CIMA rules for regulated funds — Cayman Islands
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This page summarises four CIMA rules relevant to Cayman regulated funds. The NAV and offering document rules apply to every mutual fund licensed or registered under section 4 of the Mutual Funds Act. The segregation rule applies to the same funds, except those under the Retail Mutual Funds (Japan) Regulations. The fourth sets governance duties for the board of every entity CIMA regulates, private funds included. All four are issued under section 34 of the Monetary Authority Act, and a breach engages CIMA's Enforcement Manual.
Scope and the core mechanism
The three fund rules share one scope clause. Each applies to funds "licensed or registered under s. 4" of the Mutual Funds Law (2020 Revision), now the Mutual Funds Act (NAV rule 3.1; offering document rule 3.1). The segregation rule excludes funds subject to the Retail Mutual Funds (Japan) Regulations (segregation rule 3.1).
The governance rule reaches wider. It applies to the governing body of all regulated entities, scaled to size, complexity and risk (rule 3). Mutual funds and private funds read it with CIMA's Statement of Guidance on corporate governance for those funds (rule 1.2).
In practice: a private fund registered under the Private Funds Act sits outside the scope clauses of the three mutual-fund rules. Its statutory valuation, safekeeping and cash-monitoring duties are in sections 16 to 18 of that Act. CIMA's separate rules for private funds are not covered here. The governance rule applies to both.
Key provisions
| Provision | What it says | The practical point |
|---|---|---|
| Calculation of Asset Values, July 2020. | ||
| NAV policy (rules 5.1 to 5.4). | A written NAV Calculation Policy, disclosed in the offering document, based on IFRS or US, Japanese, Swiss or non-high-risk-jurisdiction GAAP. NAV is calculated at least quarterly. | The NAV method must match the accounting standard used for the audited accounts (rule 5.3). |
| Valuation inputs (rules 5.5 and 5.6). | Unadjusted market prices come first. For hard-to-value assets, inputs seen in the market come before unobservable ones. Pricing models must be tested and calibrated. | A model need not chase every data point, but it must use all information reasonably available at the NAV date (rule 5.6.2). |
| Independence (rules 5.8 to 5.11). | By default, NAV is calculated by a service provider independent of the investment manager and the operators. Where the manager sources prices, it supplies the supporting information. The calculator takes reasonable, proportionate steps to verify the facts and the price, as far as reasonably possible (rule 5.9). | The manager may calculate or assist only if the offering document says so and explains why another service provider could not (rule 5.10). Where NAV is not calculated independently, CIMA may require an auditor or independent third party to verify valuations (rule 5.11). |
| Oversight (rules 5.13 and 5.14). | The party that calculates NAV sends it straight to each investor on the register. The operators approve and review the policy and any pricing models at least once a year. | Deviations from the policy that affect NAV are disclosed to investors at once and agreed by the operators in advance (rule 5.7). |
| Contents of Offering Documents, May 2020. | ||
| Fund information (rule 5.1). | Twenty-two items, including dealing and suspension terms, investment policy, material risks, the NAV policy, fees and conflicts of interest. | Item (xviii) requires a statement of the power to enter side letters that improve one investor's ability to redeem, or to decide whether to redeem. It covers terms that could put others in the same class at a material disadvantage. |
| CIMA statement (rule 5.1(xxii)). | A set statement that a CIMA licence or registration is no obligation of CIMA on performance or creditworthiness. | It also states that CIMA is not liable for the fund's losses or for statements in the offering document. |
| Service providers (rules 5.2 to 5.9). | Names and addresses of the operator, the investment manager and its principals, the auditor, the administrator, the custodian and the legal advisers. For the principal prime broker, its name only. | The custodian and principal prime broker entries name the regulator each operates under, if any (rules 5.6 and 5.7). |
| Segregation of Assets. | ||
