidance.
• A fund dissolving by merger within six months of its last audited financial year end must provide deregistration information, and if it is the surviving CIMA-regulated fund, must also provide audited financial statements at its next audit period including the dissolving fund's financial information.
• If a Private Fund applies for an audit exemption for two consecutive years, it may be required to provide additional information to the Authority explaining its inability to produce audited accounts.
• A fund seeking an audit waiver in connection with deregistration must submit the documents and fees specified in the Authority's separate deregistration guidance.

Applies to

Private Funds (registered under the Private Funds Act)

Deadlines

• within six months of the end of that financial year: Statutory deadline under section 13(4) of the PFA for a Private Fund to send its audited accounts to the Authority, unless extended by the Authority.
• maximum of 18 months from the date of registration: Maximum extension the Authority may consider for a Private Fund's first audit period.
• maximum of 18 months from the date of the last financial year end for which an audit has been filed: Maximum extension the Authority may consider for a Private Fund's last audit period.
• within six (6) months of its last financial year end for which an audit has been filed, or is due to be filed: Timeframe within which a fund transferring to another jurisdiction or dissolving by merger may qualify for an audit exemption consideration.