Asian Investment Funds | Corporate Governance and Compliance

Jan 2024

As you are aware, the Cayman Islands Monetary Authority’s (CIMA) new Rule on Corporate Governance for Regulated Entities (CG Rule) has now come into effect. This builds on CIMA’s Statement of Guidance– Corporate Governance – Mutual Funds and Private Funds (CG SOG, together with the CG Rule, the CG Measures) by extending CIMA’s expectations for minimum expectations for sound and prudent corporate governance to providing clear, concise directives that create binding obligations for which any breach could lead to an administrative fine or regulatory enforcement action by CIMA.

At a minimum, the Governing Body¹ of a regulated fund (the Fund) is responsible for documenting and implementing a corporate governance framework that addresses the following:

• objectives and strategies of the Fund;
• structure and governance of the governing body;
• appropriate allocation of oversight and management responsibilities;
• independence and objectivity;
• collective duties of the governing body;
• duties of individual directors of the governing body;
• appointments and delegation of functions and responsibilities;
• risk management and internal control systems;
• conflicts of interest and code of conduct;
• remuneration policy and practices;
• reliable and transparent financial reporting;
• transparency and communications;
• duties of senior management; and
• Relations with CIMA.

Separately, CIMA has issued a new Rule and Statement of Guidance – Internal Controls for Regulated Entities. Although this applies to all Cayman regulated entities, regulated funds generally do not have senior management or staff, instead outsourcing day-to-day management to service providers. As such it is unlikely that additional measures with respect to internal controls beyond adopting the corporate governance framework required under the CG Measures would be required.

These tailored solutions therefore focus primarily on the GC Measures. However, if you would like further information for Rule and Statement of Guidance – Internal Controls on Regulated Entities and how this may affect your business (e.g. you have Cayman regulated investment advisor or investment manager in your fund group structure), then please then please let us know and we would be happy to provide further information.

 

¹Governing Body means: the board of directors where the regulated fund is a company; the general partner where the regulated fund is a partnership; the manager (or equivalent) where the regulated fund is a limited liability company; and the trustee where the regulated fund is a unit trust.