Regulatory Policy on Licensing Mutual Fund Administrators (September 2018)

Summary

This is CIMA's Regulatory Policy on Licensing Mutual Fund Administrators (September 2018), which sets out the criteria the Authority applies when assessing applications for a Mutual Fund Administrators Licence (MFAL) or a Restricted Mutual Fund Administrators Licence (RMFAL) under sections 11 and 12 of the Mutual Funds Law. It applies to any person seeking to carry on mutual fund administration in or from within the Cayman Islands, and explains that such activity cannot be conducted without CIMA's prior approval.

Assessment Criteria

Fitness and propriety: Fitness and propriety of directors/senior management.
Ownership and control: Transparency of ownership and control.
Financial resources: Financial resources, including a minimum net worth requirement for MFAL applicants.
Track record and business plan: Track record and a five-year business plan.
Internal systems/controls: Internal systems/controls including AML/CFT.
Record-keeping: Record-keeping requirements.
Other criteria: Licensing categories, physical presence requirements in the Islands, permissible legal structures, and specific conditions for RMFAL holders, such as needing prior approval for each fund they administer.

Ongoing Requirements

Beyond the application stage, the policy imposes ongoing requirements on licensees, notably around annual audited financial statement filings, physical presence/staffing, and restrictions on legal structure and use of registered agents. It should be read alongside the Mutual Funds Law, the Mutual Fund Administrators Licence (Applications) Regulations 2001, AML Regulations/Guidance Notes, and other CIMA rules and statements of guidance.

Key obligations

Persons seeking to conduct mutual fund administration in or from within the Cayman Islands must obtain CIMA's prior approval/licence before doing so.
Applicants must submit a written application accompanied by the documents/information set out in the Schedule to the Regulations, plus the prescribed fee.
Applicants must demonstrate fitness and propriety of directors and senior management, with at least two directors (for corporate applicants) each generally having a minimum of five years' relevant experience, and the business conducted by at least two individuals with sound fund administration experience.
Any changes in directors and senior officers must be approved by the Authority.
Applicants must provide a corporate chart showing all entities under common ownership or management, and Personal Questionnaires for shareholders holding 10% or more of shares/voting power (or the ten largest shareholders if none exceed 10%).
MFAL applicants must prove a minimum net worth of US$400,000 (or equivalent), unless waived by CIMA; RMFAL applicants' net worth is assessed based on nature, scale and complexity of business.
Applicants must provide a detailed five-year business plan covering rationale, background, financial plan, pro forma financial statements, risk management strategy, marketing strategy, investment policy and remuneration plan.
Applicants must provide a written commitment to an independent audit function and, where there are two or fewer shareholders, a succession plan covering death or incapacity of shareholders.
Applicants must demonstrate adequate record-keeping systems and reasonable access for the Authority to records at all reasonable times, generally maintaining books and records in the Islands unless an exception is justified.
All mutual fund administrators must have their accounts audited annually by a local auditor and file audited accounts with CIMA within six months of the end of the financial year, pursuant to section 20 of the MFL, and applicants must supply an Auditor's Letter of Consent.
MFAL applicants must have a principal office in the Islands and two individuals or a body corporate resident/incorporated in the Islands as agent; agents must have genuine physical presence and not provide solely corporate secretarial services.
RMFAL applicants must have a registered office in the Islands, which may not be provided by the RMFAL holder itself.
Holders of an RMFAL must seek CIMA approval for each fund they intend to administer and may not act as registered office for another mutual fund administrator.
Applicants may be required to provide a formal legal opinion supporting how they meet licensing requirements, and to provide an undertaking to finance on-site inspections of books and records.

Applies to

mutual fund administrators, restricted mutual fund administrators, applicants for a Mutual Fund Administrators Licence (MFAL), applicants for a Restricted Mutual Fund Administrators Licence (RMFAL)

Deadlines

within six (6) months of the end of the financial year: Mutual fund administrators must file audited accounts with CIMA within six months of the end of their financial year, pursuant to section 20 of the MFL.
six (6) to eight (8) weeks: Typical timeframe for CIMA to process a licence application for MFAL or RMFAL, commencing once all required documentation, information and full fee have been received.