In order to provide mutual fund administration services in or from within the Cayman Islands, a mutual fund administrator’s license is required pursuant to the Mutual Funds law (2015 Revision) of the Cayman Islands.
Generally, an entity which is applying for a mutual fund administrators licence (the “Applicant“) must satisfy the Cayman Islands Monetary Authority (“CIMA“) that it has sufficient expertise to administer regulated mutual funds, is of sound reputation and has the ability to administer regulated mutual funds in a proper manner. CIMA has in response to data security breaches in other Offshore Financial Centers advised existing licensees that it will review the approach to data security risk management with emphasis on the following areas: technical controls, incident response and staff training. Applicants should focus on how they will protect the confidentiality, integrity and availability of sensitive customer and other information.
There are two types of licenses that may be obtained:
- A Restricted Mutual Fund Administrator’s License (“RMFAL“); or
- a Full Mutual Fund Administrator’s License (“FMFAL“).
In the case of a RMFAL the Applicant would either be restricted to administering a single fund or a specified list of funds. While CIMA has not specified a limit on the number of funds which may be administered under an RMFAL, CIMA has advised that its policy is to subject those Applicants proposing to administer ten (10) or more funds to greater scrutiny in order to satisfy itself that such Applicants will be suitable licensees. CIMA’s general policy is that the mutual funds to be administered by holders of RMFALs should be related mutual funds however there are exceptional circumstances in which CIMA will grant a RMFAL for the administration of unrelated mutual funds.
Additionally for a RMFAL, there are no capitalisation requirements for the Applicant, whereas for the FMFAL there is a requirement that CIMA be provided with evidence that the Applicant has a net worth of at least CI$400,000.00 (US$487,804.88).
For a RMFAL there is no physical presence requirement, whilst for a FMFAL a physical presence is required, either in the form of a physical office on island or a principal office provided by the holder of an FMFAL.
Whilst a foreign company may be registered as a mutual fund administrator, it is most common for Cayman subsidiary entities to be formed for that purpose. Where a Cayman company serves as the Applicant, for both the RMFAL and the FMFAL CIMA’s policy is to require that the company be an ordinary resident Cayman Islands company rather than an exempted company.
It is to be noted that Cayman companies must have a minimum of one shareholder who may be an individual or entity. The shares of a licensed administrator may not be transferred without CIMA’s approval. A minimum of two (2) directors must be appointed and these must be fit and proper persons.
The licensee will be required to maintain good governance standards including keeping proper books of account and having its accounts audited annually by a CIMA approved auditor. Audited financial statements of the licensee must be filed with CIMA annually however these are not available for public review.
Licensees will be required to maintain adequate anti-money laundering policies in compliance with Cayman’s anti-money laundering regime. Licensees will also be required to be vigilant in their compliance with local laws which enforce FACTA and CRS.
The following information will be required in order to make the application:
In the case of a RMFAL – the location of the registered office of the Applicant in the Cayman Islands.
In the case of an FMFAL – the address of the physical office of the Applicant is required and the address of two (2) persons or the body corporate resident or incorporated in the Islands and authorised to be the Applicant’s agent in the Cayman Islands.
Where the Applicant is a foreign company registered in Cayman, the names and addresses of at least one (1) person authorised to accept on its behalf, service of process and any notices required to be served on it.
If the Applicant is a company, evidence of its incorporation and a copy of its constitutional documents which will need to be verified by a declaration made by one (1) of its directors or partners or by its secretary and either certified as a true copy by the Cayman Islands Registrar of Companies (if the Applicant is incorporated in Cayman) or certified and authenticated under the public seal of the country, city or place of the Applicant’s incorporation (if the Applicant is incorporated elsewhere) together with a certified English translation thereof, where such documents are not in English.
A list of the names, addresses and nationalities of all directors and corporate officers of the Applicant which list must be certified by the Company Secretary.
An organisational structure chart showing the relationship of the Applicant to its subsidiaries and affiliates (if any) and any holding company. If the Applicant has any subsidiaries, please provide the names and addresses of the registered offices of such subsidiaries together with a statement as to how much of the capital of each such company constitutes an asset of the Applicant.
A list of the shareholders and a statement of the number shares held by each shareholder in the Applicant. Additionally, the name, address and country of incorporation of any corporate shareholder which holds more than ten percent (10%) of the Applicant’s issued share capital or total voting rights.
The latest annual accounts of the Applicant and those of its holding company as well as annual accounts for the two (2) years immediately preceding the year of application of each corporate shareholder which holds more than ten percent (10%) of the Applicant’s issued share capital or total voting rights (together with similar accounts for the parent body, if any, of each such corporate shareholder).
Personal questionnaires (in the form specified by CIMA) completed and signed by:
- each shareholder or beneficial shareholder who is a natural person holding more than ten percent (10%) of the Applicant’s issued share capital or total voting rights;
- the beneficial owner of each corporate shareholder holding more than ten percent (10%) of the Applicant’s issued share capital or total voting rights (or evidence that the shares of such corporate shareholder are publicly traded on a stock exchange recognized by CIMA); and
- all the directors, managers and officers of the Applicant who are involved in the administration of mutual funds.
For each director and officer of the Applicant and for each shareholder and each beneficial shareholder who is a natural person holding more than ten percent (10%) of the Applicant’s issued share capital or total voting rights, there must be obtained:
- not less than three (3) references acceptable to CIMA (all being dated no more than six (6) months prior to the date of submission to CIMA), including two (2) character references and one (1) reference verifying his good financial standing; and
- a police certificate, which must be dated no more than six (6) months prior to the date of submission to CIMA and duly stamped and signed by the issuing authority.
