Cayman Fund Corporate Governance Framework

CIMA governance framework

CIMA has issued a Statement of Guidance on Corporate Governance – Mutual Funds and Private Funds (SOG) which came into effect on 14 April 2023.

This article provides an overview of the core elements of the new SOG which applies to all funds regulated under the Mutual Funds Act (Revised) of the Cayman Islands (Mutual Funds Act) and the Private Funds Act (Revised) of the Cayman islands (Private Funds Act) (together, Regulated Funds). CIMA has also issued the following regulatory measures which are applicable to regulated entities, including investment funds:

(i) a new Rule on Corporate Governance for Regulated Entities;

(ii) a new Rule and Statement of Guidance on Internal Controls for Regulated Entities; and

(iii) an amended Statement of Guidance on Nature, Accessibility and Retention of Records.

Directors of a Cayman Regulated Fund should constitute an appropriate number of individual(s) as required by applicable acts and regulations in the Cayman Islands with a diversity of skills, background, experience and expertise to ensure that there is an overall adequate level of competence at the Directors level the governing body should meet at least annually, and more frequently where the circumstances or size, complexity, structure, nature of business and risk profile of the Regulated Fund's operations so require.

Directors should have a written conflicts of interest policy commensurate with the size, complexity, structure, nature of business and risk profile of the Regulated Fund's operations. CIMA has helpfully confirmed that such policy may be documented in the relevant Regulated Fund's constitutional documents, offering documents or marketing materials (as applicable), which is consistent with industry practice disclosures of conflicts of interest must be documented in a manner consistent with a Regulated Fund's constitutional documents, offering documents or marketing materials (as applicable).

Directors should record in their meeting minutes, all disclosed conflicts of interest relevant to a meeting during which a matter is being decided or approved – and all conflicts of interest should be disclosed at least on an annual basis

Directors must exercise independent judgement, always acting in the best interests of the Regulated Fund (other than where lawfully permitted or required to consider other interests) and taking into consideration the interests of the Regulated Fund's investors as a whole.

Directors must make relevant enquiries where issues are raised on matters fully within the scope of the Directors’ responsibility and be satisfied that an appropriate and timely course of action is being taken and, specifically, that any concerns raised and related corrective action are documented.

Directors should communicate adequate information to the Regulated Fund’s investors, including any material changes to the Regulated Fund. In addition, Directors should communicate and evidence communication of material changes relating to investor rights to the investors of the Regulated Fund at the time the changes are being made or on an ongoing basis upon registration or licensing of a Regulated Fund, and on a continuing basis, the Directors of such Regulated Fund are responsible for ensuring or receiving confirmation that the constitutional documents, offering documents or marketing materials, as applicable, of the Regulated Fund comply with applicable acts, regulations, and regulatory measures issued by CIMA from time to time.

Directors are responsible for approving the appointment and removal of the Regulated Fund’s service providers and the terms of the contracts with each of such service providers and, where they delegate this authority to another service provider, the Directors will nonetheless retain overall responsibility for overseeing any outsourced functions. Directors are responsible for ensuring that the Regulated Fund's investors and CIMA are notified of any material changes to these appointments.

Directors should review the Regulated Fund's material service provider contracts (the prior guidance contained in the 2013 SOG provided for a review of all of the Regulated Fund's service provider contracts) to ensure that any outsourced or delegated roles and responsibilities are clearly defined and that, where appropriate, any such responsibilities are clearly divided as between the Regulated Fund's service providers.

Directors should also ensure that they have a thorough understanding of the scope and nature of the responsibilities of each of the Cayman Regulated Fund's service providers Directors are responsible for ensuring that a full, accurate and clear written record is kept of all Operators' meetings and/or determinations and that, in each case, these records should address certain key matters, including a declaration of conflicts of interest.

Duties of Directors

The SOG provides guidance on Directors' duties, including that a Director:

must exercise independent judgement, always acting in the best interests of the Regulated Fund (other than where lawfully permitted or required to consider other interests) and taking into consideration the interests of the Regulated Fund's investors as a whole.

must make relevant enquiries where issues are raised on matters fully within the scope of the Directors' responsibility and be satisfied that an appropriate and timely course of action is being taken; and that all concerns raised and related corrective actions are documented should communicate adequate information to the Regulated Fund's investors, including any material changes to the Regulated Fund and should communicate (and evidence communication of) material changes relating to investor rights to the investor(s) in the Regulated Fund at the time such changes are being made or on an ongoing basis must operate with due skill, care and diligence and must always act honestly and in good faith must oversee and supervise each Regulated Fund for which it functions and all matters falling within the scope of its related responsibilities and, before taking on any additional Regulated Funds, should ensure that it is able to perform its functions and duties in a responsible and effective manner (and in accordance with applicable acts, regulations and regulatory measures) upon registration or licensing of a Regulated Fund with CIMA, and on a continuing basis, should ensure or receive confirmation:

(i) that the constitutional documents, offering documents and/or marketing materials (as applicable) of the Regulated Fund comply with applicable acts, regulations and regulatory measures as issued by CIMA from time to time; and

(ii) that the constitutional documents, offering documents and/or marketing materials (as applicable) of the Regulated Fund clearly describe (a) the investment strategy and conflicts of interest policy of the Regulated Fund; and (b) the equity and/or investment interests in the Regulated Fund in all material respects (and contain such other information is necessary to enable a prospective investor to make an informed decision as to whether or not to subscribe for or purchase an equity and/or investment interest in the Regulated Fund) is responsible for approving the appointment and removal of the Regulated Fund's service providers and the terms of the contracts with each such service provider; and, where they delegate this authority to another service provider, the Director nonetheless retains overall responsibility for overseeing any outsourced functions and for ensuring that both investors in the Regulated Fund and CIMA are notified of any material changes to these appointments retains ultimate responsibility for functions delegated to service providers and should regularly monitor and supervise any such delegated functions should review all material service provider contracts to ensure that any outsourced or delegated roles and responsibilities are clearly defined and that, where appropriate, any such responsibilities are clearly divided as between each relevant service provider should ensure that the Regulated Fund's service providers are performing their functions in accordance with the terms of their respective contracts upon registration or licensing of a Regulated Fund with CIMA, and on a continuing basis, is responsible for regularly assessing the suitability and capability of its service providers should regularly verify or seek confirmation from its service providers that they are acting in accordance with the Regulated Fund's constitutional documents, offering documents and marketing materials, as applicable should regularly monitor whether the Regulated Fund's investment manager is performing in accordance with any defined investment criteria, investment strategy and restrictions should, as necessary and at all material times, inform itself of the Regulated Fund's investment activities, performance and financial position should review and approve the Regulated Fund's financial results and audited financial statements and regularly monitor the Regulated Fund's net asset valuation policy and whether the calculation of its net asset value is being calculated in accordance with such net asset valuation policy should ensure that it has sufficient and relevant knowledge and experience to carry out its duties as an Director of a Regulated Fund should assess whether it has, together with any other Director(s) of the Regulated Fund, sufficient and relevant collective knowledge and experience to perform the duties imposed upon the Director in relation to the Regulated Fund.

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Related insight

CIMA Fund Governance Guidance: Board Responsibilities

Official resources

CIMA investment fund regulatory measures