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Carne welcomes CIMA consultation on governance of Cayman Islands funds

Carne Group, the global fund governance specialist, has welcomed the consultation initiative and the decision by the Cayman Islands Monetary Authority (CIMA) to enhance and clarify corporate governance standards for the Cayman Islands funds community.

The proposals include the extension of the current Statement of Guidance on Corporate Governance to all registrants, including registered mutual funds “to reinforce fundamental corporate governance standards expected from entities regulated and supervised by the Authority”.

The draft Statement of Guidance has also been enhanced to clarify the role and duties of Cayman Islands fund directors in accordance with existing common law principles and international supervisory standards.

CIMA has requested input as to whether the Statement of Guidance should apply across all sectors of the financial industry or should be tailored to relevant sectors.

The proposals also include a public database to facilitate due diligence, and increase transparency.

CIMA also proposes the extension of the Companies Management Law to apply to all directors, irrespective of their location. In particular, CIMA is proposing that directors with six or more appointments should be pre-approved and licensed. This brings sole practitioner individuals into the regulatory framework, and pre-approves employees of license-holders who act as directors. Those with fewer than six appointments must at least register with CIMA if any of the appointments relate to a regulated entity. This registration will apply to the typical “investment manager director”, who often sits on the board of a fund which he also manages.

CIMA has commissioned an anonymous online survey through Ernst & Young which will focus on certain issues, including the hot-button issue of whether limits should be imposed on the number of appointments.

CIMA indicates in its consultation paper that there will be further future consultation regarding the use of corporate directors as opposed to individual directors, but that they welcome the industry’s initial thoughts on the subject.

Peter Heaps (pictured), managing director, Carne Cayman Islands, says: “These proposals represent a significant step forward for the Cayman Islands, as they will substantially enhance the levels of regulatory oversight of corporate governance in Cayman funds. They will help to bring the Cayman Islands funds regime more closely into step with accepted governance norms elsewhere in the world, enhancing this jurisdiction’s credibility and helping CIMA to provide a better investor protection framework.”

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