Cayman Islands And AIFMD Compliance

Cayman Islands and AIFMD Compliance
Mar 25, 2013

The Cayman Islands Government passed an amendment on Friday March 15, 2013, granting the marketing of Cayman Registered Funds in the European Union (EU). This amendment allows the Cayman Islands regulator to enter into Memoranda of Understating (MoU) with its counterparts, using a model MoU developed by the European Securities Market Authority (ESMA).

The Alternative Investment Fund Managers Directive (AIFMD) seeks to create a cohesive regulatory environment to address the management and distribution of alternative investment funds within the EU, whether or not the funds or the fund managers themselves are established within the EU. The AIFMD is set to become fully effective in July 2013.

Cayman Islands compliance with the AIFMD will allow funds domiciled in the Cayman Islands to be marketed within the European Union. Following are the three (3) relevant conditions which third country jurisdictions must meet to achieve compliance with the AIFMD:

  • The third country in which the investment manager and/or fund is domiciled must not be on the Financial Action Task Force’s (FATF) list of non-cooperative jurisdictions. The Cayman Islands is not on the list of non-cooperative jurisdictions maintained by the FATF.
  • The financial regulatory body in the relevant third country must have in place a cooperation agreement with its counterpart in the relevant EU member state in which it is proposed that a fund would be marketed. CIMA continues to engage ESMA to agree on a MoU to be entered into between third countries and national regulators within the EU, as well as maintaining open dialogue with financial regulators in several key EU member states in connection with AIFMD.
  • Agreements for exchange of information for tax purposes are in place between the EU and third countries. Although this requirement will only become relevant beginning in 2015 when the EU regime within AIFMD is extended to third party country funds, the Cayman Islands continues to extend is network of tax information exchange agreements, both within and outside of Europe.