CIMA


Regulator-to-regulator engagement facilitates consolidated supervision of entities that operate in two jurisdictions, as well as bilateral regulatory cooperation and information exchange. Increasing such collaboration has made supervision of our international entities more cost-efficient and effective. One of the things that we see as positive, and that we encourage, is increased communication among regulators.


Being involved in international forums and groups has been invaluable


in enabling Cayman to influence some of the regulatory/standard-setting discussions and developments that have occurred, has increased recognition by standard-setters regarding the quality and compliance of this jurisdiction’s regulatory regime, and has enabled CIMA representatives to be welcomed into leadership roles, or other positions of influence, in a number of these bodies. These currently include the deputy chairmanship of the Group of International Financial Centre Supervisors, the executive committee of the International Association of Insurance Supervisors, the Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Review Committee and Steering Committee, and the Financial Stability Board Regional Consultative Group of the Americas.


Meeting the increased demands on the regulator also involves increasing our own organisational efficiency. We are doing this through technology-leveraged initiatives such as (i) the expansion of our electronic reporting system, which started with funds, to other areas of CIMA; (ii) through our electronic application system (CIMAConnect), which also began with funds; and (iii) by our current efforts to enhance automated billing and develop a complementary electronic fee payments system that we aim to launch this year.


Refinements have been drafted to the Fund Annual Return (FAR) that


regulated funds are required to file electronically. These amendments will be issued shortly for industry consultation and further refinement as necessary, before implementation. The adjustments will allow more of the information that is now provided in other formats to be captured on the FAR so that it can be electronically processed and analysed, providing us with readier insight on funds and enabling us to expand the statistical data available to the public. The registration of master funds, currently underway, is another initiative to give CIMA a more detailed view of these funds and, thus, a better oversight of the industry.


Responding to change


Maintaining regulatory stability does not mean refusing to change. When international rules change, when market conditions change or weaknesses become evident, we must respond appropriately, in order for the jurisdiction to remain competitive, and for market confidence, consumer protection and our jurisdictional reputation to be preserved. The key is not to make knee-jerk reactions but to ensure that proposals are fully understood, carefully weighed, and that stakeholders are part of the process, before changes are adopted.


Our review of the corporate governance framework for funds and


other regulated sectors, for example, has been extensive and we expect it to result in some additional prudential measures during 2012.


We have also taken a comprehensive approach in our response to


the Alternative Investment Fund Manager Directive (AIFMD). With an estimated 30 percent of Cayman-regulated funds being sold to European investors, we must prepare to meet the requirements of the directive when they become effective from July 2013. CIMA has been monitoring the AIFMD’s development and that of the related technical measures. As the initiative has become increasingly concrete we have provided input to the European Securities and Markets Authority (ESMA), have conducted industry consultations locally to identify the sector’s main concerns, and have carried out a gap analysis of the requirements vis-à-vis our existing regulatory framework.


At the time of writing, we are assessing the impact of the technical


measures on the Cayman funds industry and have formed the AIFMD Working Group, comprising representatives from the funds sector, the Cayman Islands government and CIMA. The group’s objectives are to review and make recommendations for amending the existing regulatory framework for hedge funds, depositories and fund managers, to ensure that our regime does not hinder the marketing of Cayman- domiciled funds in the EU and that the Cayman Islands continues to be an attractive hedge fund domicile. In making such recommendations, the group is considering the current local legislation, as well as the AIFMD.


Meanwhile, we have pursued discussions with regulatory authorities


in several EU member countries on the possible development of memoranda of understanding on supervisory cooperation, consultation and information exchange, and have recently engaged with ESMA itself, as the probable central negotiator.


CIMA is committed to ensuring that the regulator and the local


industry are able to comply with the new framework. The AIFMD will bring additional regulatory requirements for those persons and entities


“Being involved in international forums and groups has been invaluable in enabling Cayman to influence some of the regulatory/standard-setting discussions and developments that have occurred.”


affected. However, creating conditions locally that facilitate compliance provides opportunities for the Cayman Islands to grow the market for investment funds that are looking for an offshore regime with higher levels of regulation, as well as the market for depositories.


Our willingness to adjust to changing international regulatory


standards demonstrates our commitment to cross-border cooperation to ensure a sound international financial system. It underscores our commitment to ensuring that Cayman-domiciled businesses do not lose access to international markets. Our ability to adjust also shows the jurisdiction’s nimbleness. Such agility is not something that all jurisdictions can claim. It is another contributing factor to the Cayman Islands’ position as the leading hedge fund domicile.


Cindy Scotland is the managing director of CIMA. She can be contacted at: cima@cimoney.com.ky


Cindy Scotland has been in her current role since 2002 and has more than 20 years’ regulatory and currency management experience. She is accountable for the sound management of the Cayman Islands currency, the effective supervision of CIMA- regulated entities and the advancement of relationships with government, industry and


international regulators and regulatory standard-setters. She represents CIMA and the Cayman Islands extensively overseas.


CAYMAN FUNDS | 2012


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