Preliminary section: Definitions and jurisdiction

The preliminary section introduces the Act, providing clarity on its application and defining key terminology. It outlines essential definitions for terms such as “mutual fund”, “equity interest”, “licensed mutual fund administrator”, and “EU Connected Fund”, establishing a foundation for interpreting subsequent provisions. The Act further stipulates its jurisdictional application, emphasising its relevance to funds licensed or registered in the Cayman Islands and EU-connected funds operating within the framework of European regulations.

Part 2: Requirements for regulated mutual funds

Part 2 delineates the requirements for regulated mutual funds, ensuring fitness, propriety, and compliance across operational practices. It mandates that mutual funds must either obtain a licence or register with CIMA, while also submitting a current offering document that discloses material information vital for investor decision-making. Additional provisions prohibit misrepresentation as a regulated fund, and the Act demands annual audits conducted by approved auditors, ensuring financial integrity. Penalties for contraventions are explicitly articulated, enhancing accountability.

Part 3: Administration of mutual funds

Part 3 shifts focus to the administration of mutual funds, dictating that mutual fund administrators must hold relevant licences issued by CIMA. The Act defines the types of licences available, including unrestricted and restricted licences, with criteria ensuring that administrators possess the expertise and financial stability to manage mutual funds responsibly. CIMA is empowered to impose conditions on licences, require adherence to specific capital requirements, and ensure the competence of directors or officers managing these entities. Annual fees and audited accounts are integral compliance components, reflecting an ongoing commitment to regulatory oversight.

Part 3A: EU-connected funds

A more modern inclusion, Part 3A addresses “EU Connected Funds”, reflecting international alignment with European Union directives. It introduces mechanisms for these funds to opt for licensing or registration in the Cayman Islands, bridging local regulation with cross-border obligations. CIMA is tasked with monitoring compliance, facilitating attestation, and handling information exchange where required under agreements with EU regulators.

Part 4: Supervisory and enforcement powers of the authority

Part 4 underscores CIMA’s supervisory and enforcement capabilities, dividing its oversight into two divisions. Division 1 focuses on regulated mutual funds and EU Connected Funds, granting CIMA the power to require special audits, investigate alleged breaches, and pursue action against unregulated or non-compliant entities. Division 2 extends these powers to mutual fund administrators, enabling CIMA to demand information, initiate audits, and impose measures to safeguard investor interests and maintain sector integrity.

Part 5: Duties and powers of the authority

Central to the Act, Part 5 outlines the duties and powers of CIMA. It is entrusted with the administration of the legislation, the issuance and revocation of licences, and the approval of exemptions. CIMA also conducts regular reviews of mutual fund businesses, harnessing tools like on-site inspections, return submissions, and auditor reports to ensure compliance. Where necessary, CIMA can impose conditions, appoint advisors or controllers, and even intervene with court approval to restructure or dissolve entities where investor interests are threatened.

Part 6: Miscellaneous provisions

Concluding the legislative framework, Part 6 encompasses miscellaneous provisions, which include obligations for auditors, an appeals process for decisions made by CIMA, and the Cabinet’s regulatory powers. Auditors who identify discrepancies or risks within funds must report these instances directly to CIMA, enhancing transparency and safeguarding financial stability. Additionally, the Act incorporates savings and transitional provisions to accommodate entities regulated under previous laws, ensuring a seamless shift to the revised framework.

Conclusion: Significance of the Mutual Funds Act (2025 Revision)

Overall, the Mutual Funds Act (2025 Revision) represents a robust legal regime aimed at fostering investor confidence and maintaining the Cayman Islands’ status as a leading global financial jurisdiction. Its balance of regulatory precision, operational standards, and international alignment exemplifies a commitment to both marketplace efficacy and investor protection.

Further reading

• Cayman Islands Mutual Funds Act (2025 Revision)