Please note that the financial reference letter must be from a financial institution and:
- should state whether the account has been satisfactorily maintained;
- should state the period of the relationship which should be a minimum of two (2) years; and
- should be signed and on a company letterhead.
The character reference letters must:
- not be written by any person with a familial relationship to the subject of the reference;
- state the period for which the person writing the reference has known person who is the subject of the reference, which should be a minimum of three (3) years;
- state the nature of the relationship;
- be written by a person who is independent, without a vested interest in the acceptability of the reference;
- be signed and indicate a contact name, address and telephone number; and
- should with respect to the subject of the reference, address his or her honesty, integrity and reputation as well as his or her competence and capability in fulfilling the proposed role.
Résumés of each of the Applicant’s directors, including evidence of their professional knowledge and experience in the administration of mutual funds, together with relevant professional and educational qualifications and work experience.
Name and address of the auditor, the partner responsible for the audit and a letter from the auditor acknowledging their obligations under s. 35 of the Mutual Funds Law (2015 Revision). Note that this must be a local auditor i.e. an auditor with a local set up in Cayman. Note that all the Big 4 Auditors are in Cayman as well as numerous others.
A statement describing the history of the Applicant (if applicable) and a summary of the reasons for applying for a license.
A detailed business plan covering the first three (3) years of the Applicant’s business, which must demonstrate that the Applicant has adequate resources in terms of manpower, systems and expertise, to meet its objectives. It must also include:
- the Applicant’s proposed business activities;
- the Applicant’s business aims;
- short and long term objectives and how these will be achieved;
- proposed range of services to be provided by the Applicant;
- a statement as to its customer base, including the type of mutual fund to be administered;
- any assumptions or qualifications; and
- a copy of the most recent balance sheet and details of its fee earnings, if any.
In the case of an RMFAL, names and addresses of the mutual fund(s) to be administered by the Applicant and a copy of the Offering Memoranda. Where related mutual funds are to be administered, evidence acceptable to CIMA that all of the proposed mutual funds to be administered comply with CIMA’s policy for related mutual funds.
If the Applicant is incorporated outside Cayman, (a) confirmation in writing signed by the presiding officer of the applicant and the presiding officer of its parent company (if any) that they concur in the making of the application and (b) a statement in writing in a form acceptable to CIMA accepting legal responsibility for the obligations and liabilities of the Applicant executed by and binding on the parent company, if any, of the Applicant.
In the case of an FMFAL, evidence that the Applicant has a net worth of at least CI$400,000 (US$487,804.88).
If the Applicant intends to carry on business of mutual fund administration outside of the Cayman Islands, an indication must be provided as to whether the administration will be carried out through a branch office, subsidiary or associate.
Whether the Applicant or its parent company (if any) is currently authorised to carry on investment, insurance or banking activities in countries outside the Islands. If so, please provide the name and address of the authority responsible for the authorisation.
An undertaking that the Applicant will disclose any material changes that may occur while the application is being considered.
In the case of a RMFAL, an undertaking that the Applicant will not carry on mutual fund administrator’s business for mutual funds other than those whose names and addresses are specified to CIMA.
If the Applicant or its parent company is not subject to regulation in the Cayman Islands or in any other country, the following details must be provided:
- whether the Applicant, its parent company or its principals have ever been refused or had revoked any authorisation to carry on investment, banking or other financial business in any country;
- whether the Applicant, its parent company or its principals have ever been refused or had revoked membership of any association of dealers in securities or of any stock exchange;
- whether the Applicant, its parent company or its principals have, at any time during the ten (10) years prior to the date of the application had a receiver, administrative receiver or administrator appointed, or failed to satisfy a debt adjudged due or a debt in respect of which a decree has been passed against it or entered into a scheme of arrangement or composition of its debts with its creditors;
- whether a petition for the compulsory winding up of the Applicant or its parent company has been served at any time during the ten (10) years prior to the application;
- whether the bankers, legal advisors or auditors of the Applicant or its parent company have changed during the three (3) years prior to the date of the application and if so, details of the change, including the reason for the change;
- whether the Applicant, its parent company or its principals have ever been convicted of any offence involving fraud or other dishonesty or of an offence under any law relating to financial services, insolvency, consumer credit or consumer protection; and
- whether the Applicant, its parent company or its principals have ever been the subject of regulatory, administrative or other civil or criminal proceeding or investigation under the law of any country.
Applicable Fees are prescribed by the Mutual Funds (Fees) Regulations (Revised) in respect of the initial application and thereafter as an annual fee:
- for an unrestricted mutual fund administration licence to administer not more than 50 regulated mutual funds: Application Fee: US$24,390.24 & Annual Fee: US$36,585.36;
- for an unrestricted mutual fund administration licence to administer greater than 50 regulated funds: Application Fee: US$35,000 & Annual Fee US$42,682.92; and
- for a restricted mutual fund administration licence: Application Fee & Annual Fee: USS$8,536.58.
 FrancisGrey’s corporate services affiliate can provide this service.
 As part of the Application Service, FrancisGrey will prepare this undertaking for the Applicant’s signature.
 As part of the Application Service, FrancisGrey will prepare this undertaking for the Applicant’s signature.
This note has been provided as a general guide only and should not be relied upon as a substitute for specific legal advice. Advice which is specific to your circumstances should always be obtained. If you would like further information on any aspect of this note or on any other Cayman Islands legal issue please contact us at:
Corporate & Commercial Practice Group
D. +1 345 815 2807
Suite 2206, Cassia Court
72 Market Street, Camana Bay
P.O. Box 32302
Grand Cayman KY1-1209
T. +1 345. 815. 2800
F. +1 345. 947. 4728