New CIMA Rule & Guidance for corporate governance – what this means for your funds
The Rule, which becomes effective 6 months after publication, i.e. October 2023, sets out CIMA’s requirements for corporate governance, and covers all entities regulated by CIMA, including funds registered under the Mutual Funds Act and the Private Funds Act (together, “Regulated Funds”). Noncompliance with the Rule can result in penalties against Regulated Funds and their operators.
The SoG, which became effective upon being published, sets out CIMA’s specific guidance for corporate governance of Regulated Funds, and CIMA’s minimum expectations for the operators of Regulated Funds to provide sound and prudent governance. This SoG replaces the Statement of Guidance – Corporate Governance for Regulated Mutual Funds, which was issued by CIMA in 2013, notably to bring Private Funds into scope.
For Regulated Funds, it’s crucial that their operators familiarise themselves with the Rule and the SoG. CIMA considers the operator of a Regulated Fund to be the governing body i.e. the board of directors where the Regulated Fund is a corporation, and the general partner where the Regulated Fund is a partnership.
What has changed? See below for a brief overview of some of the key changes:
- Private Funds are now in scope of the SoG (previously, just Mutual Funds).
- Expanded expectations from CIMA for board meetings of Private Funds, and records thereof.
- Clarified requirements from CIMA regarding board composition including diversity of skills, background, experience and expertise of operators, and an appropriate number of individuals.
- Increased obligations from CIMA around self-assessment of the performance of operators.
- Increased focus from CIMA on independence of operators, adherence to a code of conduct, and application of independent judgement.
- Increased expectations from CIMA on management and disclosure of conflicts of interest of operators.
- Once the Rule is in effect, noncompliance with CIMA’s requirements relating to corporate governance can result in penalties against Regulated Funds and their operators.
How Waystone can help
Waystone has been at the forefront of Cayman fund governance for over 20 years. With over 20 full-time professional and highly-qualified independent fund directors with a wide diversity of knowledge, background, skills and experience, Waystone is well placed to provide independent operators to your Regulated Funds who can help ensure compliance with the Rule and SoG.
Many Cayman Regulated Funds are partnerships operated by general partners controlled by principals of the investment manager. The obligations of the Rule and SoG may require more extensive consideration in these cases, given the potential penalties for noncompliance. Waystone has extensive experience providing governance to partnerships via independent governance committees that mirror the roles and responsibilities of directors to Regulated Funds structured as corporations. We would be pleased to discuss how we could structure an independent governance committee solution for your partnerships.
In addition, Waystone’s directors are supported by a global board support services team that can help ensure the board meetings of your Regulated Funds are held and documented in accordance with the Rule and SoG.
Please reach out to your usual Waystone representatives if you would like to discuss the Rule and SoG in more detail.
