Retail Mutual Funds (Japan) Regulations (2018 Revision)

Summary

This is the consolidated 2018 Revision of the Retail Mutual Funds (Japan) Regulations, made under the Mutual Funds Law. It sets out a detailed regulatory regime for a specific category of Cayman Islands mutual fund: a fund licensed under section 4(1)(a) of the Mutual Funds Law that has made, or intends to make, a public offering of its securities in Japan (a "retail mutual fund"). Funds that were already offering publicly in Japan before 17 November 2003 are generally excluded unless they irrevocably elect in writing to be covered.

The regulations impose ongoing obligations on the retail mutual fund itself and on its key service providers - the administrator, custodian, investment adviser and auditor. These obligations cover the following areas:

• Disclosure: Disclosure of the fund's constitution and pricing information to investors.
• Reporting: Periodic and annual reporting to investors and to the Cayman Islands Monetary Authority (CIMA).
• Service provider notifications: Appointment and change-of-service-provider notification requirements, and delegation notification duties.
• Financial statements and audits: Minimum content requirements for financial statements and audits.
• Prospectus content: Detailed minimum content requirements for the fund's prospectus, including a mandatory CIMA disclaimer statement.

The document also contains savings and transitional provisions confirming that licences in force before the 31 August 2012 commencement date of an earlier amendment continue to have effect as if granted under this Revision. Overall this is a consolidated, revised regulatory text, not a new policy announcement, that operators, administrators, custodians, investment advisers and auditors of Japan-facing retail mutual funds must continue to comply with.

Key obligations

• A retail mutual fund must make its constitution available for inspection free of charge to investors or prospective investors, and provide copies on payment of reasonable costs.
• The fund's constitution must include specified provisions covering security rights/restrictions, valuation, pricing, issue/transfer/redemption terms, and auditor appointment.
• Issue and redemption/repurchase prices must be made available on request without charge at the administrator's office.
• A retail mutual fund must prepare and distribute an annual report to investors, including audited financial statements, within six months of the end of its financial year (or an earlier date specified in the prospectus).
• Where an administrator becomes aware of non-compliance with investment objectives or the constitution/prospectus, it must promptly report in writing to the operator and submit a copy to CIMA, and this must be summarized in the fund's next annual/interim report.
• An administrator must notify CIMA as soon as practicable of any suspension of subscriptions/redemptions or any intention to liquidate the fund.
• The operator must submit a written activity report to CIMA within twenty days after the end of the six-month period following each financial year end, containing specified fund data.
• The operator must submit an annual compliance declaration to CIMA confirming adherence to investment guidelines/restrictions and that the fund has not operated prejudicially to investors or creditors.
• A retail mutual fund must appoint and maintain an administrator approved by CIMA, and obtain CIMA's prior approval before changing administrator, giving written notice of the proposed change to CIMA, investors and other service providers at least one month in advance.
• A retail mutual fund must appoint and maintain a custodian regulated in the Islands, an equivalent legislation jurisdiction, or another CIMA-approved jurisdiction, and give at least one month's written notice of any proposed change of custodian to CIMA, investors and other service providers.
• An administrator delegating its functions must give prior written notification of the delegation to CIMA and immediate notice to the operator, other service providers and investors.
• Financial statements must be audited and prepared in accordance with the minimum requirements set out in Part VI, and auditors must be appointed/changed and provide consent in accordance with Part VII.
• The fund's prospectus must contain the extensive minimum content set out in regulation 37, including a mandatory prescribed CIMA disclaimer statement.

Applies to

retail mutual funds, administrators, custodians, investment advisers, auditors, operators of mutual funds

Deadlines

• within six months of the end of its financial year: Retail mutual fund must prepare and distribute annual report to investors, including audited financial statements.
• within twenty days after the end of the six month period following the end of each financial year: Operator must submit a written activity report on the fund to CIMA.
• not less than one month before such change: Written notice of any proposed change of administrator must be given to CIMA, investors and other service providers.
• not less than one month prior to such change: Written notice of any proposed change of custodian must be given to CIMA, investors and other service providers.
• annually: Operator must submit an annual compliance declaration/statement to CIMA.
• 31st August, 2012: Commencement date of the Retail Mutual Funds (Japan) (Amendment) Regulations, 2012, from which existing licences continue in force as if granted under this Revision.

Related documents

• Retail Mutual Funds (Japan) Regulations (2023 Revision) replaces this document