| Safekeeping (rules 5.1 to 5.4). | The fund appoints a service provider for safekeeping. The portfolio is kept apart from, and booked separately to, each service provider's own assets. | A licensed fund must also make sure, by contract, that any service provider holding or managing the portfolio is regulated. The regulator may be CIMA, a recognised overseas regulator or one CIMA approves (rule 5.4). |
| No financing (rules 5.5 and 5.6). | No service provider may use the portfolio to finance its own or any other operations. | Transfer and reuse of assets is an exception to that ban only where the fund consents. The arrangement and its maximum level must be disclosed before investors invest, and material changes disclosed too (rule 5.6.5). |
| Title check (rule 5.8). | The operators make sure the fund's title to its assets is checked and recorded. An administrator or another independent third party does this. | The manager, an operator or a person in a defined control relationship with either may do it instead. The task must then sit apart from portfolio management. Failing that, the conflicts must be identified, managed, monitored and disclosed to investors (rule 5.8.2). |
| Corporate Governance for Regulated Entities, April 2023. | ||
| Notification (rule 5.6.1). | The board tells the regulator by email within ten days of any substantive issue that could materially affect the entity. | It must also review strategy and policies at least once a year and amend or re-adopt them (rule 5.6.2). |
| Compliance reporting (rule 5.8.1). | The board has a compliance committee or person reporting directly to it. | A fund can meet this with a direct report from its AML compliance officer or a suitably qualified compliance or legal professional, subject to its size and risk. Reports come at least annually and on a timely ad hoc basis as appropriate (footnote 4). |
| Meetings and minutes (rules 5.13.3 to 5.13.6). | The governing body meets at least annually. Minutes record attendance, dissent, declared conflicts and the substance of matters considered. | Directors and senior managers also confirm in an annual written declaration that all conflicts have been declared (rule 5.10.5). |
Amendment history
| Date | Instrument | What changed |
|---|---|---|
| May 2020 | Rule: Contents of Offering Documents. | Set the minimum contents of a regulated mutual fund's offering document under section 4(6) of the Mutual Funds Law. |
| July 2020 | Rule: Calculation of Asset Values. | Set the written NAV policy, the quarterly minimum and independent calculation as the default. |
| Date not stated | Revised Rule: Segregation of Assets. | The file is named as a revised rule; the document's own title is "Segregation of Assets – Regulated Mutual Funds". Its issue date is listed under To verify. |
| April 2023 | Rule: Corporate Governance for Regulated Entities. | Effective within six months of publication in the Gazette (rule 8.1). |
What it works with
The rules sit under the two fund statutes. The Mutual Funds Act creates the licensed and registered categories that the three fund rules attach to. The Private Funds Act carries its own valuation and safekeeping duties for closed-ended funds. The Cayman funds guide sets the rules beside both Acts: which regime applies, the CIMA routes and the yearly filings.
On NAV errors, the CIMA valuation rule sets a qualitative standard: NAV must be "free from material error" (rule 5.1). The NAV error correction matrix sets that standard beside the rules in other domiciles. The audited accounts and the Fund Annual Return follow on, with dates in the fund annual return deadlines.
In practice: where a manager prices hard-to-value assets, two of these rules engage at once. The offering document discloses the manager's role and the conflict (NAV rule 5.12; offering document rule 5.1(xiv) and (xvii)). The calculator takes proportionate steps to verify the manager's prices (NAV rule 5.9). The operators answer for the whole valuation process (NAV rule 5.14).
To verify
- Segregation rule date: the issue and effective date of the revised Segregation of Assets rule, from the Gazette notice.
- Governance rule start date: the Gazette publication date of the April 2023 rule, which fixes its effective date under rule 8.1.
- Statute references: that the rules' 2020 references to the Mutual Funds Law and Monetary Authority Law still match the current Acts.
- Private fund rules: which CIMA rules on NAV and asset segregation apply to registered private funds alongside sections 16 to 18 of the Private Funds Act.
- Statement of Guidance: the current version of CIMA's Statement of Guidance on corporate governance for mutual funds and private funds, named in governance rule 1.2.
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