Regulatory Policy - Local Audit Sign-off for Mutual Funds and Mutual Fund Administrators

Summary

This is a CIMA regulatory policy, dated February 2021, that sets out the Authority's requirement that regulated mutual funds and licensed mutual fund administrators have their accounts audited and signed off by a locally approved auditor. It implements sections 8(1)/8(2) and 20(1)/20(2) of the Mutual Funds Act, which require annual audited accounts prepared by an approved auditor and filed with CIMA.

The policy clarifies that only auditors with a genuine physical presence in the Cayman Islands (adequate staff, facilities, books and records) will be approved as auditors of record, though not all audit work needs to be performed locally or solely by that local auditor.

• Scope: Applies to mutual funds and mutual fund administrators regulated under the Mutual Funds Act, but does not extend to foreign domiciled funds administered in the Cayman Islands that are not otherwise registered as foreign companies doing business there.
• Auditor reporting obligations: Documents auditors' statutory obligations to report certain adverse findings to CIMA.
• Auditor removal: Describes the process for revocation or removal of an approved local auditor.

• Appointment: A local auditor must be appointed from CIMA's Approved Auditors list at the time of registration or licensing.
• Filing deadline: Audited accounts must be submitted within six months of financial year end, or such extension as CIMA allows.
• Auditor notification duty: Auditors must immediately notify CIMA in writing if they obtain information or suspect insolvency, prejudicial winding-up, inadequate accounting records, fraud, or non-compliance with the MFA, Monetary Authority Act, or AML Regulations.
• Entity notification duty: Entities must notify CIMA in writing with reasons if a local auditor is removed and propose a replacement from the approved list.

Key obligations

• MFs and Mutual Fund Administrators must have their accounts audited annually by an auditor approved by CIMA, with physical presence in the Cayman Islands.
• Audited accounts must be prepared in accordance with IFRS or US/Japan/Switzerland/non-high-risk jurisdiction GAAP.
• Audited accounts must be submitted to CIMA within six months of the end of the fund's or administrator's financial year, or within such extension as CIMA allows.
• When applying to be registered or licensed, MFs and Mutual Fund Administrators must appoint a local auditor from CIMA's list of Approved Auditors, including submitting the auditor's name/address and a letter of consent from the auditor confirming awareness of its responsibilities under the MFA.
• Auditors must immediately give CIMA written notice, with reasons, if they obtain information or suspect the MF/Administrator is insolvent or likely to become so, is winding up prejudicially to investors/creditors, lacks adequate accounting records, is acting fraudulently/criminally, or is otherwise non-compliant with the MFA, Monetary Authority Act, or AML Regulations.
• Where a local auditor is removed, the MF or Mutual Fund Administrator must notify CIMA in writing of the reasons for removal and the name of the proposed new auditor.

Applies to

Mutual Funds, Mutual Fund Administrators, Auditors

Deadlines

• within six months of the end of that financial year: MFs and Mutual Fund Administrators must submit their audited accounts to CIMA within six months of the end of the relevant financial year, or such extension as CIMA allows.