Securities Investment Business (EU Connected Fund (Alternative Investment Fund Managers Directive)) Regulations, 2016

Summary

This is a 2016 Cayman Islands regulation made under the Securities Investment Business Law that implements Cayman-specific rules mirroring the EU's Alternative Investment Fund Managers Directive (AIFMD) for so-called 'EU Connected' managers and funds. It applies to Cayman-based managers (whether licensed or exempt) that have EU connections because they manage or market funds into the EU, and to the Cayman Islands funds ('EU Connected Funds') they manage, where the manager qualifies as a 'Cayman Islands AIFM'.

Notification and Disclosure Regime

• Manager-level notification: EU Connected Managers must notify CIMA and provide specified information about their business, capital, programme of activity, and compliance intentions.
• Fund-level information: Managers must give further fund-level information for each EU Connected Fund, including investment strategy, offering documents, leverage policy, and depositary arrangements, among other items.
• Capital and own funds: Cayman Islands AIFMs must maintain minimum capital and own funds, calculated per a detailed Schedule, capped at CI$9 million.
• Conduct and risk rules: Cayman Islands AIFMs must comply with an extensive Schedule of AIFMD-equivalent conduct, risk management, valuation, delegation, depositary, disclosure, leverage, remuneration and asset-stripping rules for a 24-month post-acquisition period following control of a non-listed EU company.

Ongoing Obligations

• Breach notification: Prompt notification of breaches or anticipated breaches of capital requirements.
• Cessation notification: Notification of ceasing to be a Cayman Islands AIFM.
• Change notification: Notification of changes to previously submitted information.
• Annual compliance declaration: An annual compliance declaration tied to the financial year end.
• Attestation request: A right for non-licensee EU Connected Managers to request an attestation of status from CIMA for a fee.

The regime is intended to allow Cayman managers to demonstrate AIFMD-equivalent compliance so they can access EU marketing/management passporting or otherwise satisfy EU regulators and investors.

Key obligations

• EU Connected Managers required to notify under section 5(2)/5(2A) of the Law must provide CIMA with specified information (Member States of operation, commencement date, programme of activity, capital evidence, compliance declaration, fund names/jurisdictions) in the form designated by the Authority (reg 3).
• Managers seeking or holding an EU Passport must additionally provide remuneration policy information and delegation/sub-delegation arrangement details (reg 3(2)).
• For each EU Connected Fund, provide CIMA with fund name/jurisdiction, investment strategy, offering documents, and (if a feeder fund) master fund location; passport holders must also provide leverage policy, risk profile details, and depositary appointment details (reg 4).
• A Cayman Islands AIFM must at all times maintain capital equal to the greater of the Schedule requirement or the Financial Requirements and Standards Regulations requirement (reg 6(1)).
• Notify CIMA forthwith in writing of an actual or anticipated (within one month) breach of capital requirements, specifying remedial steps (reg 6(2) and Schedule para 2(8)).
• A licensee must inform CIMA in writing, and submit its licence certificate and related information, upon ceasing to be a Cayman Islands AIFM, to amend its licence (reg 7).
• Notify CIMA in writing of changes to previously submitted information within specified periods (7 days, 21 days, or immediately depending on the type of change) (reg 8).
• Within six months of financial year end, provide a declaration of compliance with regulations 3, 4 and 8, evidence of EU authorisation (if applicable), and a declaration of AIFMD compliance (reg 9).
• Comply at all times with the Schedule's AIFMD-equivalent conditions (capital, conduct of business, risk management, delegation, remuneration, depositary, disclosure, leverage, asset-stripping restrictions) to the extent required by the AIFMD (reg 10).
• Non-licensee EU Connected Managers seeking an attestation of status must pay a fee of CI$800 and supply prescribed information/declarations (regs 11-12).
• Notify CIMA within 21 days of any change to information provided for an attestation, or of ceasing to be an EU Connected Manager (reg 13).
• Provide CIMA with all information requested to demonstrate ongoing compliance with the Regulations and the AIFMD (reg 14).
• Following acquisition of control of a non-listed company, refrain for 24 months from facilitating, voting for, or failing to use best efforts to prevent certain distributions, capital reductions, or share buybacks (Schedule para 24).

Applies to

Cayman Islands AIFM, EU Connected Manager, licensees under the Securities Investment Business Law, EU Connected Funds

Deadlines

• within twenty-one days of the EU Connected Manager receiving its licence: Notification under regulation 3 or 4 for a manager newly licensed under section 5(2) of the Law.
• within three months of the commencement of these Regulations: Notification under regulation 3 or 4 for an existing licensee making a notification under section 5(2A) of the Law.
• forthwith / within one month: Notify CIMA forthwith where an AIFM believes it is in breach, or anticipates being in breach within one month, of capital requirements.
• within seven days: Licensee must inform CIMA in writing after ceasing to be a Cayman Islands AIFM, and submit licence amendment information.
• within seven days: Notify CIMA of a change in information originally provided under regulation 3.
• within twenty-one days: Notify CIMA of a change in information originally provided under regulation 4, or of commencing activities in respect of an EU Connected Fund after notification.
• immediately: Upon submitting an application for an EU Passport, provide the information required under regulation 3(1)(ff) and regulation 4.
• within six months of financial year end: Provide declarations of compliance and evidence of EU authorisation together with other annual filings.
• within twenty-one days: EU Connected Manager holding an attestation must notify CIMA of any change to information provided or of ceasing to be an EU Connected Manager.
• 24 months following acquisition of control: Restrictions on facilitating/voting for distributions, capital reductions or share buybacks by an acquired non-listed company (asset-stripping provisions).