CIMA Rule on Contents of Offering Documents
The Cayman Islands Monetary Authority (“CIMA”) recently issued its Rule on the Contents of Offering Documents of Regulated Mutual Funds (the “Rule”). All open-end mutual funds need to ensure that, going forward, their offering documents contain the information as prescribed in the Rule.
As such, the Rule applies to the following mutual funds regulated under the Mutual Funds Law (as amended) (the “MFL”):
- Licensed mutual funds (regulated under section 4(1)(a) of the MFL);
- Administered mutual funds (regulated under section 4(1)(b) of the MFL);
- Registered mutual funds (regulated under section 4(3) of the MFL); and
- Limited investor funds (regulated under section 4(4) of the MFL).
However, closed-end private funds are not within scope of the Rule, as these are not considered mutual funds, but are separately regulated under the Private Funds Law (as amended). Private funds are not required to have an offering document.
Under section 4(6) of the MFL, mutual funds are required to have an offering document (i) describing the equity interests offered therein in all material respects and (ii) containing such information as is necessary to enable a prospective investor to make an informed decision as to whether or not to subscribe for the equity interests. This section has been further substantiated in the – binding – Rule.
In the Rule, CIMA specifies what kind of information relating to the mutual fund must be included in the offering document. This concerns, inter alia:
- The name and address of the fund, its date of incorporation or establishment and its financial year end;
- The specifics of the fund’s operators (such as the directors of a company or the general partner of a limited partnership);
- The name, address and further details of the administrator, auditor, custodian, legal advisor and prime broker, insofar applicable;
- The investment objective and investment policy as well as any investment restrictions;
- The possibility to declare any distributions;
- The material risks (including any borrowing powers of the fund);
- The details of the equity interests, including the rights and restrictions attached thereto;
- The procedures and conditions for the subscription and redemption of equity interests (including any suspension possibilities);
- The manner of calculation of the remuneration of the fund’s service providers;
- The process for calculating the net asset value, including a disclosure on any conflicts of interest of the investment manager in the pricing of the fund’s portfolio;
- The determination of subscription and redemption prices as well as the frequency of subscriptions and redemptions;
- The financial year end and the reporting standards to be adopted;
- The nature and frequency of reports to be provided to investors; and
- The statement, in the form as stated in the Rule, that CIMA (i) has not assessed the performance or creditworthiness of the fund and (ii) does not verify the correctness of any statement or opinion in the offering document.