Rule - Segregation of Assets - Registered Private Funds

Summary

This is a CIMA Rule that sets out how registered private funds must handle the segregation of fund assets. It applies to all private funds registered under section 7 of the Private Funds Law, 2020, other than Alternative Investment Vehicles, and is issued under section 34 of the Monetary Authority Law. It is intended to be read alongside CIMA's Rule on Contents of Marketing Materials of Registered Private Funds.

The core requirement is that a fund's Portfolio (its financial assets and liabilities, including investor funds and investments) must be segregated and accounted for separately from the assets of the fund's Manager, Operator(s), or any Section 17 Person (a party appointed to hold custodial fund assets). The overriding principle is that none of these parties may use the Portfolio to finance their own or any other operations.

• Paying redemption proceeds
• Paying investor-related fees
• Paying properly disclosed fund expenses
• Carrying out legitimate investment transactions
• Transfer and reuse of assets by a Section 17 Person, where properly disclosed to investors in advance

The Rule lists the activities above as ones that do not, by themselves, count as improper financing of operations. Operators are specifically required to establish, implement and maintain (or oversee the establishment of) strategies, policies, controls and procedures to ensure compliance with these segregation rules, tailored to the size, complexity and nature of the fund's activities and investors.

Breach of the Rules exposes a fund and relevant parties to CIMA's enforcement powers under its Enforcement Manual, the Private Funds Law and the Monetary Authority Law. The document does not state a specific effective date or transition period.

Key obligations

• A registered private fund's Portfolio must be segregated and accounted for separately from the assets of its Manager, Operator(s), or any Section 17 Person.
• A Fund must ensure that any Manager, Operator or Section 17 Person holding or managing the Portfolio complies with the segregation requirement.
• A Fund must ensure that no Manager, Operator or Section 17 Person uses the Portfolio to finance its own or any other operations.
• Where a Section 17 Person's arrangements allow for transfer and reuse of assets, the Fund must ensure this (and the maximum permitted level) is disclosed in offering documents or otherwise to investors before they invest, with material changes also disclosed.
• The Operator(s) of a Fund must establish, implement, and maintain (or oversee the establishment, implementation and maintenance of) strategies, policies, controls, and procedures to ensure compliance with these Rules, appropriate to the fund's size, complexity, nature of activities and investors.

Applies to

Registered Private Funds (registered under section 7 of the Private Funds Law, 2020), Managers of Private Funds, Operators of Private Funds, Section 17 Persons (custodians of Custodial Fund Assets)

Related documents

• This document is made under Monetary Authority Law (2020 Revision)